From Nasdaq.: 2025-02-24 20:45:13

Goosehead Insurance held its Q4 2024 earnings call on February 24, 2025, discussing forward-looking statements and non-GAAP financial measures. The company’s CEO, Mark Miller, highlighted the critical role of insurance in rebuilding lives after natural disasters like the California wildfires. Goosehead’s unique value proposition focuses on finding the right coverage at the best price for clients, with access to over 200 carriers. Market conditions are showing signs of improvement, with auto premium increases slowing down and favorable loss ratios for insurers. In Q4, auto insurance product capacity is opening up, while homeowners product remains tight. Goosehead reports an outstanding 2024 with 20% total revenue growth, 17% core revenue growth, and EBITDA near $100 million. The company reaccelerated growth by increasing producer headcount, enhancing profitability, and making critical investments in technology. Franchise distribution expansion and corporate agent growth are key focus areas for 2025. Goosehead will launch a mobile app and expand quote-to-issue technology. The company is investing in AI tools to improve client communication, service, and sales processes. Goosehead believes in the role of independent agents in personalized insurance. Goosehead Insurance is on track to become a Rule of 60 company after impressive 2024 results with 20% revenue growth and 32% EBITDA margin. With less than 1% U.S. personalized mortgage share, the company is poised for growth. The franchise business saw a 47% productivity increase in Q4 and 49% for the full year, thanks to technological advancements. A focus on middle market franchises, particularly in the home insurance sector, has led to partnerships with national brands like banks, showcasing Goosehead’s unique capabilities and potential for sustained growth in 2025 and beyond. In the latest update, the franchise pipeline continues to grow, providing diversification and insulation from market fluctuations. Corporate producers increased by 39% year-over-year to 417. Premiums for the quarter reached $966 million, a 28% increase, with full-year premiums hitting $3.81 billion, up 29%. Total revenues grew to $93.9 million, representing a 49% increase over the previous year. Looking ahead, the company remains confident in continued premium growth due to stable client retention and productivity enhancements, with a focus on digital and partnership channels.

The company reported a strong financial performance with a 164% increase in adjusted EBITDA to $37.4 million. Contingent commissions for the year reached $31.4 million, higher than anticipated. Policies in force grew by 13% to 1.7 million by year-end, with expectations for gradual expansion in growth rates through 2025. The company remains conservative in its forecast for 2025 due to uncertainties in loss trends, while focusing on strengthening carrier relationships and maximizing profitability through high-quality business distribution and client service.

Looking ahead to 2025, the company plans to capture additional market share by expanding go-to-market strategies through strategic partnerships and technological advancements. Investments in talent, software development, and digital integration aim to enhance client engagement and improve agent productivity. With a strong balance sheet, including $54.3 million in cash and total debt of $93.1 million, the company completed a new term loan offering to strengthen its financial position and support growth initiatives. Goosehead reported strong operating cash and free cash flow growth in 2024, with operating cash generation up 41% to $71.5 million and free cash flow up 53% to $59.4 million. Total revenues for 2025 are expected between $350 million and $385 million, with premiums expected to be between $4.65 billion and $4.88 billion. The company anticipates gradual pricing declines and conservative client retention levels for the year ahead. Analysts inquired about a large contingent commission true-up and the direction of the EBITDA margin in 2025, with management providing insights on core performance and margin expansion strategies. Product availability is improving across different states and product lines, with some regions seeing faster recovery than others. In a recent earnings call, Goosehead executives discussed their strong product offerings in California compared to competitors and the potential for growth in the state’s independent broker market. They mentioned thriving in the E&S market and the return to pre-catastrophic fire conditions. The company expects to increase its franchise footprint in California in the future. Executives also discussed plans to drive average commission rates up and the potential for direct-to-consumer experiences, starting with auto insurance. Additionally, they expect accelerating core revenue growth in 2025 and are working towards achieving high organic growth rates in the future. In the latest earnings call, Goosehead reported a 7% increase in franchise producer count and a 39% increase in corporate agent count. The company expects to see continued growth in producer count and operating franchise count in 2025. While premium growth guidance is conservative due to uncertainty in pricing impact and client retention, they anticipate improvements as macroeconomic factors improve. The uptick in home sales is positive for Goosehead, as they have built relationships with more referral partners. The company does not have its own wholesale brokerage but distributes through others for access to excess and surplus lines. They will focus on driving value in their core business rather than starting a wholesale brokerage. Katie Sakys from Autonomous Research asks about hiring expectations and margin-accretive timelines for new hires in franchise and corporate channels. Mark E. Jones, CFO, explains that franchise hires are margin-accretive almost immediately, while corporate hires may take 6-8 months. Mark Miller, CEO, discusses matching franchise presence with demand, citing recent office openings in Arizona and Texas. Jones mentions plans for more franchise growth in target states. Miller emphasizes using corporate offices as feeder grounds for future franchises. Michael Zaremski from BMO questions the growth rate of corporate agents, with Miller noting the typical hiring pattern and strict production standards. In a recent earnings call, executives at a real estate agency discussed their hiring strategy and growth plans. They are slowing down new agent hiring to focus on absorbing new agents effectively. The company remains bullish on the agent model and plans to continue adding agents responsibly. The enterprise sales team is growing rapidly to handle new partnerships and lead flow. Additionally, the company expects core revenue growth to accelerate in the coming years, driven by new business growth, client retention, and potential partnerships. The mortgage servicer side of the business is also expected to become a significant part of the company’s revenue in the near future. California market share is not expected to impact production significantly. Goosehead Insurance reported steady premium retention, with corporate retention dropping slightly while franchise retention improved. The difference is due to a larger portion of the corporate book being located in Texas, which has seen high price increases. Interest expense on a $300 million term loan is SOFR plus 3.50. Analysts asked about operating in E&S homeowners business in California, commission leakage risks, and pricing increases. Goosehead expects the admitted market to remain dominant. The company plans to continue special dividends as the business is cash flow positive and maintains an efficient balance sheet. Goosehead Insurance reported an increase in policies issued through its QTI platform, with tens of thousands now written monthly. The company expects this trend to continue as they expand pipelines with carriers and develop more online products. The platform enables agents to distribute policies more efficiently, benefitting clients, agents, and carrier partners. Goosehead plans to further expand the platform by adding more carriers and states. The company’s focus on underwriting profitability and building direct connections with carriers has led to significant growth in policy issuance. Analysts are optimistic about the company’s performance and outlook.



Read more at Nasdaq.: Goosehead Insurance (GSHD) Q4 2024 Earnings Call Transcript