Q3 2024 TWFG Inc Earnings Call
Okay.
Josh: Good morning, My name is Josh and I will be your conference operator today at this time I would like to welcome everyone to the T. W. F. G third quarter 2024 conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session. If you would like to ask a question. During this time simply press Star then one one on your telephone keypad. If you would like to withdraw your question Press Star. One again this call is being recorded and will be available for replay on the company.
Josh: Website.
Josh: Before we begin let me remind you that today's discussion may contain forward looking statements and actual results may differ materially from those discussed.
Josh: For more information regarding forward looking statements. Please refer to the company's press releases and SEC filings also on todays call. Our speakers will reference certain non-GAAP financial measures, which we believe will provide useful information for investors. The company has posted reconciliations of the non-GAAP financial measures discussed during this call.
Speaker Change: In the tables accompanying the company's earnings press release located in the investors section of the company's website at Www Dot Tw F. G. Dot com. It is now my pleasure to introduce Mr. Gordy bunch, founder chairman and CEO of Tw ft. Sir the floor is yours.
Josh: Okay.
Gordy Bunch: Thank you operator, good morning, everyone and thank you for taking time to join US today to discuss our third quarter 2024 results joining.
Gordy Bunch: Joining me on the call is Janice <unk>, our Chief Financial Officer.
Gordy Bunch: After my opening remarks, Janice will review our financial results and then we will take your questions.
Gordy Bunch: I would like to start off every call to take time to thank all of our employees carriers agents clients and vendors that continue to partner with us to achieve our goals.
We have a great team working everyday to create one of the fastest growing independent insurance distribution platforms in the country.
Gordy Bunch: This quarter, highlighting our team's resiliency as we started July with hurricane barrel rolling over our home office, knocking out power and Internet for several days.
Gordy Bunch: Our home office team executed our business continuity plan, bringing our temporary location online.
Day after landfall.
Gordy Bunch: Knowing we had a tremendously talented team capable of addressing the challenges from barrel allowed us to continue watching launching our IPO roadshow the same day.
Gordy Bunch: We completed our IPO in July.
Gordy Bunch: Using a $192 9 million in net proceeds through the issuance of $12 million 650000 shares of class a common stock at $17 per share price.
Gordy Bunch: Hurricanes, Francine Helene and Melton further tested our resiliency across Louisiana, and North Carolina, and Florida locations.
Gordy Bunch: GWG agencies have been through numerous catastrophic events over our 24 years and have contingency plans in place to address the safety of our agents and staff.
Gordy Bunch: <unk> offices can work remotely as needed to continue supporting our clients in their time of need. Our policy is caring is not just a tagline that comes to life in its most visible during these catastrophic events.
Gordy Bunch: Couldn't be prouder of our agents employees carriers and first responders answering the call to do their duty during our clients' greatest time of need.
Gordy Bunch: I want to remind everyone that tw if she does not have balance sheet exposure to the ensuing losses are carriers will cover.
Gordy Bunch: New business production timing of commissions overtime expenses contingency amounts and temporary operational disruptions would be TWD <unk> impacts from hurricanes floods and other catastrophic events.
Gordy Bunch: Our third quarter recruiting efforts continued to outpace our historical growth trends with our agency and our box offering launching 86, new twok locations in the quarter.
Gordy Bunch: The 86, new agencies opened 13, new states for TWC branches, and Alabama, genetic Idaho, Indiana, Missouri, Nevada, New Mexico, Oregon, South Carolina, South Dakota, Tennessee, Washington, and Wyoming.
Gordy Bunch: Which we believe will provide future growth for our business.
Gordy Bunch: Please note it will take several years for the newly on boarded agencies to contribute to our current period financials.
Gordy Bunch: It is too early to tell how these agencies will perform but it is good to see the growth in new locations and our geographical expansion.
As far as the operating environment is concerned we are beginning to see improvements in carrier appetite for growth as the industry achieved significant improvements in loss ratios.
Gordy Bunch: This is expected to lead to higher new business growth and expansion opportunities heading into 2025.
