Q4 2024 Goosehead Insurance Inc Earnings Call

February 24, 2025

Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Dan Farrell, Vice President capital markets. Please go ahead.

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Thank you and good afternoon before we begin our formal remarks I need to remind everyone that part of our discussion. Today may include forward looking statements, which are based on expectations estimates and projections of management as of today forward looking statements in our discussion are subject to various assumptions risks uncertainties that are.

Difficult to predict and which could cause actual results to differ materially from those expressed or implied in the forward looking statements.

These statements are not guarantees of future performance and therefore undue reliance should not be placed on them. We refer all of you to our recent SEC filings for more detailed discussion of risks and uncertainties that could impact future operating results and financial condition of Doucet, we disclaim any intention or obligation to update or revise any forward looking statements.

Except to the extent required by applicable law I would also like to point out that during this call. We will discuss certain financial measures that are not prepared in accordance with GAAP management uses these non-GAAP financial measures when planning monitoring and evaluating our performance. We consider these non-GAAP financial measures to be useful metrics for management and investors to.

<unk> operating performance comparisons period to period by including potential differences caused by variations in capital structure tax position depreciation and amortization and certain other items that we believe are not representative of our core business for more information regarding the use of non-GAAP financial measures, including reconciliations of these measures.

So the most recent comparable GAAP financial measures. We refer you to today's earnings release. In addition, this call is being webcast an archived version will be available. Shortly after the call ends on the Investor Relations portion of the company's website at <unk> Dot com.

Mark Miller: Now I'd like to turn the call over to our President and CEO Mark Miller.

Mark Miller: Thanks, Dan and good afternoon, everyone and welcome to our fourth quarter 2024 earnings call before we dive into the results I want to take a moment to acknowledge those affected by the devastating California wildfires.

Mark Miller: Our thoughts are with the individuals and families impacted by this tragedy. These.

Mark Miller: These events serve as a powerful reminder of the critical role insurance plays in rebuilding lives and we're deeply thankful for our agents who are on the ground supporting clients. During these most challenging times.

Mark Miller: Throughout 2024, we saw many powerful reminders why insurance is more than a product it's a lifeline when it matters most.

Mark Miller: It was a year of significant natural catastrophes and insurance market challenges, which underscore the critical role we play for clients agents and carriers.

Mark Miller: A recent report by Gallagher re estimated that U S catastrophe related insured losses were $117 billion in 2024 20.

Mark Miller: 27% higher than the five year average.

Mark Miller: U S economic losses were estimated at 222 billion, leaving a substantial insurance coverage gap.

Mark Miller: For many years households are treated personal lines insurance is a commodity decision based solely on cost.

Mark Miller: But extreme events of 2024, and the recent California wildfires remind us of the risks of an adequate coverage.

Mark Miller: At the same time premiums have increased rapidly in certain geographies have product limitations.

Mark Miller: This has left the consumer confused on where to turn.

Mark Miller: Fortunately goes head was uniquely built for this challenging market. This is why we exist.

Mark Miller: Our expert agents backed by a strong network of top tier insurance carriers simplify the complexities of insurance to find the right coverage at the best possible price.

Mark Miller: Our agents evaluate proper deductibles replacement costs and key perils, such as fire wind flood liability and personal policy terms.

Mark Miller: And we accomplished this while providing a true shopping experience with access to over 200 carriers or.

For many years households are treated personal lines insurance is a commodity decision based solely on cost.

Mark Miller: Our value proposition is equally compelling for carrier partners.

But extreme events of 2024, and the recent California wildfires remind us of the risk of an adequate coverage.

Mark Miller: By leading with home <unk> brings high quality bundled clients to carriers, who attained well which drives favorable loss ratios.

At the same time premium has increased rapidly in certain geographies have product limitations.

Mark Miller: We work with each carrier to understand their risk appetite and then leverage technology to deliver the exact type of clients. They are looking for.

This has left the consumer confused on where to turn.

Fortunately goes head was uniquely built for this challenging market. This is why we exist.

Mark Miller: Delivering profitable growth for carriers allows them to open up for us even when they're closed for other distribution partners.

Our expert agents backed by a strong network of top tier insurance carriers simplify the complexity of insurance to find the right coverage at the best possible price.

Mark Miller: We're not just a partner, we drive growth and profitability for their businesses, where and when they need it most.

Our agents evaluate proper deductibles replacement costs and key perils, such as fire wind flood liability and personal policy terms.

Mark Miller: Turning to market conditions over the past two years, we have successfully navigated unprecedented product challenges I.

Mark Miller: I am pleased that the market is now continuing to show gradual signs of improvement.

And we accomplished this while providing a true shopping experience with access to over 200 carriers.

Mark Miller: Through the first nine months of the year the industry statutory auto direct loss ratios were 64, 5% down from 74, 8% a year ago.

Our value proposition is equally compelling for carrier partners.

By leading with home <unk> brings high quality bundled clients to carriers, who retain well which drives favorable loss ratios.

Mark Miller: Homeowners direct loss ratios were 66, 8% versus 81% a year ago.

We work with each carrier to understand their risk appetite and then leverage technology to deliver the exact type of client theyre looking for.

Mark Miller: And fourth quarter results for publicly traded personal lines companies have generally improved.

Mark Miller: Auto premium increases are slowing and in some instances, we're seeing modest decreases as more carriers are continuing to open up auto product capacity and look for growth.

Delivering profitable growth for carriers allows them to open up for us even when they're closed for other distribution partners.

We're not just a partner will drive growth and profitability for their businesses, where and when they need it most.

Mark Miller: Homeowners product remained tight in Q4, but we're seeing signs of carriers starting to open capacity or indicate they intend to open more product as the year progresses.

Turning to market conditions over the past two years, we have successfully navigated unprecedented product challenges.

Mark Miller: Although this varies by carrier and state.

I am pleased that the market is now continuing to show gradual signs of improvement.

Mark Miller: An improving market will allow us to better serve clients and lean more heavily into technology rollouts in areas such as quote to issue that had been limited to some extent by carriers appetite for growth.

Through the first nine months of the year the industry statutory auto direct loss ratios were 64, 5% down from 74, 8% a year ago.

Mark Miller: Turning to our results we delivered an outstanding 2024, with 20% total revenue growth, 17% core revenue growth.

And homeowners direct loss ratios were 66, 8% versus 81% a year ago.

And fourth quarter results for publicly traded personal lines companies have generally improved.

Mark Miller: 29% premium growth in EBITDA in year $100 million up 43% year over year with a record margin of 32%.

Auto premium increases are slowing and in some instances, we're seeing modest decreases.

Mark Miller: Delivering these numbers in this market speaks to our team's no excuses mindset to deliver results.

As more carriers are continuing to open up auto product capacity and look for growth.

Homeowners product remained tight in Q4, but we're seeing signs of carriers starting to open capacity or indicate they intend to open more product as the year progresses.

Mark Miller: Here's how we got there.

Mark Miller: We reaccelerate growth by increasing producer head count, which drove year over year Pip growth to 13% in Q4 up from 12% in Q3 and 11% in Q2.

Although this varies by carrier and state and.

An improving market will allow us to better serve clients and lean more heavily into technology rollout in areas such as quote to issue that had been limited to some extent by carriers appetite for growth.

Mark Miller: We believe this momentum signals even stronger growth ahead in 2025.

Mark Miller: We enhanced profitability through disciplined cost management and achieved record margin all while continuing to make critical investments in our people and technology.

Turning to our results we delivered an outstanding 2024, with 20% total revenue growth, 17% core revenue growth <unk>.

Mark Miller: We extended our leadership in technology innovation by expanding and refining proprietary tools like our quote to issue capability.

29% premium growth in EBITDA in year $100 million.

Mark Miller: Our agent platform and referral partner marketing technology.

About 43% year over year with a record margin of 32%.

Mark Miller: With these advancements we are setting a new standard for tech enabled insurance.

Delivering these numbers in this market speaks to our team's no excuses mindset to deliver results.

Mark Miller: We strengthened our talent by Onboarding over 800 top tier sales agents across corporate enterprise and franchise distribution.

Here's how we got there.

We reaccelerate growth by increasing producer head count, which drove year over year Pip growth to 13% in Q4 up from 12% in Q3 and 11% in Q2.

Mark Miller: Our record recruitment effort.

Mark Miller: We continue to transform our largest piece of business franchise distribution, which accounts for 83% of our producer force.

We believe this momentum signals even stronger growth ahead in 2025.

Mark Miller: Franchise progress included.

Mark Miller: Scaling of existing franchises with average producers per franchise at one nine versus $1 six a year ago and franchise producers up 7% year over year.

We enhanced profitability through disciplined cost management and achieved record margin all while continuing to make critical investments in our people and technology.

Dramatically, increasing our franchise, new business productivity, which was up 49% in 2024.

We extended our leadership in technology innovation by expanding and refining proprietary tools like our quote to issue capability.

Mark Miller: Significantly reducing franchise terminations, given higher quality across our network.

Our agent platform and referral partner marketing technology.

Mark Miller: Improving the Onboarding time and performance of new franchises.

With these advancements we are setting a new standard for tech enabled insurance.

Mark Miller: Just to give some data on overall franchise health total average gross pay to franchises in 2024 was up 47% when compared to 2023.

We strengthened our talent by Onboarding over 800 top tier sales agents across corporate enterprise and franchise distribution Ah.

Our record recruitment effort.

Mark Miller: Our franchise has got stronger and more successful across the board despite the market getting more difficult.

We continue to transform our largest piece of business franchise distribution, which accounts for 83% of our producer force.

Mark Miller: Building on our achievements in 2024, we're excited to accelerate momentum in key areas for 2025.

Franchise progress included.

Scaling of existing franchises with average producers per franchise at one nine versus $1 six a year ago and franchise producers up 7% year over year.

Mark Miller: Franchise distribution expansion will be driven by.

Mark Miller: Expanding recruiting of producers and Onboarding of franchises.

Mark Miller: As an increasing percentage of our franchise base, we'll look to scale their businesses.

Dramatically, increasing our franchise, new business productivity, which was up 49% in 2024.

Mark Miller: Today, roughly 38% of our franchise base has multiple producers compared to 27% two years ago.

Significantly reducing franchise terminations, given higher quality across our network.

Mark Miller: Increasing franchise launches through expanded franchise development resources and.

Improving the Onboarding time and performance of new franchises.

Mark Miller: In 2024, we doubled the size of our franchise development team to position us for more rapid expansion as market conditions improve.

Just to give some data on overall franchise health total average gross pay to franchises in 2024 was up 47% when compared to 2023.

Mark Miller: And attracting larger middle market franchises. The types of franchises, we are adding are changing more and more.

Our franchise has got stronger and more successful across the board despite the market getting more difficult.

Mark Miller: More we're looking for franchises with larger growth potential and built in lead flow. This.

Building on our achievements in 2024, we're excited to accelerate momentum in key areas for 2025.

Mark Miller: This includes businesses like mortgage Servicers and realtors that want to access insurance economics by embedding our franchise in their business.

Franchise distribution expansion will be driven by.

Mark Miller: We had early success in 2024 and will ramp. These efforts in 2025 with a continued focus on support training and resource allocation to help franchisees maximize growth.

Expanding recruiting of producers and Onboarding of franchises as an increasing percentage of our franchise base, we'll look to scale their businesses.

Today, roughly 38% of our franchise base has multiple producers compared to 27% two years ago.

Mark Miller: We also expect to continue continue to convert successful corporate agents to franchises.

Increasing franchise launches through expanded franchise development resources.

Mark Miller: And corporate distribution, we will be growing across both traditional corporate agents that work with referral partners and enterprise sales agents, which handle inbound digital and partnership leads our corporate agent count at year end was 417, an increase of 39% of which 65 were enterprise <unk>.

