TWFG, Inc.(TWFG) - 2025 Q2 - Quarterly Results

Company Overview TWFG's Q2 2025 performance, strategic growth initiatives, and its core business as an independent insurance distribution platform are highlighted Second Quarter 2025 Highlights TWFG demonstrated strong performance in Q2 2025 with significant year-over-year growth in total revenue, total written premium, and adjusted EBITDA, alongside an improved adjusted EBITDA margin Key Financial Highlights (Q2 2025) | Metric | Amount ($ million) | Year-over-Year Growth | Notes | | :-------------------- | :----------------- | :--------- | :--- | | Total Revenue | $60.3 | +13.8% | | | Total Written Premium | $450.3 | +14.4% | | | Organic Revenue Growth Rate | 10.6% | - | | | Net Income | $9.0 | - | | | Adjusted EBITDA | $15.1 | +40.7% | | | Adjusted EBITDA Margin | 25.1% | - | Improved from 20.3% in prior year period | CEO Commentary and Strategic Initiatives CEO Gordy Bunch highlighted strong Q2 performance driven by strategic execution and business model strengths, with distribution platform expansion through acquisitions and new retail branches - CEO Gordy Bunch stated that the company's strong second-quarter results reflect continued strategic execution and the strength of its business model[4] - The company continued to grow its distribution platform through recruiting and M&A activities, completing four acquisitions, adding nine new retail branches, and expanding into Kentucky this quarter[5] - Acquisitions added five new corporate locations (one each in Texas, Louisiana, North Carolina) and a new MGA (Managing General Agent) property program in Florida, enhancing the company's market presence in the East Gulf region[5] About TWFG TWFG is a high-growth independent distribution platform providing personal and commercial insurance across the US, partnering with numerous carriers - TWFG is a high-growth independent insurance distribution platform providing personal and commercial insurance across the United States[20] - The company represents hundreds of insurance carriers to underwrite personal and commercial lines risks[20] Second Quarter 2025 Financial Results This section details TWFG's Q2 2025 financial performance, covering revenue growth, expense analysis, profitability, and cash flow Revenue Performance TWFG achieved strong Q2 2025 revenue growth, with total revenue up 13.8% and organic revenue up 10.6%, driven by new business and stable client retention Revenue Performance (Q2 2025) | Metric | Q2 2025 ($ million) | Q2 2024 ($ million) | Year-over-Year Change | | :-------------------- | :------------------------- | :------------------------- | :--------- | | Total Revenue | $60.3 | $53.0 | +13.8% | | Commission Revenue | $54.6 | $48.7 | +12.1% | | Total Written Premium | $450.3 | $393.6 | +14.4% | | Organic Revenue | $54.1 | $48.4 | +11.8% | | Organic Revenue Growth Rate | 10.6% | - | - | - For the six months ended June 30, 2025, total revenue was $114.1 million, representing a 15.1% year-over-year increase[7] - For the six months ended June 30, 2025, organic revenue was $103.3 million, representing a 14.9% year-over-year increase, with an organic revenue growth rate of 12.4%[8] Expense Analysis Q2 2025 operating expenses significantly increased due to higher compensation and benefits, including equity compensation and acquisition-related costs, and other G&A expenses supporting growth and public company operations Expense Analysis (Q2 2025) | Expense Category | Q2 2025 ($ million) | Q2 2024 ($ million) | Year-over-Year Change | | :-------------------------- | :------------------------- | :------------------------- | :--------- | | Commission Expense | $34.2 | $32.0 | +6.8% | | Compensation and Employee Benefits | $9.5 | $6.8 | +39.3% | | Other General and Administrative Expenses | $5.4 | $3.7 | +44.2% | - The increase in compensation and employee benefits includes $1.5 million in equity-based compensation expense and $1.2 million in compensation and employee benefits related to corporate branch acquisitions in 