Gordy Bunch: <unk> had a strong third quarter highlighted by 14, 5% total revenue growth seven 6% organic revenue growth 15, 3% adjusted net income margin and a 21, 5% adjusted EBITDA margin.
At TWD <unk>, we believe we offer a strong value proposition for the tens of thousands of captive agents and independent agents looking for the right partner to help them grow and perpetuate their businesses are.
Gordy Bunch: Our value proposition, coupled with a conservative balance sheet flexibility around deal structuring and our efficient operating model position us well going forward.
Gordy Bunch: <unk> continues to build a pipeline of potential acquisitions, and we will have several non binding letters of intent in the marketplace.
Speaker Change: I'll now ask Jeff to review, our third quarter results in greater detail.
Jeff: Thank you Gordon and good morning to everyone on the call.
Speaker Change: With the top line written premium increased $46 million or 13% over the prior year period to $400 1 million under our primary offerings insurance services grew to $40 5 million or 13, 5% and TWC MCA grew $5 5 million or 10% over the <unk>.
Prior year period the.
Speaker Change: The increase in written premium was driven by an acceleration in new business and normalizing retention levels Cary.
Speaker Change: <unk> have begun to open up for new business across geographies, where they had previously restricted growth and consumers have more choices in the marketplace today compared to prior periods.
Speaker Change: As a result, we saw a shift in our back with new business premiums, increasing 39% or $25 million compared to a decrease of 21% or $16 1 million in the same period in the prior year and premium retention normalizing to 88% from 97% in the third quarter of 24.
Speaker Change: Total revenue increased $6 9 million or 14, 5% over the prior year period to $54 6 million, which was driven by accelerating new business activity rate increases healthy economic growth in our core states higher investment income and moderating retention level.
Speaker Change: Commission income increased $4 2 million or nine 7% over the prior year period to $48 2 million. This increase was due mainly to higher premium rates new business growth and continued rollout of our book of business acquisitions, and the 2023 and for the current period.
Speaker Change: We'd be income increased <unk> 8 million or 37, 2% over the prior year period to $2 9 million due mainly to an increase in policy fee income driven by higher policy count in RTW FTE MCA offering.
Speaker Change: In addition branch fee income increased <unk> 3 million or 42, 2% over the prior year period to $1 2 million due to an increased branch fee rates.
Speaker Change: Other income increased $1 6 million or 270% over the prior year period.
Speaker Change: You increased investment income.
Organic revenue increased $4 5 million to $47 3 million for an organic growth rate of seven 6% driven by increases in premium rates and healthy new business growth.
Speaker Change: Now turning to expenses.
Speaker Change: Make a comment that our expense comparisons to prior year periods for mainly commission expense in salary and employee benefits are.
The acquisition of nine of our independent branches in January 2024, which in prior years for operators agencies in a box and has now been converted into corporate branches.
Speaker Change: The commission expense associated with branch conversion to decrease while salary and benefits increased compared to prior year period.
Speaker Change: Commission expense decreased $1 7 million or five 2% over the prior year period to $30 8 million.
Speaker Change: This decrease represents one of $3 9 million decrease related to the branch conversions of which $2 4 million shifted his salary and benefits. This was offset by a $2 2 million increase related to growth of emissions.
Speaker Change: Total salary and benefits.
Speaker Change: <unk> increased by $4 9 million or 146% over the prior year period to $8 3 million.
Speaker Change: This increase was primarily due to one $2 4 million increase related to branch conversions in Q1 24.
Speaker Change: Commission expense shifted to salary and benefits.
Speaker Change: Secondly, 1 million $1 million increase related to 2023, corporate store acquisitions, and thirdly, a $1 million increased from the issuance of RF used in conjunction with the IPO.
Speaker Change: Other administrative expenses increased 2 million or 71, 2% over the prior year period to $4 8 million due to the continued growth in the business branch conversions and the absorption of public company costs.
Speaker Change: Amortization and depreciation expenses increased $1 9 million or 161% over the prior year period to 3 million due mainly to the amortization of intangibles associated with our branch conversions and the 2023 corporate store asset acquisition.
Speaker Change: Net income for the quarter decreased <unk> 7 million or nine 4% of the prior year period to $6 9 million.