In 2024, we doubled the size of our franchise development team to position us for more rapid expansion as market conditions improve.

And attracting larger middle market franchises. The types of franchises, we are adding are changing.

More and more we're looking for franchises with larger growth potential and built in lead flow.

Mark Miller: <unk> agents.

Mark Miller: We will likely grow corporate agent count at a slower pace in 2025, given our larger starting base, particularly in enterprise sales, which doubled in 2024.

This includes businesses like mortgage Servicers and realtors that want to access insurance economics by embedding our franchise in their business.

Mark Miller: Texas continues to have our largest concentration of corporate agents, but we're quickly diversifying our footprint to capitalize on changing market opportunities for example.

We had early success in 2024 and will ramp. These efforts in 2025 with a continued focus on support training and resource allocation to help franchisees maximize growth.

Mark Miller: We successfully launched our new Phoenix, Arizona Office in Q4, and initial production per agent has been strong.

We also expect to continue continue to convert successful corporate agents to franchises.

Mark Miller: New corporate offices will help revenue in underpenetrated regions and provide a consistent stream of highly skilled future franchise owners.

And corporate distribution, we will be growing across both traditional corporate agents that work with referral partners and enterprise sales agents, which handle inbound digital and partnership leads our corporate agent count at year end was 417, an increase of 39% of which 65 were enterprise sale.

Mark Miller: Enterprise sales should continue to grow faster than total corporate producer count as we're building capacity to ultimately capitalize on a robust partnership pipeline.

Mark Miller: On the technology front, we will be launching the goose had mobile app empowering clients with unprecedented self service functionality from proof of insurance to claim tracking.

<unk> agents.

We will likely grow corporate agent count at a slower pace in 2025, given our larger starting base, particularly in enterprise sales, which doubled in 2024.

Mark Miller: And we will continue our expansion of our quote to issue technology across carriers and states.

Texas continues to have our largest concentration of corporate agents, but we're quickly diversifying our footprint to capitalize on changing market opportunities for.

Mark Miller: This technology is quickly becoming the standard that will allow the broker carrier partner, our clients to seamlessly transact business and ultimately deliver a direct to client experience that opens up new pools of clients.

For example, we successfully launched our new Phoenix, Arizona Office in Q4 and initial production per agent has been strong.

Mark Miller: We strongly believe that knowledgeable and independent agents will always play a major role in personal lines insurance for those clients that want and need agent expertise.

New corporate offices will help revenue in underpenetrated regions and provide a consistent stream of highly skilled future franchise owners.

Mark Miller: These tools allow those agents to be more productive, while giving us access to new clients.

Enterprise sales should continue to grow faster than total corporate producer count as we're building capacity to ultimately capitalize on a robust partnership pipeline.

Mark Miller: Additionally, we believe AI will impact virtually every aspect of how we sell and service personal lines insurance in the future.

On the technology front, we will be launching the goose had mobile app empowering clients with unprecedented self service functionality from proof of insurance to claim tracking.

To capitalize on these opportunities we're investing in our data infrastructure sophisticated AI tools and the talent necessary to design and build these capabilities.

And we will continue our expansion of our quote to issue technology across carriers and states.

Mark Miller: We currently use AI in a variety of ways for our service and sales teams, we use AI to assist in auto drafting E mails to more effectively and efficiently communicate with clients.

This technology is quickly becoming the standard that will allow the broker carrier partner, our client to seamlessly transact business and ultimately deliver a direct to client experience that opens up new pools of clients.

Mark Miller: We also utilize AI to draft code that is used in the testing of our current software.

We strongly believe that knowledgeable and independent agents will always play a major role in personal lines insurance for those clients that want and need agent expertise.

Mark Miller: In the near term, we expect to use AI to capture and summarize conversations with clients for our service center, which will allow us to analyze sentiment and identify service improvement opportunities in real time.

These tools allow those agents to be more productive, while giving us access to new clients.

Mark Miller: In addition on the sales side, we intend to leverage AI to create a policy recommendation engine, creating a better experience for both the sales agents and clients.

Additionally, we believe AI will impact virtually every aspect of how we sell and service personal lines insurance in the future.

To capitalize on these opportunities we're investing in our data infrastructure sophisticated AI tools and talent necessary to design and build these capabilities.

Mark Miller: Ultimately AI tools are becoming ubiquitous, but the data and accumulated experience of proprietary to goose head.

Mark Miller: That is why we believe we have a unique opportunity to widen our moat and create a sustained AI competitive advantage.

We currently use AI in a variety of ways for our service and sales teams, we use AI to assist in auto drafting E mails to more effectively and efficiently communicate with clients.

Mark Miller: Our company is built for sustained profitable growth and we're just getting started.

Mark Miller: We're continuing on our trajectory toward becoming a rule of 60 company, where the combination of revenue growth and profit margin exceed 60%.

We also utilize AI to draft code that is used in the testing of our current software.

In the near term, we expect to use AI to capture and summarized conversations with clients for our service center, which will allow us to analyze sentiment and identify service improvement opportunities in real time.

Mark Miller: In 2024, we ended the year as a rule of 50 company, delivering 20% revenue growth and 32% EBITDA margin.

Mark Miller: An impressive result, amidst challenging market conditions.

In addition on the sales side, we intend to leverage AI to create a policy recommendation engine, creating a better experience for both the sales agents and clients.

Mark Miller: I am confident that our investments in innovation people and operational excellence will propel us toward and sustain rule of 60 performance for many years to come.

Ultimately AI tools are becoming ubiquitous, but the data and accumulated experience of proprietary to goose head.

Mark Miller: Although we're pleased with our success. Thus far goes head is just beginning its journey.

Mark Miller: As a reminder, we are still less than 1% of the U S personal lines market share.

That is why we believe we have a unique opportunity to widen our moat and create a sustained AI competitive advantage.

Backed by a clear strategy unparalleled capabilities, our relentless commitment to precision execution and an ever expanding competitive mode. We are poised to redefine what's possible in the insurance industry.

Our company is built for sustained profitable growth and we're just getting started.

We're continuing on our trajectory towards becoming a rule of 60 company, where the combination of revenue growth and profit margin exceed 60%.

Mark Miller: <unk> future is brighter than ever and I want to thank our employees agents and partners for their tireless efforts.

In 2024, we ended the year as a rule of 50 company, delivering 20% revenue growth and 32% EBITDA margin.

Mark Miller: Your dedication and innovation fueled everything we achieved.

An impressive result, amidst challenging market conditions.

Speaker Change: Now I'll hand, it over to our CFO Mark Jones Junior to review the financial details. Thank you.

I am confident that our investments in innovation people and operational excellence will propel us toward and sustained rule of 60 performance for many years to come.

Speaker Change: Thanks, Mark and good afternoon to everyone on the call.

Speaker Change: Over the last year, Mark and I have spoken extensively about <unk> strategy for re accelerating growth.

Although we're pleased with our success. Thus far goes head is just beginning its journey.

Speaker Change: Expanding productive head count and agent productivity leveraging technology strengthening partnerships.

As a reminder, we are still less than 1% of the U S personal lines market share.

Speaker Change: As defined lead sources and most importantly, keeping the client at the center of our universe.

Speaker Change: I could not be more pleased that the fruits of our efforts are beginning to materialize in our results and should continue to benefit us in 2025 and beyond.

Speaker Change: Today, Mark Miller also talked a little bit about the overall landscape of the personal lines industry and our 2025 priorities.

<unk> future is brighter than ever and I want to thank our employees agents and partners for their tireless efforts.

Speaker Change: I'm going to hit a little deeper on these topics and provide some additional insight into our 2024 results.

Your dedication and innovation fueled everything we achieved.

Speaker Change: Over the past two years personal lines insurance has shifted from a product that was on auto pilot for many clients to a significant focus due to rapid premium increases and evolving risk exposure nationwide.

Speaker Change: Now I'll hand, it over to our CFO Mark Jones Junior to review the financial details. Thank you.

Speaker Change: Thanks, Mark and good afternoon to everyone on the call.

Today discussions also include policy nuances, what's covered and importantly, what's not.

Over the last year, Mark and I have spoken extensively about <unk> strategy for re accelerating growth.

Speaker Change: As carriers have navigated the last couple of years to get more sustainable underwriting results. There have been changes to coverages deductibles and new entrants into the market that many clients are not used to.

Speaker Change: Expanding productive head count and agent productivity, leveraging technology strengthening partnerships diversify lead sources and most importantly, keeping the client at the center of our universe.

Speaker Change: An increasing percentage of business has shifted to the excess and surplus lines market, adding complexity for clients referral partners and independent agents across the industry.

Speaker Change: I could not be more pleased that the fruits of our efforts are beginning to materialize in our results and should continue to benefit us in 2025 and beyond.

Speaker Change: This is where it goes head thrives solving the unique challenges of our key stakeholders through advanced technology robust product offering and a fully integrated back office.

Speaker Change: Today, Mark Miller also talked a little bit about the overall landscape of the personal lines industry and our 2025 priorities.

Speaker Change: Going to hit a little deeper on these topics and provide some additional insight into our 2024 results.

Looking at our agent for US specifically the franchise business and is now healthier than ever and positioned for strong sustainable growth franchise.

Speaker Change: Over the past two years personal lines insurance has shifted from a product that was on auto pilot for many clients through significant focus due to rapid premium increases and evolving risk exposure nationwide.

Speaker Change: <unk> franchise productivity grew 47% year over year in the fourth quarter and 49% for the full year.

Speaker Change: We've been able to achieve this through continued investment in our technological advantage further widening our competitive moat by providing our agents with tools that we believe do not exist elsewhere in the industry.

Speaker Change: Today discussions also include policy nuances, what's covered and importantly, what's not.

Speaker Change: Our quote to issue platform is now at a scale that we are issuing thousands of policies each month, allowing us to learn adapt and deploy changes that make the platform more user friendly for agents and were targeted for our carrier partners at a really rapid pace.

Speaker Change: As we look to the future the improving landscape our underwriting profitability should allow us to further capitalize on the development work, we have done as more carriers allocate their capital to growth based initiatives.

Speaker Change: This is where it goes head thrives solving the unique challenges of our key stakeholders through advanced technology robust product offering and a fully integrated back office.

Speaker Change: Yearend franchise producers totaled 2092 up 7% and producers per franchise was one nine up 19% from one year ago.

Looking at our agent for US specifically the franchise business and is now healthier than ever and positioned for strong sustainable growth franchise.

Speaker Change: <unk> franchise productivity grew 47% year over year in the fourth quarter and 49% for the full year.

Speaker Change: As we've discussed in the past growing the average number of producers for franchise is a highly leveraged strategic initiatives.

Speaker Change: Each time, an agency adds it producer the productivity of everyone in that agency improves.

Speaker Change: As more of the franchise base progresses from a single producer location to scale businesses the impact of total new business production becomes exponential.

Speaker Change: Our quote to issue platform is now at a scale, where we are issuing thousands of policies each month, allowing us to learn adapt and deploy changes that make the platform more user friendly for agents and were targeted for our carrier partners at a really rapid pace.

Speaker Change: We're still in the early stages of this powerful growth lever and expect to see continued momentum.

Speaker Change: During the fourth quarter 37, operating agencies terminated or transferred within the network turnover rate of 3% for the quarter, which we believe to be a healthy level.

Speaker Change: Launched 23% and 97, new franchises for the three months and full year ended December 31, respectively. The quality of which can be seen directly reflected in first year franchise productivity numbers.

Speaker Change: Yearend franchise producers totaled 2092 up 7% and producers per franchise was one nine up 19% from one year ago.