2025[10] - The increase in other general and administrative expenses reflects investments to support business growth and costs incurred as a public company[11] Profitability and Earnings Q2 2025 saw improved net income and adjusted net income with expanding margins, alongside substantial adjusted EBITDA growth and margin enhancement reflecting operational efficiency Profitability and Earnings (Q2 2025) | Metric | Q2 2025 ($ million) | Q2 2024 ($ million) | Year-over-Year Change | | :-------------------- | :------------------------- | :------------------------- | :--------- | | Net Income | $9.0 | $6.9 | +30.4% | | Net Income Margin | 14.9% | 13.1% | +1.8 pp | | Adjusted Net Income | $11.5 | $9.8 | +17.3% | | Adjusted Net Income Margin | 19.1% | 18.5% | +0.6 pp | | Adjusted EBITDA | $15.1 | $10.8 | +40.7% | | Adjusted EBITDA Margin | 25.1% | 20.3% | +4.8 pp | - Diluted earnings per share for Q2 2025 was $0.13, and adjusted diluted earnings per share was $0.20[6] Cash Flow from Operations Q2 2025 operating cash flow increased, while adjusted free cash flow decreased primarily due to distributions made to pre-IPO members Cash Flow from Operations (Q2 2025) | Metric | Q2 2025 ($ million) | Q2 2024 ($ million) | Year-over-Year Change | | :-------------------------- | :------------------------- | :------------------------- | :--------- | | Cash Flow from Operations | $9.6 | $7.4 | +29.7% | | Adjusted Free Cash Flow | $2.9 | $3.7 | -21.6% | - The decrease in adjusted free cash flow was primarily due to distributions made to pre-IPO members[14] Liquidity and Capital Resources This section outlines TWFG's liquidity position and capital resources, including cash reserves, credit facilities, and outstanding debt Liquidity and Capital Resources Overview As of June 30, 2025, TWFG maintained a strong liquidity position with ample cash reserves, a $50 million undrawn revolving credit facility, and a relatively low term note balance - As of June 30, 2025, the company had $159.8 million in cash and cash equivalents[15] - The company had the full $50.0 million available under its revolving credit facility as of June 30, 2025[15] - The outstanding term note balance was $5.0 million as of June 30, 2025[15] 2025 Updated Outlook This section provides TWFG's updated financial guidance for the full fiscal year 2025, including revenue and profitability expectations Full-Year 2025 Guidance TWFG updated its full-year 2025 guidance, projecting continued growth in total revenue and organic revenue growth rate, alongside a healthy adjusted EBITDA margin Full-Year 2025 Guidance | Metric | FY 2025 Guidance | | :---------------------- | :---------------------- | | Total Revenue | $240 million to $255 million | | Organic Revenue Growth Rate | 11% to 14% | | Adjusted EBITDA Margin | 21% to 23% | - The company is unable to provide a reconciliation to the most directly comparable GAAP measures without unreasonable effort due to the inherent difficulty in forecasting the timing and quantifying certain amounts necessary for such reconciliations of items that have not yet occurred[17] Non-GAAP Financial Measures and Key Performance Indicators This section defines TWFG's non-GAAP financial measures and key performance indicators, along with their reconciliations to GAAP equivalents Non-GAAP Financial Measures Definitions This section defines TWFG's key non-GAAP financial measures, including organic revenue, adjusted net income, adjusted EBITDA, and adjusted free cash flow, explaining their calculation and relevance for performance evaluation - Organic Revenue is total revenue (the most directly comparable GAAP measure) excluding or adjusting for contingent revenue, non-policy fee revenue, other revenue, and revenue from acquired businesses with annualized revenue greater than $0.5 million that have not met the 12-month hold period; as of Q1 2025, the calculation of organic revenue has been revised to include policy fee revenue[24] - Adjusted Net Income is net income (the most directly comparable GAAP measure) before