Speaker Change: Adjusted net income for the quarter decreased <unk> 3 million or three 9% over the prior year period to $8 3 million. This decrease represents one of the increase in stock based comp of one 1 million.
Speaker Change: Increase the amortization to $2 9 million due to the aforementioned acquisitions and branch conversions.
Speaker Change: And thirdly, offset by an increase in tax expense on adjusted net income of $2 5 million.
Speaker Change: EBITDA and adjusted EBITDA for the quarter was $10 7 million with 18, 5% growth and $11 $7 million or 29, 7% growth respectively.
Speaker Change: Our adjusted EBITDA margin was 21, 5% in the third quarter compared to 19% in the prior year period.
The margin expansion was driven by branch conversions corporate locations acquired last year and economies of scale offset somewhat by public company costs, which we expect to continue to ramp into our run rate expense base over the next several quarters.
Speaker Change: With that I'll turn it back to Gordon.
Gordon: Thank you Janice in summary, this was a solid third quarter, our recruiting and M&A pipeline continued to build when we anticipate opportunities to deploy some of our $191 million unrestricted cash and $50 million undrawn revolver capacity in the months and quarters ahead with that we'd like to open the call for questions I will now turn it over to the.
Speaker Change: <unk>.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, we will pause for just a moment to compile the Q&A roster.
Speaker Change: Our first question comes from Michael Zaremski with BMO you May proceed.
Hey, good morning. Thank you this is Charlie on for Mike.
Can you update us on the number of agencies woodlands has by distribution channel and whether the recent pace of growth is sustainable.
Speaker Change: To clarify I think you reported 86, new agencies added in the quarter.
Speaker Change: And then I think you said 44 experienced agent hires from captives last quarter. So we're just trying to understand.
Speaker Change: The comparability and the sustainability of that growth. Thanks.
Speaker Change: Thanks, Charlie.
Speaker Change: Yes, we ended the calendar year.
Speaker Change: 23, with a little over 400 locations.
Speaker Change: Throughout this calendar year, we've added.
Speaker Change: Close to 130 540, new offices.
Speaker Change: Total office count right now would be north of 500.
Speaker Change: And we're seeing.
Speaker Change: Other.
Speaker Change: Changes in the marketplace that is still giving us a good pipeline flow.
Speaker Change: We did in the last quarter talk about specific carrier taking action on their distribution that gave us outsized Ricky.
Speaker Change: Our recruiting results for the second quarter that has bled into the third quarter.
Speaker Change: Most of that has already kind of played through we.
Speaker Change: We did expect more exposure from the IPO.
Speaker Change: And get more attention from perspective independent agencies and existing captive agencies looking to adopt our agency and our box model as well as partner with our MGA programs.
Speaker Change: And so in the agency in a box category Thats about 520 plus locations.
Speaker Change: The MGA it's over 2000.
Speaker Change: And our pipeline as far as inquiries coming in.
Speaker Change: We still have a lot of activity coming in.
Speaker Change: For new potential agency unit box recruits.
Speaker Change: So we do want to caution that the second quarter and third quarter.
Speaker Change: Or above historical averages.
Speaker Change: But even.
Looking at what's in our pipeline we.
We see that there'll be a.
Speaker Change: Continuation of above our average, but probably not at the same extreme that we saw in say the third quarter.
Speaker Change: Got it got it. Thank you that's helpful.
Speaker Change: The contingence in the quarter, if we look at it as a percentage of revenue that ticked up was there anything one time in that figure.
Speaker Change: Is this the right run rate ratio to think about going forward and is there upside should home insurance loss ratios continue to improve in the coming years.
Yes.
Speaker Change: Yes so.
Speaker Change: We will have some adjustments in the fourth quarter.
Speaker Change: When we get closer to seeing the year end results.
Speaker Change: I think when you look at the prior periods, where you had.
Speaker Change: So loss ratios for personal lines in homeowners loss ratio was elevated.
Speaker Change: The prior calendar years.
Speaker Change: That has taken us to a historical low.
Speaker Change: As we are starting to see the results of improved loss ratios across both lines of business.
