Goosehead Insurance(GSHD) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Goosehead Insurance, Inc. reported a total revenue growth of 20% for 2024, with core revenue growth of 17% and premium growth of 29% [19][50] - EBITDA reached nearly $100 million, reflecting a 43% year-over-year increase and a record margin of 32% [19][34] - Adjusted EBITDA for Q4 grew 164% to$ 37.4 million, up from $14.1 million in the previous year [55] Business Line Data and Key Metrics Changes - Franchise premiums increased by 33% to$ 778 million, while corporate premiums grew by 9% to $187 million [49][50] - Policies in force as of year-end were 1.7 million, marking a 13% increase [54] - Franchise productivity grew 47% year-over-year in Q4 and 49% for the full year [40] Market Data and Key Metrics Changes - The personal lines insurance market is showing signs of improvement, with auto direct loss ratios decreasing from 74.8% to 64.5% year-over-year, and homeowners' direct loss ratios improving from 81% to 66.8% [17][18] - Contingent commissions for Q4 were$ 24 million, bringing the full year to $31.4 million, significantly higher than anticipated [51] Company Strategy and Development Direction - Goosehead Insurance aims to expand its franchise distribution and enhance technology capabilities, including the launch of a mobile app and improvements in quote-to-issue technology [29][30][34] - The company is focusing on embedding franchises within existing businesses, such as mortgage servicers, to diversify lead flow and mitigate fluctuations in housing transaction volumes [46][110] - The goal is to achieve a "rule of sixty" performance, combining revenue growth and profit margin exceeding 60% [34] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of insurance in the wake of significant natural catastrophes and emphasized the need for adequate coverage [10][11] - The company remains optimistic about continued growth in 2025, driven by improved market conditions and strategic initiatives [19][60] - Management expressed confidence in the ability to capture additional market share and improve client retention rates [57][106] Other Important Information - Goosehead Insurance ended the year with$ 54.3 million in cash and total debt of $93.1 million [58] - The company completed a new term loan B offering of$ 300 million and a revolving credit facility of $75 million [59] Q&A Session Summary Question: Insights on contingent commissions - Management noted that the core performance of the book was better than anticipated, leading to larger contingencies from carriers [66] Question: Direction of EBITDA margin in 2025 - Management expects core revenue to grow faster than expenses, leading to margin expansion over time [69] Question: Product availability across geographies - Management indicated that product availability varies by state, with Texas seeing improvements in the E&S side [75] Question: Guidance on commission rates and client retention - Management anticipates an increase in average commission rates as the admitted market heals and expects gradual improvement in client retention [86] Question: Expectations for hiring and margin accretion - On the franchise side, new hires are margin accretive almost immediately, while corporate agents take about six to eight months to become margin accretive [121] Question: Long-term organic growth guidance - Management expects accelerating core revenue growth in 2025 compared to 2024, despite some conservative estimates due to contingent commissions [95]