amortization, non-recurring or non-operating income and expenses (including equity-based compensation), and assuming a single class of stock (Class A) with no non-controlling interest[26] - Adjusted EBITDA is EBITDA adjusted for equity-based compensation, interest income, other non-operating, and certain non-recurring items; EBITDA is defined as net income (the most directly comparable GAAP measure) before interest, income taxes, depreciation, and amortization[30] - Adjusted Free Cash Flow is defined as cash flow from operating activities (the most directly comparable GAAP measure) less cash payments for tax distributions, purchases of property and equipment, and acquisition-related costs[33] Key Performance Indicators Definitions TWFG's primary KPI is total written premium, representing the aggregate current premium bound with carriers, considered a fundamental driver of most company revenue - Total Written Premium represents the aggregate current premium bound with carriers (net of cancellations) during any reporting period[35] - The company uses total written premium as a key performance indicator for planning, monitoring, and evaluating performance because it is considered a fundamental driver of most of the company's revenue[35] Reconciliation of Non-GAAP Financial Measures This section provides detailed reconciliations of TWFG's non-GAAP financial measures to their most directly comparable GAAP metrics for the three and six months ended June 30, 2025 and 2024, using revised and historical methodologies as applicable Organic Revenue and Organic Revenue Growth Rate Reconciliation This reconciliation details adjustments made to total revenue to derive organic revenue, highlighting the impact of acquisitions, contingent revenue, and other revenue components Organic Revenue and Organic Revenue Growth Rate Reconciliation ($ thousand) | Metric | Q2 2025 (Revised) | Q2 2024 (Revised) | H1 2025 (Revised) | H1 2024 (Revised) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Total Revenue | $60,308 | $53,011 | $114,131 | $99,155 | | Acquisition Adjustment | $(1,524) | $(1,217) | $(2,133) | $(2,684) | | Contingent Revenue | $(2,033) | $(1,258) | $(3,696) | $(2,334) | | Fee Revenue | $(3,329) | $(2,689) | $(6,340) | $(4,921) | | Policy Fee Revenue | $1,082 | $933 | $2,134 | $1,446 | | Other Revenue | $(384) | $(402) | $(748) | $(693) | | Organic Revenue | $54,120 | $48,378 | $103,348 | $89,969 | | Organic Revenue Growth Rate | 10.6% | 14.6% | 12.4% | 13.6% | Adjusted Net Income and Adjusted Net Income Margin Reconciliation This reconciliation details adjustments to net income, including income tax expense, acquisition-related costs, equity-based compensation, and amortization, to derive adjusted net income and its corresponding margin Adjusted Net Income and Adjusted Net Income Margin Reconciliation ($ thousand) | Metric | Q2 2025 (Revised) | Q2 2024 (Revised) | H1 2025 (Revised) | H1 2024 (Revised) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net Income | $9,000 | $6,918 | $15,853 | $13,547 | | Income Tax Expense | $620 | — | $1,276 | — | | Acquisition-Related Costs | $19 | — | $52 | — | | Equity-Based Compensation | $1,515 | — | $2,719 | — | | Other Non-Recurring Items | $10 | — | $10 | $(1,477) | | Amortization Expense | $3,762 | $2,904 | $6,971 | $5,851 | | Adjusted Pre-Tax Income | $14,926 | $9,822 | $26,881 | $17,921 | | Adjusted Income Tax Expense | $(3,407) | — | $(6,135) | — | | Adjusted Net Income | $11,519 | $9,822 | $20,746 | $17,921 | | Net Income Margin | 14.9% | 13.1% | 13.9% | 13.7% | | Adjusted Net Income Margin | 19.1% | 18.5% | 18.2% | 18.1% | Adjusted EBITDA and Adjusted EBITDA Margin Reconciliation This reconciliation shows adjustments to net income to calculate EBITDA and Adjusted EBITDA, including interest, taxes, depreciation, amortization, and other non-recurring items Adjusted EBITDA and Adjusted EBITDA Margin Reconciliation ($ thousand) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------- | :---------------- | :---------------- | :---------------- | :---------------- | | Net