Speaker Change: We're starting to see the contingency is coming towards us.
Speaker Change: More toward normalized levels.
Speaker Change: This is still below the peak.
Contingency revenue ratios that we've seen in the past.
Speaker Change: So far everything is looking.
Speaker Change: Good for the back half of 'twenty four.
Speaker Change: We think we will continue on in 'twenty five.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Paul Newsome with Piper Sandler You May proceed.
Speaker Change: Good morning, I was hoping you could give us a little bit more color about the change in the customer retention as it relates to the opening.
Yes.
Speaker Change: The various states.
Speaker Change: For new business, it sounds like Theres, a little bit about pushing pull with the new business, helping but.
Speaker Change: The.
Speaker Change: Retention offsetting that and I was wondering if that.
His behavior, you think will continue or if there's some sort of.
Speaker Change: Differences in how those two work together.
Speaker Change: Yes, Thanks Paul.
Speaker Change: I think theres a couple of things occurring when you look at the premium retention.
Speaker Change: One more markets have opened up to accept new business across a larger geography in the third quarter than was president and the first and second quarter.
Speaker Change: Providing our agents and our customers alternatives for their insurance that's renewing.
Also giving us more opportunities to write new business in areas that previously.
Speaker Change: Or <unk>.
Restricted for new business.
So it's not that our customers being lost.
Speaker Change: Or going elsewhere, it could be that the renewal premium or the expiring premium was a travelers might have been $2000 a year, but now that theres two or three new markets that have opened up that travelers travelers renewal they come in at 2500, but we have two or three alternative markets that were off our statements that would have coverage for <unk>.
Speaker Change: 800 or 900 so.
Speaker Change: The customers are having some options.
Speaker Change: Where they want to place their renewals.
Speaker Change: And similarly customers even in areas that are still hard.
Speaker Change: <unk> have less options, they're making coverage decisions, where the renewal for their premium may come in at plus 15% 20%.
Speaker Change: Work with their agent on how to really mitigate that increase and so many customers are opting to increase their deductibles or alter their coverages to help lower their rates to make their premiums were affordable. So that's part of what youre seeing in the premium retention.
Yes, new business as escalated as our agents are able to secure insurance across a broader portfolio.
Speaker Change: We indicated last quarter that we saw signs that the market was starting to head towards normalization I would say that that trend line continues we expect it to.
Speaker Change: Come fully normalized in the private passenger auto side through 'twenty five.
Some states that are working through rate filings at rate adequacy, but for the most part.
Speaker Change: All of our major markets are signaling positivity towards 25, and being more broadly open and looking to reinitiate growth initiatives. So good tailwind in that manner.
Speaker Change: Great I appreciate the help thank you.
Yes.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Tommy joined with <unk> You May proceed.
Speaker Change: Hi, This is dean Chris <unk> on for Tommy.
Speaker Change: You guys called out a change in the fee Commission structure, everyone on the MGA programs being like a headwind to organic growth this quarter.
Any way to quantify the impact and then also would you expect.
Speaker Change: Some modest headwinds in light.
Speaker Change: The fourth quarter or the first quarter of next year as well.
Speaker Change: So.
Speaker Change: Referring to the MGA program for <unk>, we did see and we projected as well we had a decline of $1 million for the quarter.
Speaker Change: So that we expect to see that when we compare next year, we won't have this anomaly.
Speaker Change: But that is we.
We have a flat fee now, but it was $1 million.
Speaker Change: Lawyer.
Speaker Change: A black.
Speaker Change: Fee income.
Yes Deane.
To answer your question about where you see that next year, we should not see that next year given that we have a five year agreement.
Speaker Change: We have a flat fee with the reset annually.
Speaker Change: So this was a.
Speaker Change: This was the most acute quarter, we knew that this was going to occur.
Speaker Change: Included that in our analyst models.
Speaker Change: It played through exactly as expected.
Speaker Change: It should not be a reoccurring and 25 given that we would have lived through the first year of that transition as the agreements.
Speaker Change: Okay that makes sense and then my next one could you guys just remind us of what goes into that other income line I know it ticked up a bit year over year. I think you mentioned in your prepared remarks, but can you just remind us about that and then how we should think about like a run rate.