Speaker Change: The productivity of first year franchises is up 63% for the quarter and 76% for the year we.

Speaker Change: As we've discussed in the past growing the average number of producers per franchise is a highly leveraged strategic initiatives.

Speaker Change: We believe these strong metrics are a leading indicator of the future success of these newly launched franchises.

Speaker Change: With our continued progress in our franchise development efforts, we expect to drive operating franchise count growth in 2025.

Speaker Change: Each time, an agency adds it producer the productivity of everyone in that agency improves.

Speaker Change: As more of the franchise base progresses from a single producer location to scale businesses the impact of total new business production becomes exponential.

Speaker Change: Turning to our strategy surrounding middle market franchises, either agencies that we embed within another existing business with natural inbound lead flow.

Speaker Change: We're still in the early stages of this powerful growth lever and expect to see continued momentum.

Speaker Change: Home insurance has become a hot topic of conversation among mortgage servicers as rapid premium increases can impact the default rates at their existing books of business.

Speaker Change: During the fourth quarter 37, operating agencies terminated or transferred within the network turnover rate of 3% for the quarter, which we believe to be a healthy level.

Speaker Change: As their executive teams look to find ways to add value to their clients and solve the complex problem of national home insurance coverage. They are left with that many options to choose from.

Speaker Change: We launched 23% and 97, new franchises for the three months and full year ended December 31, respectively. The quality of which can be seen directly reflected in first year franchise productivity numbers.

Speaker Change: To that end, we've seen a significant uptick in inbound interest from national mortgage servicers to integrate into our platform either through a strategic partnership or through an embedded franchise.

Speaker Change: The productivity of first year franchises is up 63% for the quarter and 76% for the year. We believe these strong metrics are a leading indicator of the future success of these newly launched franchises.

Speaker Change: Our unique ability to provide product access from coast to coast extraordinary client service and technology that improves cross sell rates differentiate our model and make us a natural choice for national brands.

Speaker Change: With our continued progress in our franchise development efforts, we expect to drive operating franchise count growth in 2025.

Speaker Change: We recently launched an embedded franchise with the national bank containing both mortgage origination and servicing divisions.

Speaker Change: Turning to our strategy surrounding middle market franchises, either agencies that we embed within another existing business with natural inbound lead flow.

Speaker Change: Their franchise has access to tens of thousands of clients and through our proprietary technology national footprint and fully integrated back office. We believe there will be much more productive than the average franchise.

Speaker Change: Home insurance has become a hot topic of conversation among mortgage servicers as rapid premium increases can impact the default rates at their existing books of business.

Speaker Change: The pipeline for franchises that look just like this one is large and growing with multiple others in various stages of implementation.

Speaker Change: This allows us to diversify our lead flow and insulate us from fluctuations in home closing transaction volumes.

Speaker Change: Corporate producers at quarter end were $4 17 up 39% from a year ago within that $4 17 is 65 enterprise sales producers, who are focused solely on our digital and partnership lead channels, which is now the fastest growing division of the business.

Speaker Change: The enterprise sales team provides an additional track for career development for our traditional corporate agents as well as our top service agents, who have a deep product knowledge and provide a top tier client experience.

Speaker Change: We recently launched an embedded franchise with a national bank containing both mortgage origination and servicing divisions.

Speaker Change: Their franchise has access to tens of thousands of clients and through our proprietary technology national footprint and fully integrated back office, we believe there'll be much more productive than the average franchise.

Speaker Change: Over the next year, we expect this team to become a more meaningful portion of the total corporate sales production.

Speaker Change: Moving to the financial results.

Speaker Change: Premiums grew 28% year over year to $966 million and full year premiums for 2024 were $3 eight 1 billion up.

Speaker Change: The pipeline for franchises that look just like this one is large and growing with multiple others in various stages of implementation.

Speaker Change: Up 29% for the year.

Speaker Change: This allows us to diversify our lead flow and insulate us from fluctuations in home closing transaction volumes.

Speaker Change: The quarter included franchise premiums of $778 million up, 33% and corporate premiums of $187 million up 9%.

Speaker Change: Corporate producers at quarter end were $4 17 up 39% from a year ago within that $4 17, as 65 enterprise sales producers, who are focused solely on our digital and partnership lead channels, which is now the fastest growing division of the business.

Speaker Change: With continued stabilization in client retention and ultimately improvement in client retention over time, coupled with acceleration in new business production through productivity enhancements and total producer growth. We remain confident in our ability to drive continued high levels of premium growth in the near and medium term.

Speaker Change: Total revenues for the quarter grew to $93 9 million representing.

Speaker Change: Over the next year, we expect this team to become a more meaningful portion of the total corporate sales production.

Speaker Change: Representing 49% growth over the prior year period with core revenues growing 19% to $68 million accelerating over the 16% core revenue growth rate in the third quarter of 2024.

Speaker Change: Moving to the financial results.

Speaker Change: Premiums grew 28% year over year to $966 million and full year premiums for 2024 were $3 eight 1 billion up.

Speaker Change: Further underscoring the improving health of the personal lines industry contingent commissions for the fourth quarter were $24 million.

Up 29% for the year.

Speaker Change: Bringing the full year to $31 4 million or <unk> 82 basis points of total written premium substantially higher than we anticipated earlier this year.

Speaker Change: The quarter included franchise premiums of $778 million up, 33% and corporate premiums of $187 million up 9%.

Speaker Change: Our core loss ratio is that some of our largest carriers improved significantly in the second half of the year, coupled with our continued high growth rate of total written premium leading to a strong contingent commission year.

Speaker Change: Looking into 2025, we are remaining conservative in our forecasting compared to the 2024 levels as a percentage of premium approximately 40% to 65 basis points as there is still uncertainty on how loss trends will progress.

Speaker Change: Total revenues for the quarter grew to $93 9 million representing.

Speaker Change: Representing 49% growth over the prior year period with core revenues growing 19% to $68 million accelerating over the 16% core revenue growth rate in the third quarter of 2024.

Speaker Change: Additionally, we view our carrier relationships in total through the lens of core commissions cost to service technological ability and contingent commissions and there may be tradeoffs from one year to the next and resource allocation.

Speaker Change: Further underscoring the improving health of the personal lines industry contingent commissions for the fourth quarter were $24 million.

Speaker Change: Over the longer term, we see no reason to expect contingent commissions would not trend in the historical average of 80% to 85 basis points of total written premium.

Speaker Change: Bringing the full year to $31 4 million or <unk> 82 basis points of total written premium substantially higher than we anticipated earlier this year.

Speaker Change: Cost recovery revenue for the quarter was $1 5 million or 44% decline from the previous year period.

Speaker Change: As a reminder franchise fees are recognized over the 10 year life of the contract and when an agency exit the system any unamortized revenues accelerated and recognized upon franchise termination.

Speaker Change: As franchise turnover is down significantly year over year and has now stabilized we expect our fourth quarter run rate to be in appropriate forecasting guidepost for 2025, effectively growing with new franchise launches.

Additionally, we view our carrier relationships in total through the lens of core commissions cost to service technological ability and contingent commissions and there may be tradeoffs from one year to the next and resource allocation.

Speaker Change: Policies enforced as of year end were $1 7, million% to 13% increase in the second consecutive quarter of accelerating growth.

Speaker Change: We expect to continue to drive gradual expansion in the policies in force growth rate through 2025, as our strategic initiatives to drive new business production take hold our agent force continues to expand and mature and client retention ultimately approves through a combination of agent training process improvements in both sales and service and a year over year increases.

Speaker Change: Over the longer term, we see no reason to expect contingent commissions would not trend to the historical average of 80 to 85 basis points of total written premium.

Speaker Change: Cost recovery revenue for the quarter was $1 5 million or.

Speaker Change: A 44% decline from the previous year period.

Speaker Change: Homeowners premiums debate.

Speaker Change: Our client retention as of year end was stable compared to the second and third quarters of 2024 at 84% and we see no structural impediments to our client retention returning to our historical high of 89%.

Speaker Change: Adjusted EBITDA for the quarter grew 164% $37 4 million up from $14 1 million in the year ago period. This is where the true value of our model shines because we've been so disciplined and avoiding the potential distraction of vertical integration our expansion into other lines of business.

Speaker Change: Policies enforced as of year end were $1 7, million% to 13% increase in the second consecutive quarter of accelerating growth.

Expect to continue to drive gradual expansion in the policies in force growth rate through 2025, as our strategic initiatives to drive new business production take hold our agent force continues to expand and mature and client retention ultimately approved through a combination of agent training process improvements in both sales and service and a year over year increases in.

Speaker Change: We've been able to focus on what maximizes our profitability distributing high quality business through our carrier partners and providing world class client service.

Speaker Change: Very intentional about our position in the value chain and while that May mean, we missed some periods of potential upside. We're also insulated to some extent from the volatility of underwriting results.

Speaker Change: Premiums abate.

Because of our close proximity to the client relationship we've been able to build a business that can deliver consistent results through both up and down macro environments.

Speaker Change: Looking into 2025 and beyond there's a significant opportunity for us to capture additional market share as we expand our go to market strategy through strategic partnerships and further technological advancements.

Speaker Change: Adjusted EBITDA for the quarter grew 164% to $37 4 million up from $14 $1 million in the year ago period. This is where the true value of our model shines because we've been so disciplined and avoiding the potential distraction of vertical integration our expansion into other lines of business we've been able.

Speaker Change: Clients more and more want to interact in the digital and fully integrated environment and we believe we have a big head start on the industry.

Speaker Change: Seizing this opportunity will take significant investment in our people, bringing in new types of talent that this industry has struggled to attract for its entire history.

Our focus on what maximizes our profitability distributing high quality business through our carrier partners and providing world class client service.

Developing new software and expanding on our existing highly differentiated platform.

Speaker Change: We're very intentional about our positioning the value chain and while that May mean, we met some periods of potential upside. We're also insulated to some extent from the volatility of underwriting results.

Speaker Change: Because of our existing go to market strategy is so tightly driven by relationships our agents make in their local community we've.

Speaker Change: We believe our further progress into the digital world only enhances our existing strategy.

Our close proximity to the client relationship we've been able to build a business that can deliver consistent results through both up and down macro environments.

Speaker Change: We will always be a place for a knowledgeable independent agent and being able to meet clients via the medium. They want to engage we believe will improve the productivity and success of our existing agents, while unlocking of clients. We have not historically had access to.

Speaker Change: Turning to our balance sheet, we ended the year with $54 $3 million of cash on the balance sheet and total debt of $93 1 million.

Speaker Change: Clients more and more want to interact in the digital and fully integrated environment and we believe we have a big head start on the industry sees.

Speaker Change: We were pleased to have completed a new term loan b offering of $300 million in January of 2025, and revolving credit facility of $75 million.

Speaker Change: Seizing this opportunity will take significant investment in our people, bringing in new types of talent that this industry has struggled to attract for its entire history.

Speaker Change: Cash from the new term loan was used to pay down existing debt and pay a cash dividend to shareholders totaling $205 million.

Developing new software and expanding on our existing highly differentiated platform.

Speaker Change: Because our existing go to market strategy is so tightly driven by relationships our agents make in their local communities.

Speaker Change: We were pleased to deliver strong operating cash and free cash flow growth in 2024.

Speaker Change: We believe our further progress into the digital world only enhances our existing strategy.

Speaker Change: Operating cash generation for the year was $71 5 million up 41%, while free cash flow of $59 4 million increased 53% for the year.

Speaker Change: There will always be a place for a knowledgeable independent agent and being able to meet clients via the medium. They want to engage we believe will improve the productivity and success of our existing agents, while unlocking of clients. We have not historically had access to.