Income | $9,000 | $6,918 | $15,853 | $13,547 | | Interest Expense | $68 | $872 | $151 | $1,714 | | Interest Income | $(1,751) | $(255) | $(3,614) | $(424) | | Depreciation and Amortization | $3,901 | $2,968 | $7,260 | $5,981 | | Income Tax Expense | $620 | — | $1,276 | — | | EBITDA | $11,838 | $10,503 | $20,926 | $20,818 | | Acquisition-Related Costs | $19 | — | $52 | — | | Equity-Based Compensation | $1,515 | — | $2,719 | — | | Interest Income (Adjustment) | $1,751 | $255 | $3,614 | $424 | | Other Non-Recurring Items | $10 | — | $10 | $(1,477) | | Adjusted EBITDA | $15,133 | $10,758 | $27,321 | $19,765 | | Adjusted EBITDA Margin | 25.1% | 20.3% | 23.9% | 19.9% | Adjusted Free Cash Flow Reconciliation This reconciliation adjusts cash flow from operations by deducting capital expenditures, tax distributions, and acquisition-related costs to derive adjusted free cash flow Adjusted Free Cash Flow Reconciliation ($ thousand) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------- | :---------------- | :---------------- | :---------------- | :---------------- | | Cash Flow from Operations | $9,615 | $7,400 | $25,260 | $17,154 | | Purchases of Property and Equipment | $(44) | $(39) | $(59) | $(47) | | Tax Distributions to Members | $(6,728) | $(3,685) | $(8,752) | $(6,104) | | Acquisition-Related Costs | $19 | — | $52 | — | | Adjusted Free Cash Flow | $2,862 | $3,676 | $16,501 | $11,003 | Adjusted Diluted Earnings Per Share Reconciliation This reconciliation adjusts diluted EPS for the impact of LLC unit conversion to Class A common stock and other adjusted net income adjustments, providing a comparable operating performance measure Adjusted Diluted Earnings Per Share Reconciliation | Metric | Q2 2025 | H1 2025 | | :------------------------------------------------ | :-------- | :-------- | | Diluted Earnings Per Share of Common Stock | $0.13 | $0.22 | | Add: Impact of all LLC Units converted to Class A Common Stock | $0.03 | $0.06 | | Add: Adjustments to Adjusted Net Income | $0.04 | $0.09 | | Adjusted Diluted Earnings Per Share | $0.20 | $0.37 | Disaggregation of Revenues and Expenses by Offering This section details the disaggregation of TWFG's total revenue, commission revenue, fee revenue, and commission expense by business type, including Agency-in-a-Box, Corporate Branches, and TWFG MGA Q2 2025 Total Revenue by Offering ($ thousand) | Offering Type | Amount | | :---------------- | :----- | | Insurance Services | $50,709 | | - Agency-in-a-Box | $39,316 | | - Corporate Branches | $11,393 | | TWFG MGA | $9,233 | Q2 2025 Commission Revenue by Offering ($ thousand) | Offering Type | Amount | | :---------------- | :----- | | Insurance Services | $47,569 | | - Agency-in-a-Box | $36,275 | | - Corporate Branches | $11,294 | | TWFG MGA | $6,993 | Q2 2025 Fee Revenue by Primary Source ($ thousand) | Fee Source | Amount | | :--------- | :----- | | Policy Fees | $1,082 | | Branch Fees | $1,416 | | Licensing Fees | $559 | | TPA Fees | $272 | Q2 2025 Commission Expense by Offering ($ thousand) | Offering Type | Amount | | :---------------- | :----- | | Insurance Services | $29,581 | | - Agency-in-a-Box | $28,013 | | - Corporate Branches | $1,568 | | TWFG MGA | $4,544 | Disaggregation of Total Written Premium This section disaggregates total written premium by business type (Insurance Services, TWFG MGA), business mix (renewal, new business), and line of business (personal, commercial), offering insights into premium composition and retention rates Q2 2025 Total Written Premium by Offering Type ($ thousand) | Offering Type | Amount | Percentage of Total | | :---------------- | :----- | :----------- | | Insurance Services | $389,397 | 86% | | TWFG MGA | $60,891 | 14% | Q2 2025 Total Written Premium by Business Mix ($ thousand) | Business Mix | Amount | Percentage of Total | | :-------------------------- | :----- | :----------- | | Insurance Services Renewal Business | $301,930 | 67% | | Insurance Services New Business | $87,467 | 19% | | TWFG MGA Renewal