Speaker Change: Going forward.
Speaker Change: So that other income.
Speaker Change: 5% of that.
Speaker Change: Investment income and its increased because we have more cash obviously from the IPO proceeds.
Speaker Change: So we will you will see that in our projections going forward to be increased.
Speaker Change: Based on our capital depending on when the M&A falls into place, but yes, you'll see that rate.
Speaker Change: Great.
Thank you. Thank you.
Speaker Change: Our next.
Speaker Change: <unk> goes from Brian Meredith with UBS you May proceed.
Brian Meredith: Yes, Thanks, I was hoping you could.
Brian Meredith: Talk a little bit more about the M&A pipeline do you think you might see some land here in the fourth quarter I know original expectations, probably not until next year and as being a public company helped at all as far as you know.
Things are getting to look at.
Speaker Change: So first question right now we do have.
Speaker Change: Signed LOI is out.
Speaker Change: With two acquisitions that we anticipate closing January one for simplicity so not.
Speaker Change: The fourth quarter.
Speaker Change: In line with what we.
Speaker Change: Provided in our projections.
Speaker Change: Analysts model.
Speaker Change: As far as are we seeing significant activity lift from the awareness of the IPO, yes.
Speaker Change: I would quantify that is substantial.
Speaker Change: Our pipeline is robust.
Speaker Change: And it spans.
Speaker Change: Retail MGA programs.
Speaker Change: We are seeing things internationally, not or chasing anything outside of the country.
Speaker Change: We're getting a lot of looks coming our way from a number of investment banks.
Speaker Change: M&A brokers.
Speaker Change: And honestly some agencies that are reaching out to us.
Proactively knowing that we are a buyer in this space.
Speaker Change: I may have familiarity with with our organization and are actually seeking us out as potential preferred buyers. So we do have a good pipeline we do anticipate.
Meeting, what we provided in the analyst model.
Speaker Change: Which if you recall had at year end convention.
Revenue and EBITDA that we provided to you.
Speaker Change: We will.
Speaker Change: Closing those transactions one one so instead of $12 30 wanted to be one one and that just gives us a clean cut floor.
Speaker Change: The employees of the acquiring targets.
Speaker Change: And for Us to live launch with those folks beginning your calendar year.
Speaker Change: I appreciate that makes it easy for us to.
And then.
Speaker Change: Second thing wholesaler could.
Speaker Change: Could you talk a little bit about kind of flow business into your wholesaler. What are you seeing as maybe the market is opening up a little bit here or is it still a lot of business slow in that way.
Speaker Change: Our program side is seeing an influx of activity.
Speaker Change: The market in our core states is still relatively hard on the property side. So we are getting increased volume.
Speaker Change: In our programs, which is doing.
Homeowners insurance across the.
Speaker Change: The state of Texas, as well as high value home programs.
Across the country, so as that property segment.
Speaker Change: That remains.
Speaker Change: Art or fragmented we are seeing more engagement on the wholesale side. So RGA showed positive growth in the quarter.
Speaker Change: A lot of that was driven through our programs business.
Speaker Change: Great. Thank you.
Speaker Change: Jim.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Scott <unk> with RBC capital markets. You May proceed.
Speaker Change: Yes.
Speaker Change: Thanks. Good morning, just wondering if you could talk about market conditions and capacity opening up I know you've kind of referenced that in auto and talking about some normalization, but I'm wondering if you could talk about home, particularly in Texas I know that that continues to be kind of a more more difficult challenging state given whats happened with catastrophe losses, but.
Speaker Change: What are you seeing out there and do you expect to see normalization in in Texas in most places of homeowners in 2025 at some point.
Speaker Change: So with.
Speaker Change: Auto I think auto will be a different story than home auto seems to achieve rate adequacy in most of the national underwriters are projecting confidence in rates.
Many are starting to institute new business incentives, which is the signal that we like to see as they are committed to the growth on.
On the property side I'm sure you saw the announcement from progressive on being more selective.
Speaker Change: That restricted underwriting guideline that youre looking for a bundled packages.
Speaker Change: And some of the.