Speaker Change: We would note that adjusted EBITDA for the fourth quarter of 2024 includes a sizable amount of contingent commission revenue that will be included in operating cash flow in the first quarter of 2025 upon collection.

Speaker Change: Turning to our balance sheet, we ended the year with $54 $3 million of cash on the balance sheet and total debt of $93 1 million.

Speaker Change: Looking ahead to the coming year, our guidance for 2025 is as follows.

Speaker Change: We were pleased to have completed a new term loan b offering of $300 million in January of 2025, and revolving credit facility of $75 million.

Speaker Change: Total revenues for the year are expected to be between $350 million and $385 million representing.

Representing organic growth of 11% on the low end and 22% on the high end of the range.

Speaker Change: Cash from the new term loan was used to pay down existing debt and pay a cash dividend to shareholders totaling $205 million.

Speaker Change: Premiums for the full year are expected to be between $4 $65 billion to $4 88 billion, representing 22% organic growth on the low end of the range and 28% on the high end.

We were pleased to deliver strong operating cash and free cash flow growth in 2024.

Speaker Change: Operating cash generation for the year was $71 5 million up 41%, while free cash flow of $59 4 million increased 53% for the year.

Speaker Change: Our premium and revenue forecast assumed gradual decline in pricing tailwind through the year and conservative client retention levels.

Speaker Change: Thank you to our team for helping us deliver a record year, who said I'm incredibly.

Speaker Change: <unk> excited to deliver for our clients our employees and our carrier partners as well as our shareholders again in 2025 with that let's open up the line for questions operator.

Speaker Change: Looking ahead to the coming year, our guidance for 2025 is as follows.

Thank you.

Speaker Change: A reminder to ask a question. Please press Star then one of your telephone and wait for your name to be announced.

Speaker Change: Total revenues for the year are expected to be between $350 million and $385 million.

Speaker Change: So withdraw your question. Please press star one again.

Speaker Change: Representing organic growth of 11% on the low end and 22% on the high end of the range.

Speaker Change: Our first question comes from the line of Tommy Mckeith joined with <unk>. Your line is now open.

Speaker Change: Premiums for the full year are expected to be between $4 65 billion to.

Tommy Mckeith: Hey, good afternoon, guys. Thanks for taking our questions.

Speaker Change: To 488 billion, representing 22% organic growth on the low end of the range and 28% on the high end.

Speaker Change: Yes, the magnitude of the contingent commissions are up certainly caught us by surprise could you could you spend some time talking about how such a large number came through and along the same lines I want to make sure I heard you correctly that you don't think of your normalized contingent commission figure had any change relative to the historical average just because of what happened this quarter.

Speaker Change: Our premium and revenue forecast assumed a gradual decline in pricing tailwind through the year and conservative client retention levels.

Speaker Change: Thank you to our team for helping us deliver a record year at <unk>.

I am incredibly excited to deliver for our clients our employees and our carrier partners as well as our shareholders again in 2025 with that let's open up the line for questions operator.

Tommy Mckeith: Hey, Tommy Yeah, sure happy to provide some more insight there. So as you may recall, we've been guiding all year to around 35% to 40 basis points of premium is contingent commissions, but throughout really the fourth quarter. We started getting more of the core loss ratio information from some of our largest underwriters and the core performance of the book.

Speaker Change: Thank you.

Speaker Change: A reminder to ask a question. Please press Star then one of your telephone and wait for your name to be announced.

Speaker Change: To withdraw your question. Please press star one again.

Speaker Change: Our first question comes from the line of Tommy Mckeith joined with <unk>. Your line is now open.

Tommy Mckeith: Was much better than we had anticipated it to be which that led to us getting some relatively large contingencies from carriers, we've worked necessarily expecting to looking forward to 2025, it's hard to pinpoint exactly what that's going to look like is there was still a lot of catastrophic losses. During 2024. So there's puts and takes from one year to the next as those con.

Hey, good afternoon, guys. Thanks for taking our questions.

Speaker Change: Yes, the magnitude of the contingent commissions are up certainly caught us by surprise.

Speaker Change: Spend some time talking about how such a large number came through and along the same lines I want to make sure I heard you correctly that you don't think of your normalized contingent commission figure having changed relative to the historical average just because of what happened this quarter.

Tommy Mckeith: <unk> come through and as I mentioned in my prepared remarks, we're looking at the relationship with your underwriters Holistically between core commissions service technology and contingent commission. So there may be changes in that entire kind of dynamic of the portfolio from year to year. We don't see any reason why over time it shouldnt be.

Tommy Mckeith: Hey, Tommy Yeah, sure happy to provide score inside there. So as you may recall that we've been guiding all year to around 35 to 40 basis points of premium as contingent commissions, but throughout really the fourth quarter. We started getting more of the core loss ratio information from some of our largest underwriters and the core performance of the book was much.

Tommy Mckeith: Between 80, and 85 basis points of total written premium I think this year proves that as well, but just for next year and our current forecasting we wanted to be conservative.

Tommy Mckeith: Got it makes sense.

Tommy Mckeith: Better than we had anticipated it to be which that led to us getting some relatively large contingencies from carriers, we work necessarily expecting to looking forward to 2025, it's hard to pinpoint exactly what that is going to look like as there were still a lot of catastrophic losses during 2024, or so theres puts and takes from one year to the next as those contracts.

Tommy Mckeith: And then switching over or do you have any thoughts on the direction of the EBITDA margin into 2025, and when we think about that is there going to be any margin drag from the investments in some of those AI tools that you talked about or anything else that you would call out.

Tommy Mckeith: Yes, so we do plan to grow core revenue faster than what we are growing the expense base, which will naturally lead to margin expansion over time, given that we are planning for contingencies to be a smaller portion of total written premium in 2025 that could cause kind of puts and takes them a total margin looks like but on a core basis. So <unk>.

Tommy Mckeith: Come through and as I mentioned in my prepared remarks, we're looking at the relationship with your underwriters Holistically between core commissions service technology and contingent commission. So there may be changes in that entire kind of dynamic of the portfolio from year to year. We don't see any reason why over time it shouldnt be between 80.

Tommy Mckeith: <unk> margin, excluding contingent commissions, we would expect to drive margin expansion.

Tommy Mckeith: When you take into factor all the technological advances, we're putting through the business today, the pace of that kind of depends a little bit on what the underwriters are doing as well and what their appetite looks like as they pivot more to growth you should expect to see us lean more into that and we'll provide more updates to that as the year progresses.

Tommy Mckeith: 85 basis points of total written premium I think this year proves that as well, but just for next year and our current forecasting we wanted to be conservative.

Tommy Mckeith: Got it makes sense.

Speaker Change: And then switching over or do you have any thoughts on the direction of the EBITDA margin into 2025, and when we think about that is there going to be any margin drag from the investments in some of those AI tools that you talked about or anything else that you would call out.

Tommy Mckeith: Great. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Matt <unk> with citizens JMP. Your line is now open.

Speaker Change: Yes, so we do plan to grow core revenue faster than what we are growing the expense base, which will naturally lead to margin expansion over time, given that we are planning for contingencies to be a smaller portion of total written premium in 2025 that could cause kind of puts and takes them a total margin looks like but on a core basis. So <unk>.

Speaker Change: Hey, Thanks, good afternoon.

Speaker Change: Hey, Matt Mark in Europe in Europe any comments.

Speaker Change: You hit a couple of times on kind of product coming back to the market.

Speaker Change: That being a good thing that's.

Speaker Change: Kind of been improving several quarters now.

Speaker Change: Is that kind of across geographies and perils, because obviously different parts of the country have had their kind of own issues.

Speaker Change: <unk> margin, excluding contingent commissions, we would expect to drive margin expansion.

Speaker Change: So when you take into factor all of the technological advances, we're putting through the business today, the pace of that kind of depends a little bit on what the underwriters are doing as well and what their appetite looks like as they pivot more to growth you should expect to see us lean more into that and we'll provide more updates to that as the year progresses.

Speaker Change: Or are you seeing it in certain places more than others and there are certain places where either the underwriters still are comfortable with a certain payroll or might be.

Speaker Change: Regulatory or whatever it could be.

Speaker Change: Yes, Matt like I said, I think it varies by product by state.

Speaker Change: Certainly some states it's come back in a lot more quickly, Texas, we're starting to see that's our biggest market where most of our agents are.

Speaker Change: Great. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Matt <unk> with citizens JMP. Your line is now open.

Speaker Change: We're seeing it come back into Texas more on the E&S side than the admitted side.

Matt: Hey, Thanks, good afternoon.

Speaker Change: Hey, Matt Mark in Europe in your opening comments.

Speaker Change: On auto picking up very rapidly across the United States.

Matt: You hit a couple of times on kind of product coming back to the market.

Speaker Change: And so like I said, it's just it just varies by state by product.

That being a good thing that's kind of been improving several quarters now.

Speaker Change: California, we've had a pretty healthy product portfolio are there for a while.

Matt: Is that kind of across geographies and perils, because obviously different parts of the country have had their kind of own issues or are you seeing it in certain places more than others.

Speaker Change: And we're starting to see parts of California open up of course the wildfires.

Speaker Change: Curtailed that for a little bit, but overall, we're happy with the way the products coming back in.

Matt: There are certain places where either the underwriters still are comfortable with a certain payroll or might be.

Speaker Change: Okay great.

Speaker Change: And my next question, which was specific to California is there anything production wise, we should think about in Q1 from any underwriting moratoriums or anything like that and we have the annual guidance. So we know what's included in there and then just given kind of a situation that California's then kind of how you see that <unk> had longer term up ahead.

Matt: Our regulatory or whatever it could be.

Speaker Change: Yes, Matt like I said, I think it varies by product by state.

Speaker Change: Certainly some states it's come back in a lot more quickly, Texas, we're starting to see Thats, our biggest market where most of our agents are.

Speaker Change: We're seeing it come back into Texas more on the E&S side than the admitted side.

Speaker Change: <unk> opportunity.

Speaker Change: Yes, I mean, I would say we have.

Speaker Change: Really good product compared to competitors in California, our agents are doing a great job of supporting clients on the ground.

Speaker Change: On auto picking up very rapidly across the United States.

Speaker Change: And so like I said, it's just it just varies by state by product.

Speaker Change: <unk> advice through all of this.

Speaker Change: California, we've had a pretty healthy product portfolio are there for a while.

Speaker Change: Despite temporary closures, we continue to see the state.

Speaker Change: And we're starting to see parts of California open up of course, the wildfires curtailed.

Speaker Change: Pretty operational at this point.

Speaker Change: The admitted market is still tight E&S is thriving in California and.

Speaker Change: Curtailed that for a little bit, but overall, we're happy with the way the products coming back in.

Speaker Change: And we're seeing things return to kind of pre.

Speaker Change: Okay, Great and you got your kind of led me into my next question, which was specific to California is there anything production wise, we should think about in Q1 from any underwriting moratoriums or anything like that and we have the annual guidance. So we know it's included in there and then just given kind of a situation that California, then kind of how you see that.

Speaker Change: Yes, Im dystrophic fire kind of.

Speaker Change: Place and we see significant potential for the independent brokers in California, and we will continue to.

Speaker Change: To increase our our franchise footprint there.

Speaker Change: In the future.

Speaker Change: Great. Thanks for that color I appreciate it.

Speaker Change: These had longer term a headwind or an opportunity.

Speaker Change: Thank you. Our next question comes from the line of Brian Meredith with UBS. Your line is now open.

Yes, I mean, I would say we have.

Speaker Change: Really good product compared to competitors in California, our agents are doing a great job of supporting clients on the ground.