Business | $47,366 | 11% | | TWFG MGA New Business | $13,525 | 3% | Q2 2025 Written Premium Retention Rate | Offering Type | Retention Rate | | :---------------- | :----- | | Insurance Services | 90% | | TWFG MGA | 80% | | Consolidated | 89% | Q2 2025 Total Written Premium by Line of Business ($ thousand) | Line of Business | Amount | Percentage of Total | | :----------- | :----- | :----------- | | Personal Lines | $365,409 | 81% | | Commercial Lines | $84,879 | 19% | Condensed Consolidated Financial Statements (Unaudited) This section presents TWFG's unaudited condensed consolidated financial statements, including statements of income and balance sheets Condensed Consolidated Statements of Income The unaudited condensed consolidated statements of income present TWFG's revenues, expenses, and net income for the three and six months ended June 30, 2025 and 2024, with detailed breakdowns of income and expense categories Condensed Consolidated Statements of Income ($ thousand) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----------------------------------- | :---------------- | :---------------- | :---------------- | :---------------- | | Total Revenue | $60,308 | $53,011 | $114,131 | $99,155 | | Total Operating Expenses | $52,945 | $45,490 | $101,038 | $84,330 | | Operating Income | $7,363 | $7,521 | $13,093 | $14,825 | | Income Before Income Taxes | $9,620 | $6,918 | $17,129 | $13,547 | | Net Income | $9,000 | $6,918 | $15,853 | $13,547 | | Net Income Attributable to TWFG, Inc. | $1,957 | $— | $3,295 | $— | | Diluted Earnings Per Share | $0.13 | $— | $0.22 | $— | Condensed Consolidated Balance Sheets The unaudited condensed consolidated balance sheets provide a snapshot of TWFG's financial position as of June 30, 2025, and December 31, 2024, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets ($ thousand) | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :-------------- | :---------------- | | Total Current Assets | $208,525 | $241,848 | | Total Assets | $342,849 | $323,428 | | Total Current Liabilities | $45,394 | $39,617 | | Total Liabilities | $53,878 | $48,142 | | Total Stockholders' Equity | $279,210 | $275,286 | - Cash and cash equivalents decreased from $195.772 million as of December 31, 2024, to $159.827 million as of June 30, 2025[39] - Net intangible assets significantly increased from $72.978 million to $125.901 million, reflecting recent acquisitions[39] Additional Information This section provides supplementary information including conference call details, forward-looking statements, and contact information Conference Call Information TWFG will host a conference call and webcast to discuss Q2 2025 results, with details provided for registration and accessing live and replay versions - The conference call and webcast are scheduled for 10:00 AM ET on August 13, 2025[19] - Participants can register for the conference call via the provided link, and the webcast will be available on the TWFG Investor Relations website at investors.twfg.com[19] Forward-Looking Statements This section contains a standard disclaimer regarding forward-looking statements, emphasizing inherent risks and uncertainties, and advises readers to consult SEC filings for risk factors - This press release contains "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995, which involve significant risks and uncertainties[21] - Forward-looking statements are based on current expectations and projections about future events and are not guarantees of future results, activity levels, performance, or achievements[21][22] - Readers are cautioned to consider the numerous risks outlined under the "Risk Factors" item in the company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the U.S. Securities and Exchange Commission[21] Contacts Contact information for investor relations and public relations is provided - Investor Contact: Gene Padgett, Chief Accounting Officer, TWFG (gene.padgett@twfg.com)[36] - Public Relations Contact: Alex Bunch, Chief Marketing Officer, TWFG (alex@twfg.com)[36]