Speaker Change: Less appetite for cat exposed geography.
Speaker Change: That's going to create a pretty decent void in the marketplace.
Speaker Change: That market place void will get filled by regional markets.
Speaker Change: New startups programs.
Speaker Change: So our job is to make sure we're aligning our distribution up with the available capacity that exists across the span of carriers.
Speaker Change: <unk> our own programs, so in Texas, specifically Scott.
Speaker Change: Our homeowners program has seen tremendous growth.
Speaker Change: Starting back in April when Progressive first announced their restricted underwriting guidelines, we do see a couple of the national carriers.
Speaker Change: That are signaling that they have more confidence in their roof age scheduling for coverage reductions and underwriting guidelines in pricing that they're going to be more open for property.
Speaker Change: So I think it's going to be a combination of a shrinking national market.
Speaker Change: And in expanding our regional Super regional and new programs that come to fruition.
Speaker Change: The property side.
Speaker Change: Okay, that's definitely helpful color.
Speaker Change: The other thing I want to ask you is just.
Speaker Change: Is there a way you can quantify what the new public company expenses were in the quarter and how you see that.
Speaker Change: I mean over the next few quarters.
Speaker Change: I guess you just went public so obviously there is a little more to come but.
Speaker Change: Anything you can point to one on either of those.
Speaker Change: Well I know my audit expenses are significantly higher as well.
Speaker Change: My legal fees are significantly higher than our private company.
Speaker Change: Maybe when we have our one on one will give you more granular detail I don't have that number top of mind.
Speaker Change: We do know and hopefully you picked it up in our language that we do anticipate additional <unk>.
Speaker Change: Public company expenses coming in through the next several quarters, we have some open positions more SEC related experienced roles that we're looking to fill those arent in our current actuals, but their R&R forecast budgets, so even though we're achieving our EBITDA.
Speaker Change: It's higher than we projected and this quarter, we wanted to make sure that we're consciously conveying that we will have some hires that.
Speaker Change: We will bleed into the actual results going forward, but they are they are in our projections.
Speaker Change: And when we provide updated projections will include those.
Speaker Change: Okay, and then just lastly, the retention rate.
Speaker Change: Do you expect that to kind of stay normalized in the high eighties I know it had been in the Ninety's, but is that do you.
Speaker Change: Kind of expect that to that run rate to be kind of the new run rate or could it could go back to the Ninety's next next year.
Speaker Change: Yes, so Scott our actual longer term historical averages have been has been the 88%.
Speaker Change: And I think when we did the analyst model back in the spring.
Speaker Change: Showed 88% in the model, even though we were currently in the nineties.
Speaker Change: So we expected this normalization of the market.
Speaker Change: Customer behavior to self advocate right down.
Speaker Change: To get us back to where we're at on this 88% projectiles.
Speaker Change: Great. Thanks.
Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone.
Speaker Change: Our next question comes from Pablo <unk> with Jpmorgan you May proceed.
Speaker Change: Hi, good morning, So most of my questions have been asked I'll probably ask.
Speaker Change: More follow ups here. So first just on expenses given the ramp up in pub code expenses, how much higher do you think the quarterly G&A will look like from here.
Speaker Change: I think the quarter was $4 eight.
Speaker Change: Much higher pay would go from there.
What piece of DNA.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yes for the quarter, so we're up $2 million from.
Speaker Change: From prior year, and then going back to the question that you had for <unk>.
Speaker Change: On the professional fees roughly of that $10 million. We've got 500000, SME professional fees that have increased and we are expecting prop.
Speaker Change: We got the fees from mainly audit.
Speaker Change: <unk> is going to be bad guys and then the salaries, so I would say roughly 15% to 20%.
Speaker Change: We have in our.
Speaker Change: Projections for next year, increasing yes.
Speaker Change: Yes.
Speaker Change: I don't know if you heard that Pablo.
Speaker Change: Half of half of the increases legal and audit and we still have legal estimates to come in which May may spike higher, but then we have open positions, which will be new salaries related to being public that could be another <unk> 5 million to $1 million.
Speaker Change: That's not currently in the actuals.