Brian Meredith: Yes, Thanks, a couple here for you.

Brian Meredith: The first one in the guidance what are you assuming or thinking about with respect to commission rate ex contingents.

Speaker Change: <unk> advice through all of this.

Brian Meredith: And what's going to happen with client and premium retention rates.

Speaker Change: Despite temporary closures, we continue to see the state.

Brian Meredith: Yeah, Hey, Brian So if you breakdown the total revenue guide and break it into its buckets contingent commissions, we kind of gave you a guide post there are generally.

Speaker Change: Pretty operational at this point.

Speaker Change: The admitted market is still tight E&S is thriving in California.

And we're seeing things returned to kind of pre.

Brian Meredith: <unk> for a smaller amount in <unk> 25 compared to 24.

Speaker Change: Okay, I'll dystrophic fire kind of.

Speaker Change: Place and we see significant potential for the independent brokers in California, and we will continue to.

Brian Meredith: Looked a little bit about cost recovery revenue effectively being that the fourth quarter number is a good guidepost for your run rate for next year and so that would lead you then to core revenue really accelerating off of what the full year 2024 was going into next year I would expect probably over the next year, We drive average commission rate up as.

Speaker Change: Continue to increase our our franchise footprint there in the future.

Speaker Change: Yeah.

Speaker Change: Great. Thanks for the color I appreciate it.

Thank you. Our next question comes from the line of Brian Meredith with UBS. Your line is now open.

Brian Meredith: He admitted market starts to heal and more product access comes online so you're relying less on your state run plans in your excess and surplus plans that have lower commission rates, but also just to point to the product market healing. We're now having conversations with carriers, who are actively coming to us and asking to raise commission rates because they want to incentivize growth so the product and the product market.

Speaker Change: Yes, Thanks, a couple here for you.

Speaker Change: The first one in the guidance what are you assuming or thinking about with respect to commission rate ex contingence, and what's going to happen with client and premium retention rates.

Speaker Change: Yeah, Hey, Brian Thanks.

So if you breakdown the total revenue guide and break it into its buckets contingent commissions, we kind of gave you a guidepost there are generally planning for a smaller amount in <unk> 25 compared to 24.

Brian Meredith: Sealing and then from a client and premium retention standpoint, we are expecting the pricing tailwind to slowdown going into next year and then it remains to be seen how quickly that recovery in client retention as if those happen to one to one to kind of perfectly offset each other.

Speaker Change: We talked a little bit about cost recovery revenue effectively being that the fourth quarter number as a good guide post for your run rate for next year and so that would lead you then to core revenue really accelerating off of what the full year of 2024 was going into next year I would expect probably over the next year, We drive average commission rate up.

Brian Meredith: But were being conservative with client retention, we expect to drive it up but I can't guarantee exactly what the number is and then premium your assumption should be we're planning for basically pricing tailwind to abate throughout the year.

Brian Meredith: Helpful. Thanks, and then my second follow up question is.

As the admitted market starts to heal more product access comes online so you're relying less on your state run plans in your excess and surplus plans that have lower commission rates, but also just to point to the product market healing. We're now having conversations with carriers, who are actively coming to us and asking to raise commission rates because they want to incentivize growth so the product and the product.

Speaker Change: Mark you alluded to in your comments the direct to consumer experience.

Brian Meredith: Yes.

Brian Meredith: And at some point down the future how long are we from actually that being implemented.

Brian Meredith: I mean, we're actively working on it now I think youll see it on the auto side before you see it anywhere else the home is a little bit more complicated.

Speaker Change: Sealing and then from a client and premium retention standpoint, we are expecting the pricing tailwind to slow down going into next year and then it remains to be seen how quickly that recovery in client retention as if those happen one to one to kind of perfectly offset each other but we're being conservative with client retention, we expect to drive it up but I can't guarantee exactly.

Brian Meredith: But I'm not going to give a timeframe on when we will actually put it out there.

Speaker Change: Great. Thanks.

Speaker Change: Thank you. Our next question comes from the line of Paul Newsome with Piper Sandler Your line is now open.

Speaker Change: Good morning, or good afternoon.

Speaker Change: To help you.

Speaker Change: The number is and then premium your assumption should be we're planning for basically pricing tailwind to abate throughout the year.

Speaker Change: Hoping you could go a little bit further here and maybe thinking a little bit longer term with respect to the organic growth.

Speaker Change: That's helpful. Thanks, and then my second follow up question is.

Speaker Change: Guidance.

Speaker Change: Mark you alluded to in your comments the direct to consumer experience.

Speaker Change: It feels like.

Speaker Change: Pretty good.

Speaker Change: Core revenue growth.

Speaker Change: And at some point down the future how long are we from actually that being implemented.

Speaker Change: <unk>.

Speaker Change: Organic growth for the year.

Speaker Change: Organic growth for the rest of next year.

Speaker Change: I mean, we're actively working on it now I think youll see it on the auto side before you see it anywhere else. The home is a little bit more complicated, but I'm not going to give a timeframe on when we will actually put it out there.

Speaker Change: And in the middle of that right.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Acceleration, so maybe just sort of reconcile that.

Speaker Change: To us.

Speaker Change: Maybe thinking about further.

If theres any thoughts here.

Speaker Change: Great. Thanks.

Speaker Change: Some folks.

Paul Newsome: Thank you. Our next question comes from the line of Paul Newsome with Piper Sandler Your line is now open.

Speaker Change: Get too soon some of the very high 30 plus percent.

Speaker Change: Organic growth was good.

Paul Newsome: Good morning, or good afternoon.

Speaker Change: When you're getting too big to the point, where you maybe that's not.

Speaker Change: Thanks to the healthy.

Speaker Change: Reasonable.

Speaker Change: Was hoping you could go a little bit further here and maybe thinking a little bit longer term with respect to the organic growth.

Speaker Change: Okay.

Speaker Change: We are.

Speaker Change: Yes, we're expecting to drive accelerating core revenue growth and 25 over 24, when you look at the full year not quarter to quarter, there can be timing differences, but for the full year you should expect to see core revenue growth accelerate 25 over 24.

Speaker Change: Guidance.

Speaker Change: It feels like.

Pretty good core revenue growth, which I think you've been sort of the core organic growth for the year.

Speaker Change: Total revenue guide includes a couple of things that we talked about in one of those previous questions right contingent commissions lower than 25% compared to 24, and then cost recovery revenue effectively at the Q4 run rate, which would make the full year lower so all in all we are expecting very strong organic growth out of the business and longer term and we're doing everything we.

Speaker Change: But your organic growth for the rest of next year as well.

Speaker Change: In the middle there right now.

Speaker Change: Right.

Speaker Change: The.

Speaker Change: Acceleration, so maybe just sort of reconcile that.

Speaker Change: And maybe thinking about further.

Speaker Change: If theres any thoughts here I mean, I think some folks think.

Speaker Change: Can to gear back up towards those 30% plus growth rates through the middle market franchise effort through some of our <unk> efforts in driving productivity through a lot of different methods.

Speaker Change: You can get too soon some of the very high 30 plus percent.

Speaker Change: Organic growth was good, but you're getting too big to the point, where you maybe.

Speaker Change: Yes.

Speaker Change: That's my only question. Thank you very much.

Speaker Change: Reasonable.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question comes from the line of Andrew <unk> with TD Cowen. Your line is now open.

Speaker Change: Yes, we're expecting to drive accelerating core revenue growth and 25 over 24, when you look at the full year not quarter to quarter. There can be timing differences for the full year, you should expect to see core revenue growth accelerate 25 over 24.

Andrew: Hey, good afternoon, so maybe just kind.

Speaker Change: Thanks.

Speaker Change: Going up on Paul's question, just now with the revenue growth, maybe maybe turning it into your written premium guide, which would imply up.

Speaker Change: Total revenue guide includes a couple of things that we talked about in one of those previous questions or a contingent commissions lower than 25 compared to 24, and then cost recovery revenue effectively at the Q4 run rate, which would make the full year lower so all in all we are expecting very strong organic growth out of the business.

Speaker Change: <unk>, 22% to 28% this year.

Speaker Change: <unk>.

Speaker Change: To kind of get there I'm looking at.

Speaker Change: Your franchise producer count, which was up 7%.

Speaker Change: And longer term, we're doing everything we can to gear back up towards those 30% plus growth rates through the middle market franchise efforts through some of our <unk> efforts in driving productivity through a lot of different methods.

Speaker Change: And maybe you could provide a little more out.

Speaker Change: But directionally just given that you have mentioned it.

Speaker Change: Franchise has stabilized in the quarter.

Speaker Change: One I would expect.

Speaker Change: Okay.

Speaker Change: That would be up producer count would be up a lot more than 7% men on corporate agent count separate second.

Speaker Change: That's my only question. Thank you very much.

Speaker Change: Thank you. Our next question comes from the line of Andrew <unk> with TD Cowen. Your line is now open.

Speaker Change: Up 39% this quarter.

Andrew: Hey, good afternoon, so maybe just kind.

Speaker Change: You might see that decelerate as you said, but probably not that much. So so where do you see that going <unk> and then just tying it back to the written premium if you were able to do 29% written premium growth last year.

Speaker Change: Thanks.

Speaker Change: Going up on Paul's question, just now with the revenue growth, maybe maybe turning it into your written premium guide, which would imply up.

Speaker Change: <unk>, 22% to 28% this year.

Speaker Change: With franchises not even growing that much.

Speaker Change: <unk>.

Speaker Change: To kind of get there I'm looking at.

Speaker Change: You'd be able to do better than 22% to 28 this year.

Speaker Change: Your franchise producer count, which was up 7% and.

It would strike me that.

Speaker Change: Those two producer groups.

Speaker Change: And maybe you could provide a little more.

Speaker Change: On a nice trajectory.

Speaker Change: But directionally just given that you've mentioned it.

Speaker Change: Which certainly.

Speaker Change: Give us upside.

Speaker Change: Franchise has stabilized in the quarter.

Speaker Change: Yeah Andrew.

One I would expect.

Speaker Change: Let me take a couple of those things first so for franchise producer count growth up 7% year over year, we talked about in our prepared remarks that the turnover rate of franchise is now really at a healthy level, you should probably expect around that rate.

That would be up producer count would be up a lot more than 7% men on corporate agent count separate second.

Speaker Change: Up 39% this quarter.

Speaker Change: You might see that decelerate as you said, but probably not that much. So so where do you see that going that's <unk> and then just tying it back to the written premium.

Speaker Change: This year, maybe slightly lower but we feel like it's a good healthy level, where you're promoting highly productive franchises and holding people accountable to brand standards, but having said that it was we were still down 13 operating agencies sequentially in the quarter, but we are expecting to grow operating franchise count in 2025 and more than that grow the producer counts you should continue to.

Speaker Change: You were able to do 29% written premium growth last year.

Speaker Change: With franchises not even growing that much.

Speaker Change: Wouldn't you be able to do better than 22% to 28 this year and written premium it would strike me that.

Speaker Change: See producers per franchise expand and with the level of productivity improvements, we've been able to drive on the franchise side of the business.

Speaker Change: Those two producer groups.

Speaker Change: That should continue to drive nice levels of growth, where youre seeing the.

On a nice trajectory with.

Speaker Change: Certainly.

Speaker Change: Give us upside.

Speaker Change: Relatively conservative premium growth guidance numbers is we don't know exactly how the pricing impact is going to flow through the book and the rate of the recovery of client retention. So we're at 84 two days the same number three quarters in a row, we feel good about that but we would like to see that be backup towards the 89 number we don't think theres a real struck.

Speaker Change: Yes, Andrew I'll, let me take a couple of those things first so for franchise producer count growth up 7% year over year, we talked about in our prepared remarks of the turnover rate of franchise is now really at a healthy level you should probably expect around that rate next.

