Goosehead Insurance(GSHD) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the full-year 2019, premiums placed were $739 million, representing a 45% increase from 2018, exceeding the guidance range of 38% to 42% growth [12] - Revenue for the fourth quarter grew 59% to $23.4 million, while if reported under ASC 605, revenue would have grown 39% to $20.4 million [64] - Adjusted EBITDA for the full-year was $17.5 million, with an adjusted EBITDA margin of 23% under ASC 606, compared to 27% under ASC 605 [76] Business Line Data and Key Metrics Changes - The Franchise Channel generated revenues of $11 million in the fourth quarter, growing 54% to $9.5 million if reported under ASC 605 [69] - Corporate Channel revenues were $12.2 million in the fourth quarter, increasing 28% to $10.9 million if reported under ASC 605 [72] - Total written premiums for the full-year were $739 million, also an increase of 45%, with the Franchise Channel accounting for 67% of premiums compared to 62% in 2018 [67] Market Data and Key Metrics Changes - The company had over 482,000 policies in force, a 44% increase from one year ago [69] - Non-Texas franchises grew 71% year-over-year, now accounting for 76% of total franchises [71] - The Corporate Channel sales headcount increased by 49% to 248 agents [73] Company Strategy and Development Direction - The company continues to focus on long-term growth, prioritizing investments in people and technology to sustain high revenue growth [18][74] - The balance of the business is shifting towards the Franchise Channel, which is expected to yield higher margin revenue growth in the future [68] - The company plans to maintain an efficient capital structure while preserving balance sheet flexibility amid market uncertainties [29][80] Management's Comments on Operating Environment and Future Outlook - Management has seen no negative impact from the coronavirus, with strong lead flow and productivity [30][32] - The company anticipates that any potential negative impacts from the coronavirus will be temporary, maintaining optimism for long-term prospects [32] - Management is taking prudent actions to minimize potential disruptions, including preparing for remote work if necessary [31][32] Other Important Information - The company raised $85 million in new debt, with plans to use a portion to pay down existing notes payable [28][81] - The company has increased its internal technology development team by 80% compared to a year ago, emphasizing the importance of innovation [48] Q&A Session Summary Question: Will contingent commissions be restricted to just the third and fourth quarter? - Management indicated that it depends on the nature of the contingency, with better data available in the latter half of the year [84] Question: Is there any seasonality in terms of when investments will emerge in 2020? - Investments are made throughout the year, with no expected step function increase [86] Question: Can the company provide a breakdown between Corporate Channel and Franchise Channel commissions? - Management confirmed that a breakdown is available in the supplemental schedules of the earnings release [92] Question: How is the churn rate for franchises outside Texas compared to 2018? - The churn rate has decreased to 12%, accounting for only 1% to 2% of new business generated [116] Question: Did the company add any cushion in guidance for potential impacts from the coronavirus? - Management stated that there is some cushion in the guidance, but they are confident of minimal impact [112]