Speaker Change: As we live into those new hires new roles, we will keep updating but we're anticipating at least another $1 million.
Speaker Change: <unk> salary.
Speaker Change: Possibly two somewhere in that range.
Got it and the Midland is on an annual basis <unk> on a quarterly basis.
Speaker Change: No $1 million would be on an annual basis $1 1 million.
Speaker Change: Got you.
Speaker Change: And then.
Speaker Change: Second follow up so.
Speaker Change: The topic of retention had come up I think.
Speaker Change: Once or twice in the call already but.
Speaker Change: I guess just a follow up on one question about the retention has been from new agents, who are growing their books into butter markets available in your platform.
Speaker Change: So as you continue to experience above average growth over the next several quarters here is there a risk of it.
Speaker Change: If the company falling below the normal 88% potential right just as youre experiencing this above normal growth.
Speaker Change: Well the retention the retention is on prior year actual business. So agents that may have joined us that are bringing in customers from prior relationships those show up in the new business category.
Speaker Change: We're looking at that 88% retention has been the long term average.
Speaker Change: And I don't expect that the agents that are bringing in portfolio or rewriting accounts from outside are going to impact that 80%. We think that's a pretty good long term numbers.
Speaker Change: Okay.
Speaker Change: And then last for me so income tax expense booked on a GAAP basis lower than the taxes you feel for adjusted net income.
Speaker Change: What's the reason for that gap and is that a real cash benefit the company. Thank you.
Speaker Change: So the tax expense Youre seeing is just on the Pepco.
Speaker Change: Pepco in.
Speaker Change: They are their pro rata share, which is roughly 2425%.
Speaker Change: So.
Speaker Change: 21% to 22% tax rate.
Speaker Change: Finally, CMS lower we don't have on the LLC side Theres now a partnership that you don't have taxes.
Speaker Change: With that it's just on the cap ex there are percentage.
Interesting.
Speaker Change: Thank you.
Speaker Change: Yes. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question goes from Michael Zaremski with BMO you May proceed.
Speaker Change: Hey, Thanks. This is Charlie again, just one follow up.
Speaker Change: Can you update us please on the.
Speaker Change: The run rate for stock comp from here.
Speaker Change: Sure.
Speaker Change: So right now.
Speaker Change: Stock comp for the quarter was really amortization of the <unk> units from the IPO grants.
There were a little over $7 million IPO granted.
Speaker Change: Will vest over a two and a half year period.
Speaker Change: So those will amortize in throughout those quarters.
Speaker Change: Our comp committee will be improving the stock comp or equity comp plan for 'twenty five Emmy Awards for 24 and <unk>.
Speaker Change: December.
Speaker Change: We add in the analyst model and annual.
Speaker Change: Stock comp of around $4 million as a placeholder. So once we get through the <unk>.
Speaker Change: Comp committee's recommendations and the Board's ultimate selection of 24 awards in 'twenty five incentives.
Speaker Change: Will normalize whatever that total amount is but right now of $4 million a year was a good placeholder.
Speaker Change: Thank you.
Speaker Change: Thank you at this time there are no further questions I will now turn the call back over to Mr. Bunge.
Speaker Change: Thank you Josh Thank you all who attended.
Speaker Change: This morning's call.
Speaker Change: Look forward to continuing to provide information on our company's growth and prospects going forward I know, we have a number of follow up calls with many of you and we look forward to getting into more details and answering more of your questions.
Speaker Change: Again, we had a great third quarter in line with what we provided in our projections.
Analysts' models.
Speaker Change: We look forward to continuing to execute against our plans.
Speaker Change: Looking at.
Speaker Change: Current.
Speaker Change: Year end guidance would be the same as we provided in the analyst model. We are seeing things that are playing out the way we had projected so I appreciate everybody on the call and look forward to reporting full year, our fourth quarter information you are coming up in the first quarter of 2025.
Speaker Change: Thank you.
Speaker Change: Thank you and that concludes today's conference. Thank you all for participating you may now disconnect.
Speaker Change: Okay.
[music].
Speaker Change: Okay.
Speaker Change: Great.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: [music].
Speaker Change: Okay.