Speaker Change: Next year, maybe slightly lower but we feel like it's a good healthy level, where you're promoting highly productive franchises and holding people accountable to brand standards, but having said that it was we were still down 13 operating agencies sequentially in the quarter, but we are expecting to grow operating franchise count in 2025 and more than that grow the producer counts you should continue.

Speaker Change: Real impediment why it can't get back there, but part of that is macroeconomic factors the product environment and so as that heels.

Speaker Change: Very possibly to get client retention, improving much faster, which would naturally yield better premium results. So remember a significant portion of our book is renewal when compared to new business or the franchise growth, while very very good has a lesser impact than the client retention improvement.

Speaker Change: To see producers per franchise expand and with the level of productivity improvements, we have been able to drive on the franchise side of the business.

Speaker Change: I see.

Speaker Change: So thats a big part of it.

Speaker Change: It should continue to drive nice levels of growth, where youre seeing the.

Speaker Change: I see.

Speaker Change: Maybe going back to the macroeconomic drivers.

Speaker Change: It sounded like from an earlier question.

Speaker Change: Companies are coming back offering more products. So that's a good thing.

Speaker Change: Maybe.

Speaker Change: Regard to home sales, which is another big.

Speaker Change: Big driver and I know I could look at the national data, but but not necessarily your regions like Texas and other areas where your biggest.

<unk> impediment why it can't get back there, but part of that is macroeconomic factors the product environment and so as that heels.

Speaker Change: It is very possibly to get client retention, improving much faster, which would naturally yield better premium results. So.

Speaker Change: How are you seeing home sales as we head into 2025, and how might that be affecting goose hedge business. This year.

Speaker Change: Remember a significant portion of our book is renewal when compared to new business or the franchise growth, while very very good has a lesser impact than the client retention improvement.

Speaker Change: Yes.

Speaker Change: So really the tail end of 'twenty 'twenty four and the early portion of 2025, I think we're seeing upticks in transaction volumes. So in aggregate lead flow I think is moving in the right direction and our agents have done a good job going out to build more referral partners. We've started out 2025 with more referral partner Activations I think we've ever had in any kind of <unk>.

Speaker Change: I see.

Speaker Change: So thats a big part.

I see.

Speaker Change: Maybe going back to the macroeconomic drivers.

Speaker Change: It sounded like from an earlier question.

Speaker Change: Companies are coming back offering more products. So that's a good thing.

Speaker Change: First couple of months of the year. So that's a positive leading indicator certainly as housing volume picks up that is a very positive thing for us because we've built these new relationships with a bunch of more referral partners, but we're also working as we've talked about in our prepared remarks with more of these embedded type franchises that can over time help insulate the business from.

Speaker Change: Maybe.

With regard to home sales, which is another big big.

Speaker Change: A big driver and I know I can look at the national data, but not necessarily your regions like Texas and other areas where your biggest.

Speaker Change: How are you seeing home sales as we head into 2025, and how might that be affecting goose hedged business. This year.

Speaker Change: <unk> in housing new housing transaction volume, so get more to mortgage Servicers, who are really trying to capitalize on their existing book and for the most part actually just add value to their clients.

Speaker Change: Yes.

Speaker Change: It's much less to them about building a business that pays them a lot of money and it's more about helping retain their existing business.

Speaker Change: So really the tail end of 2024 and the early portion of 2025, I think we're seen upticks in transaction volumes. So in aggregate lead flow I think is moving in the right direction and our agents have done a good job going out to build more referral partners. We've started out 2025 with more referral partner Activations I think we've ever had in any kind of <unk>.

Speaker Change: <unk> to us our goal is to drive our core business as effectively as possible. It's the same thing with these mortgage Servicers then want to prevent default rate and add value to their clients I think it's going to be a very a good avenue for us to go down and that will help insulate us from volatility.

Speaker Change: Couple of months of the year. So that's a positive leading indicator certainly as housing volume picks up that's a very positive thing for us because we've built these new relationships with a bunch more referral partners, but we're also working as we talked about in our prepared remarks with more of these embedded type franchises that can over time help insulate the business from.

Speaker Change: Great and if I could just sneak one last one in you were losing to wholesaling in the E&S markets.

Speaker Change: Goose head doesn't have its own wholesale brokerage right and if you don't.

Speaker Change: Why not start wind.

Speaker Change: Yes, we don't have our own wholesale brokerage, we do distribute through.

Speaker Change: Multiple others to get the product to access to the excess and surplus lines lines. We've looked at what that type of offering would look like and ultimately decided our focus is best where we drive the most value and thats in our core business and not getting distracted through other types of operations to try and get an extra couple of points of commission on what is still a small portion of the business.

It's much less to them about building a business that pays them a lot of money and it's more about helping retain their existing business.

Speaker Change: Has increased over the last couple of years I wouldn't expect that that trend continues indefinitely and maybe it continues for a little bit longer with some of the challenges in Florida, and California, but overtime I would expect the admitted market to go back to being the lion's share of the business now we'll keep an open mind if that doesn't go back in that direction, but that's not currently our expectation.

Speaker Change: Great and if I could just sneak one last one in.

Speaker Change: You were alluding to wholesaling in the E&S markets.

Speaker Change: <unk> doesn't have its own wholesale brokerage right and if you don't.

Speaker Change: Got it thanks, so much.

Speaker Change: Thank you. Our next question comes from the line of Katy <unk> with Autonomous Research. Your line is now open.

Speaker Change: Why not start wind.

Speaker Change: Yes, we don't have our own wholesale brokerage, we do distribute through.

Katy: Thanks, Good evening.

Speaker Change: Multiple others to get the product to access to the excess and surplus lines lines. We've looked at what that type of offering will look like and ultimately decided our focus is best where we drive the most value and thats in our core business and not getting distracted through other types of operations to try and get an extra couple of points of commission.

My first question was about.

Katy: His expectations to higher <unk>.

Katy: Yes.

Katy: The franchise channel in the corporate channel.

Katy: How long does it take for an average higher can become margin accretive these days and how does that compare across channels.

Katy: So it depends on a couple of things what geography, they're in and then whether they are on the franchise side of the business with the corporate side. So on the franchise side when we're helping our franchise find a candidate now remember this is still there higher fire decisions. We're just helping to be really a recruiting resource for them to source candidates now, but when they start in their business.

Speaker Change: But it is still a small portion of the business that it has increased over the last couple of years I wouldn't expect that that trend continues indefinitely and maybe it continues for a little bit longer with some of the challenges in Florida, and California, but overtime I would expect the admitted market to go back to being the lion's share of the business now we'll keep an open mind if that doesn't go back in that day.

Katy: They are effectively margin accretive for us almost on day, one there's not a lot of costs associated to that with us.

Speaker Change: Action, but that's not currently our expectation.

Speaker Change: Got it thanks, so much.

Speaker Change: Thank you. Our next question comes from the line of Katy <unk> with Autonomous Research. Your line is now open.

Katy: Well it sounds like we're charging franchise, there's a lot of money to do it. It's a really nominal fee. It's a value add for us, but they are on the franchise's P&L, it's what's in everybody's best interest.

Katy <unk>: Thanks, Good evening.

Katy <unk>: My first question was about guidance expectations to hire into.

Katy: Almost accretive on day, one, but remember its 20 cents on the dollar on new business on the franchise side for production on the corporate side.

Katy <unk>: The franchise channel in the corporate channel.

Katy <unk>: How long does it take for an average higher to become margin accretive these days and how does that compare across channels.

Katy: It varies based on geography, because there is differences in premium per policy. So as you can imagine an agent in Houston produces at a different level in their first few months and an agent in somewhere like Columbus, Ohio, which has a lower value of premium per policy.

Katy <unk>: So it depends on a couple of things what geography, they're in and then whether they are on the franchise side of the business or the corporate side. So on the franchise side when we're helping our franchise find the candidate now remember this is still there higher fire decisions. We're just helping to be really a recruiting resource for them to source candidates now, but when they start in their business.

Katy: So you may be able to sell the same amount of policies you set a lower total dollar value. So.

Katy: Somewhere between that kind of six months to eight months timeframe is usually where you start to get margin accretive.

Katy: Yeah.

Katy <unk>: They are effectively margin accretive for us almost on day, one there's not a lot of costs associated to that with us.

Speaker Change: Thank you that's helpful and then kind of staying in a similar vein.

Speaker Change: Thinking about the geographies, where you guys are looking to either increase your franchise presence or add.

Katy <unk>: We're charging franchise, there's a lot of money to do it it's a really nominal fee, it's a value add for us, but they are on the franchise's P&L, it's what's in everybody's best interest.

Speaker Change: The producer count per franchise, how does that compare to geographies, where youre expecting to see capacity come online in 2025.

Katy <unk>: Almost accretive on day, one, but remember its 20 cents on the dollar on new business on the franchise side for production on the corporate side.

Speaker Change: That's the key is to make those two match with each other right and so where we are.

Katy <unk>: It varies based on geography, because there is differences and premium per policy. So as you can imagine an agent in Houston producers at a different level in their first few months and an agent in somewhere like Columbus, Ohio, which has a lower value of premium per policy.

Speaker Change: Not saturated in any state in the United States I would say when you compare to the overall market opportunity, but would we like to spread it out and put the agents, where we think the opportunity is yes, and so you saw in my comments that we just opened up an office in Tempe, Arizona that is to match up with demand.

Katy <unk>: So you may be able to sell the same amount of policies just at a lower total dollar value. So.

Katy <unk>: Somewhere between that kind of six to eight month timeframe is usually where you start to get margin accretive.

Speaker Change: And in that area with good product and.

Speaker Change: In Texas as we hire more corporate agents. This year, we're trying to spread them to our other offices just until Texas capacity comes comes back so I could go state by state, but that's literally how we think about it we have a geographic map and we try to put agents, where we think the demand is going to be and where we have adequate product.

Katy <unk>: Yes.

Speaker Change: Thank you that's helpful and then kind of staying in a similar vein.

Speaker Change: Thinking about the geographies, where you guys are looking to either increase your franchise presence or add.

Speaker Change: The producer count per franchise, how does that compare to geographies, where youre expecting to see capacity come online in 2025.

Speaker Change: If you don't mind me asking one for my follow up are there any states beyond Arizona, and Texas that you guys can call out.

Speaker Change: That's the key is to make those two match with each other right and so where we are.

Speaker Change: Yeah.

Speaker Change: Not saturated in any state in the United States I would say when you compare to the overall market opportunity but.

Speaker Change: There's a lot of white space, all the way across the country. We've got I think its 13 different growth states and that information is in our investor deck of where we're targeting for new franchises.

Speaker Change: But would we like to spread it out and put the agents, where we think the opportunity is yes, and so you saw.

Speaker Change: Wouldn't expect to see US open a new corporate office.

Speaker Change: In my comments that we just opened up an office in Tempe, Arizona that is to match up with demand in that area with good product and.

Speaker Change: Imminently, but we will continue to evaluate where are the right places that we can launch future top top decile franchises out of the corporate team and we made flopped out a few more of those offices over time in the right geographies, but we do have a corporate office footprint that spans across several different states, where we've got a Denver office in Chicago Office Charlotte Columbus.

Speaker Change: So we've got decent geographic dispersion, it's about putting agents in those offices as opposed to the Texas offices.

Speaker Change: If you don't mind me asking one for my follow up are there any states beyond Arizona, and Texas that you guys can call out.

Speaker Change: And making sure we've got the right management capacity in those other offices and we still plan to take those corporate offices and use them for feeder grounds for future franchises and.

Speaker Change: Yeah.

Mark Miller: I would say that was a highly successful program over the last couple of years, taking corporate agents and allowing them to have franchise ownership there're some of our most productive new franchises and so we'll continue to do that from those offices that Mark just mentioned.

Speaker Change: Wouldn't expect to see US open a new corporate office.

Speaker Change: Imminently, but we will continue to evaluate where are the right places that we can launch future top top decile franchises out of the corporate team and we made flopped out a few more of those offices overtime in the right geographies, but we do have a corporate office footprint that spans across several different states, where we've got a Denver office in Chicago Office Charlotte Columbus.

Speaker Change: Got it thank you so much.

Speaker Change: Thank you. Our next question comes from the line of Michael Zaremski with BMO. Your line is now open.

Speaker Change: Okay.

Hey, good evening.

Speaker Change: On the corporate sales agents.

Speaker Change: Tide.

Speaker Change: You updated us, saying that just given given the.

Speaker Change: So we've got decent geographic dispersion, it's about putting agents in those offices as opposed to the Texas offices.

Speaker Change: Size absolute size being much larger that next year's growth probably be.

Speaker Change: And making sure we've got the right management capacity in those other offices and we still planning to take those corporate offices and use them for feeder grounds for future franchises.

Speaker Change: Not us.

Speaker Change: As big of a growth rate.

Speaker Change: Just curious and I know that is that I thought last quarter.

Speaker Change: Not just nitpicking given the growth has been phenomenal, but I thought last quarter, you kind of said that this looked like kind of the new the new normal for at least 25 in terms of the corporate agent growth rate and it seems to kind of come down a little bit.

Speaker Change: I would say that was a highly successful program over the last couple of years, taking corporate agents and allowing them to have franchise ownership there're some of our most productive new franchises and so we'll continue to do that from those offices that Mark just mentioned.

Speaker Change: <unk> had a few more months to kind of.

Speaker Change: Got it thank you so much.

Speaker Change: So through all of those hires and how things are working.

Speaker Change: Thank you. Our next question comes from the line of Michael Zaremski with BMO. Your line is now open.

Speaker Change: Anything kind of is that is my read correct.

Speaker Change: Yes, Michael This is Mark Miller, what we typically see that we do all of our hiring for corporate agents in the summer time off and college campuses.

Michael Zaremski: Hey, good evening.

Speaker Change: On the corporate sales agents.

Tide.

Speaker Change: You updated us, saying that just given given the.

And when they start and.

Speaker Change: Size absolute size being much larger that next year's growth probably.

Speaker Change: The summer months when you typically see it naturally falloff. This year. It followed the same pattern, which is what we would expect.

Speaker Change: Not as.

Pick up the growth rate.

Speaker Change: We still maintain super strict production standards some of our older more tenured agents decided that they didn't want to lean quite into the marketing strategy to go get new referral partners as the market got tight and they opted out.

Speaker Change: Just curious and I know that is that I saw.

Thought last quarter not.

Not just nitpicking given the growth has been phenomenal, but I thought last quarter, you kind of said that this looked like kind of the new the new normal for at least two.

Speaker Change: However, our new agents that we brought in in the summertime are doing extremely well and.

Speaker Change: <unk> five in terms of the corporate agent growth rate and it seems to kind of come down a little bit.

Speaker Change: And they are adapting to the model quickly.

Speaker Change: Guys have had a few more months to kind of.

Speaker Change: We're just trying to make sure that the corporate agents that we bring and we don't flood the Texas market, which has traditionally been where we put a huge percentage of our college hires and we're spreading them out. So we just we just slowed a little bit on the new hiring it's not done yet for this year that will start in the summer.

Speaker Change: So through all of those hires and how things are working.

Speaker Change: Anything kind of is that is my read correct.

Speaker Change: Yes, Michael This is Mark Miller, what we typically see that we do all of our hiring for corporate agents in the summer time off on college campuses.

But I wouldn't say, it's dramatically its down a little bit, but I wouldn't I wouldn't say like I think you said died off I Wouldnt say died off would be the word I would use for it I would just say we slowed it down just a bit and we'll continue to go heavy at the agent count from the franchise side, we have what we call. The agency staffing program that Mark just talked about where we.

Speaker Change: And when they start.

Speaker Change: The summer months and you typically see it naturally fall off this year. It followed the same pattern, which is what we would expect.

Speaker Change: Help franchises add head count and Youll continue to see us add more agents per franchise going forward.

Speaker Change: However, our new agents that we brought in in the summertime are doing extremely well in.

Speaker Change: Yes, great just layer on there Mike. So we're also investing into the enterprise sales team with both of those kind of hit on a little bit in our prepared remarks that team will continue to grow at a higher rate just as we get more into partnerships and digitally flow, making sure. We can execute on all of that as quickly as possible. So over time, you'll probably see.

Speaker Change: And they are adapting to the model quickly.

Speaker Change: We're just trying to make sure that the corporate agents that we bring and we don't flood the Texas market, which has traditionally been where we put a huge percentage of our of our college hires and we're spreading them out. So we just we just slowed a little bit on the new hiring it's not done yet for this year that will start in the summer.

Speaker Change: US start to break that out for now it's still included in the corporate agent head count, but that's an area that's growing really really rapidly.

Speaker Change: But I wouldn't say, it's dramatically its down a little bit, but I wouldn't I wouldn't say like I think you said died off I Wouldnt say died off would be the word I would use for it I would just say we slowed it down just a bit and we'll continue to go heavy at the agent count from the franchise side, we have what we call. The agency staffing program that Mark just talked about where we.

Speaker Change: <unk>.

Speaker Change: I continue to remain Super bullish on the agent model the franchise agent and the corporate agent model.

Speaker Change: Youll see us continue to add in but the term. We always uses the boards of capacity, which is we have to have the management layer to be able to absorb it and were bringing up the tenure of the corporate agents as fast as we can and when we do we will add more corporate agents. So that we can responsibly add them to the network and they can be productive quickly.

Speaker Change: Franchises add head count and Youll continue to see us add more agents per franchise going forward.

Speaker Change: Okay got it and apologies if I came off the Saint <unk>.

Speaker Change: Just probably didn't enunciate ticked.

Speaker Change: Ticked up a bit.

Speaker Change: Okay.

Speaker Change: Tom.

Speaker Change: There are a lot of color.

Speaker Change: Color you've given us.

Speaker Change: On the outlook, but just trying to.

Speaker Change: US start to break that out for now it's still included in the corporate agent head count, but that's an area that's growing really really rapidly.

Speaker Change: To make sure I'm clear about that.

Speaker Change: A large kind of the wide gap on the guidance on an organic.

Speaker Change: I continue to remain Super bullish on the agent model the franchise agent and the corporate agent model.

Speaker Change: Revenue growth ex supplemental.

Speaker Change: And cost recovery.

Speaker Change: If I'm if I'm incorrect I think it's much much wider than your historical guide I just want to make sure im understanding what's causing the.

Speaker Change: Youll see us continue to add in but the term we always uses absorbed the capacity, which is we have to have the management layer to be able to absorb it and were bringing up the tenure of the corporate agents as fast as we can and when we do we will add more corporate agents. So that we can responsibly add them to the network and they can be productive quickly.

Speaker Change: The the wider gaps and then in the past.

Speaker Change: Yes, I'm not going to put specific numbers on the core revenue growth what I would say again is we expect core revenue growth rate to accelerate from 2024 to 2025.

Speaker Change: Okay got it and apologies if I came off the Saint <unk>.

Speaker Change: Just probably didn't enunciate kind of ticked up a bit.

Speaker Change: I don't know that if you do the implicit math that it's actually all of that wide, but if you could think about what the factors are new business growth. We feel good about the way to the franchise side of the businesses performing we feel like we've got a big crop of new corporate agents that are going to perform very well, we've got a good pipeline of potential partnerships in an enterprise sales division that's growing.

Speaker Change: Okay.

Speaker Change: All right.

Speaker Change: Lot of color to color you've given us.

Speaker Change: On the outlook, but just trying to.

Speaker Change: To make sure I'm clear about that.

Speaker Change: The large kind of the wide gap on the guidance on an organic revs.

Speaker Change: Revenue growth ex supplemental.

Quite well and on the other side of that is the renewal business, so largely driven by client retention.

Speaker Change: And cost recovery.

Speaker Change: If I'm if I'm incorrect I think it's much much wider than your historical guide I just want to make sure im understanding what's causing the.

Speaker Change: As well as pricing and so there is there is.

Speaker Change: As pricing slows down and client retention improves the timing of that will impact the growth rates of the renewal book. So we're just being a little bit conservative to that in the forecasting.

Speaker Change: The wider gap than in the past.

Speaker Change: Okay got it maybe I was just looking at last years and it was only a three point delta, but okay. And then just lastly on the same topic Directionally I'm all the exciting things you guys are doing on the market services side the National Bank.

Speaker Change: Yes, I'm not going to put specific numbers on the core revenue growth what I would say again is we expect core revenue growth rate to accelerate from 2024 to 2025.

Speaker Change: If you do the implicit math that it's actually all of that wide, but if you could think about what the factors are new business growth. We feel good about the way to the franchise side of the businesses performing we feel like we've got a big crop of new corporate agents that are going to perform very well, we've got a good pipeline of potential partnerships in an enterprise sales division that's growing.

Speaker Change: Relationship you have is this a material.

Speaker Change: Part of your guidance. This players it's still kind of.

Speaker Change: <unk>, but but growing.

Speaker Change: I wouldn't say, it's massively material yet, but it is getting to a point, where it's becoming a really real piece of the business and over the next probably year year and a half it will get to be pretty big, especially if we can execute it the way that we think we can so it's.

Well Ed on the other side of that is the renewal business, so largely driven by client retention.

Speaker Change: As well as pricing and so there is there is.

Speaker Change: Just wanted to keep an eye on.

Speaker Change: Yeah.

Speaker Change: Okay and I'll just sneak one last one in that someone asked on California earlier and I thought the the.

Speaker Change: That response.

Speaker Change: Was that things are still directional opening up just want to make sure.

Speaker Change: Okay got it maybe I was just looking at last year. It was only a three point delta, but okay. And then just lastly on the same topic Directionally I'm all the exciting things you guys are doing on the market services side the National Bank.

Speaker Change: Not missing anything we should put in our model on one Q2, Q on contingents and <unk> or anything like that or productivity.

Speaker Change: The tragedy in California, and one in <unk>.

Speaker Change: Relationship you have is this a material.

Speaker Change: Sure.

Speaker Change: No I wouldn't expect that to really move the needle it's not as if production was shut off for a month and then you got two months of production in one month nothing like that it wouldn't be massively material remember, California is kind of a high single digit market share of our total written premiums so that's not going to swing the needle.

Speaker Change: Part of your guidance. This players, it's still kind of a small but growing.

I wouldn't say, it's massively material yet, but it is getting to a point, where it's becoming a really real piece of the business and over the next probably year year and a half it will get to be pretty big.

Speaker Change: Okay. Thank you.

Speaker Change: Actually if we can execute it the way that we think we can so.

Mark Hughes: Thank you. Our next question comes from the line of Mark Hughes with <unk> Securities. Your line is now open.

Speaker Change: Just wanted to keep an eye on.

Speaker Change: Yes.

Speaker Change: Okay and I'll just sneak one last one in that someone asked on California earlier, and I talked to that.

Speaker Change: Yes, Thank you and good afternoon.

Mark Hughes: Europe premium retention you report has been very steady here lately.

Speaker Change: That response.

Speaker Change: Was that things are still directional opening up just trying to make sure.

Mark Hughes: If I were to do a little math I might conclude that the franchise retention has gotten a little bit better but should corporate retention is.

Speaker Change: Not missing anything we should put in our model on one Q2, Q on contingents and <unk> or anything like that our productivity to get to the <unk>.

Mark Hughes: It dropped off a little bit.

Tragedy in California, and one in Q.

Mark Hughes: And I'm just sort of curious as you look at the business is there anything that might account for little bit of a difference in the retention one to another again the overall numbers.

No I wouldn't expect that to really move the needle it's not as if production was shut off for a month and then you got two months of production in one month.

Nothing like that it wouldn't be massively material remember, California is kind of a high single digit market share of our total written premiums so that's not going to swing the needle.

Mark Hughes: <unk> steady and as.

Mark Hughes: You report, but is there some reason for a difference between the two channels.

Speaker Change: Yeah Super easy answers, so corporate we've been in Texas for 20 years and franchise, we've been geographically dispersed really since we started doing that in 2012.

Speaker Change: Thank you.

Thank you. Our next question comes from the line of Mark Hughes with <unk> Securities. Your line is now open.

So considerably larger portion of the book on the corporate side is located in Texas, which has been a really hard product market for a couple of years had some of the highest year over year price increases, which is dragging down the Texas retention numbers as part of the strategy to diversify outside of Texas and the corporate footprint. So we can.

Mark Hughes: Yes. Thank you good afternoon.

Mark Hughes: Europe premium retention you report has been very steady here lately.

Mark Hughes: If I were to do a little math I might conclude that the franchise retention has gotten a little bit better but should corporate retention is.

Mark Hughes: It dropped off a little bit.

Speaker Change: Normalized book like we have in the franchise side of the business that pertains really quite well.

Mark Hughes: And I'm just sort of curious as you look at the business. So is there anything that might account for a little bit of a difference in the retention one to another again the overall numbers.

Speaker Change: Thank you for that and then the interest expense with the dividend and the current debt load, what's a good run rate interest expense.

Holding steady and as you report, but is there some reason for a difference between the two channels.

Speaker Change: Yes, so $300 million term loan.

Speaker Change: If you read the release its silver plus $3 50, so that's what I would put in your model.

Mark Hughes: Super easy answers so corporate we've been in Texas for 20 years and franchise, we've been geographically dispersed really since we started doing that in 2012.

Speaker Change: Okay.

Speaker Change: Thank you very much.

Speaker Change: Yes.

Speaker Change: Thank you. Our next question comes from the line of Pablo <unk> with Jpmorgan. Your line is now open.

Mark Hughes: Considerably larger portion of the book.

Mark Hughes: Corporate side is located in Texas, which has been a really hard product market for a couple of years had some of the highest year over year price increases, which is dragging down the Texas retention numbers as part of the strategy to diversify outside of Texas and the corporate footprint. So we can.

Speaker Change: Hi, good evening.

Speaker Change: I might have missed this in the early discussion but.

Speaker Change: Theres talk right now about homeowners business in California, and moving towards the E&S and perhaps in other states. So can you talk about how we segment operating in that environment is there a risk of commission that leakage about lucid work gets involved.

Mark Hughes: Normalized book like we have in the franchise side of the business that pertains really quite well.

Speaker Change: Are you able to regain what's of economics there.

Mark Hughes: Thank you for that and then the interest expense with the dividend and the current debt load, what's a good run rate interest expense.

Speaker Change: I'm sorry.

Speaker Change: I didn't I didn't quite follow that can you break it into pieces, we will try to answer it the best we can so let's start with the first one.

Speaker Change: It's just so the premises more humorous business moving to E&S right. So some of it California specific youre right.

Mark Hughes: Yes, so $300 million term loan I think if you read the release its silver plus $3 50, So that's what I would put in your model.

Speaker Change: If you will.

Mark Hughes: Okay.

Speaker Change: Thank you very much.

Speaker Change: So in that environment is there a risk of commission when you give <unk>.

Mark Hughes: Yes.

Speaker Change: Thank you. Our next question comes from the line of Pablo <unk> with Jpmorgan. Your line is now open.

Speaker Change: Our wholesale brokerage gets involved or are you able to retain most of the economics from selling.

Speaker Change: Yes, so the average commission rate in the E&S book is going to be lower than the regular admitted market.

Speaker Change: Hi, good evening.

Speaker Change: I might have missed this in the early discussion, but theres talk right now about homeowners business in California, and moving towards E&S and perhaps in other states. So can you talk about how groups have been operating in that environment is there a risk of commission leakage, but lucid where it gets involved.

Speaker Change: I don't expect that to be the long term.

Speaker Change: <unk> go forward strategy for the entire market I would expect the admitted market to heal and go back to being kind of the dominant force that may change I might be wrong, and if that does we will revisit this kind of wholesale discussion, but for now I don't think that really makes sense and it doesn't dilute the economics all that much.

Able to accumulative economics there.

Speaker Change: I'm sorry.

Speaker Change: I didn't quite follow that can you break it into pieces, yes, we will try to answer it the best we can so let's start with the.

Speaker Change: Okay. Thank you that makes sense and then.

Speaker Change: The first one.

Speaker Change: So it's the premises more humorous business moving to E&S right. So some of it.

Speaker Change: Just second question I was wondering if you could give a sense of the percentage price increases youre getting for homeowners today right. It seems like if you look at the pricing exposure impacting on the overall book, it's about mid teens, if you compare pip growth in European growth.

Speaker Change: California specific youre right.

Speaker Change: If you.

Speaker Change: So in that environment is there a risk of commission that you get.

Speaker Change: So with auto pricing flattening out or having come down it seems like homeowners pricing exposure growth should be much higher than mid teens is that fair or.

Speaker Change: Our wholesale brokerage gets involved or are you able to retain most of the economics from selling.

Speaker Change: Yes, so the average commission rate in the E&S book is going to be lower than the regular admitted market.

Speaker Change: Or are there certain elements I'm missing.

Speaker Change: No that's probably the right way to think about it homeowners is 61% of our book, 36% as auto so.

Speaker Change: I don't expect that to be the long term kind of go forward strategy for the entire market I would expect the admitted market to heal and go back to being kind of the dominant force that may change I might be wrong.

Speaker Change: The majority of that is going to be related to homeowners, but auto has a much lower rate of increase and there is some areas small percentage, where we actually have seen premium declines year over year, which allows us to really go add value back to the clients and make sure. We're staying in front of them, but homeowners, yes, it's probably slightly higher than the total.

Speaker Change: That does we will revisit this kind of wholesale discussion, but for now I don't think that really makes sense and it doesn't dilute the economics all that much.

Speaker Change: Okay. Thank you that makes sense and then.

Speaker Change: Average like you called out the difference between policy in force growth rate in premium growth rate I think thats the right way to look at it.

Speaker Change: Just second question I was wondering if you could give a sense of the percentage of price increases you are getting for homeowners today right. It seems like if you look at the pricing exposure impacting on the overall book, it's about Nadeem could you compare pip growth in earned premium growth.

Speaker Change: Gotcha. Thank you.

Speaker Change: Thank you.

Our next question comes from the line Scott <unk> with RBC capital markets. Your line is now open.

Speaker Change: So with auto pricing flattening out or having come down it seems like homeowners pricing exposure growth should be much higher than mid teens is that fair.

Scott: Yes, Hello, Thanks, just wanted to ask first on the special dividend.

Speaker Change: Are there certain elements I'm missing thank you.

Scott: You decided now is the right time to do that the dollar amount and how often we can expect to see these types of special dividends I know I know we've seen it before but.

Speaker Change: That's probably the right way to think about it homeowners is 61% of our book, 36% as auto so.

Scott: How are you thinking about that in terms of.

Investing in the business and I know, you're doing a share buyback, but just how youre thinking of that.

Over time.

Scott: Yes, it's Scott we're in a really good position and that this business funds itself very well.

Scott: Super cash flow positive and we want to make sure we're maintaining an efficient balance sheet. So we have been messaging now for the last year and a half you should expect this type of transaction to comment that historically use of proceeds from something like this has been a special dividend now I think we also showed during 2024 the propensity to go buy back stock when there is market.

Speaker Change: Book average like you called out the difference between policy in force growth rate in premium growth rate I think thats the right way to look at it.

Speaker Change: Got you. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Scott <unk> with RBC capital markets. Your line is now open.

Scott: Yes, Hello, Thanks, just wanted to ask first on the special dividend.

Scott: Dislocation that will continue to be part of the capital management strategy and over time, if you watch our leverage ratio really even back all the way to 2016.

Scott: You decided now is the right time to do that the dollar amount and how often we can expect to see these type of special dividends I know I know we've seen it before but.

Scott: We will lever up distributing cash to shareholders through one way or another delever through earnings growth Lather Rinse repeat you should expect to see that in the future as well.

Scott: How are you thinking about that in terms of.

Scott: Investing in the business and I know, you're doing a share buyback, but just how youre thinking of that.

Speaker Change: Okay. That's helpful and then the only other question I would just.

Scott: Yes over time.

Speaker Change: <unk> you said Youre issuing 1000 policies per month out can you talk about where that was maybe a year or two ago and where you think you can get to maybe over the next couple of years. What is there any kind of target you are looking at.

Speaker Change: Yes, Scott we're in a really good position and that this business funds itself very well.

Speaker Change: Super cash flow positive and we want to make sure we're maintaining an efficient balance sheet. So we have been messaging now for the last year and a half you should expect this type of transaction to comment that historically use of proceeds from something like this has been a special dividend out I think we also showed during 2024 the propensity to go buy back stock when there is market.

Speaker Change: <unk> yeah.

Speaker Change: Yes, I would say if you roll it back a year ago. It was a very small amount of volume going through <unk>. I mean, we were still in the process of building out a lot of the pipes and we had some nice progress but during this year, we picked up a lot of steam.

Speaker Change: Dislocation that will continue to be part of the capital management strategy and over time, if you watch our leverage ratio really even back all the way to 2016.

Speaker Change: We said thousands per month I wouldn't say it was 1000, it's considerably more than that we've written tens of thousands of policies to the platform now I would expect that that continues to take hold as our in our agent for us as we develop more pipelines with carriers and the product becomes more online we still have a lot of states where carriers want to do the.

Speaker Change: We will lever up distribute cash to shareholders through one way or another delever through earnings growth Lather Rinse repeat you should expect to see that in the future as well.

Speaker Change: Okay. That's helpful and then the only other question I would just.

Speaker Change: Mentation work, but they're really waiting for underwriting profitability. So I expect that thats going to be the way our agents distributed in the future and I think thats best for both clients as well as agents, but also for carrier partners, because we can be really specific.

Speaker Change: <unk> you said Youre issuing 1000 policies per month now can you talk about where that was maybe a year or two ago and where you think you can get to maybe over the next couple of years. What is there any kind of target you are looking at.

Speaker Change: Who gets to what carrier and make sure. We're meeting all of their underwriting guidelines really better than any independent agent out there.

Speaker Change: And the <unk>.

Speaker Change: Yes, I would say if you roll it back a year ago. It was a very small amount of volume going through <unk>. I mean, we were still in the process of building out a lot of the pipes and we've had some nice progress but during this year, we picked up a lot of steam.

Speaker Change: And the key is you don't you don't really connected for a carrier and just done with it Hugo carrier by state and so we just continue to add more carriers and more states and it will take a while to get it completely embedded across the whole organization.

Speaker Change: But we see a big uptake from our agents that they really like it and it saves a lot of time and it is the backbone to build out everything else that we want to do with direct connections to the carriers.

Speaker Change: Okay. It sounds like it was a big year for it.

Speaker Change: Thanks for the detail.

Speaker Change: Thank you and I'm currently showing no further questions at this time I'd like to hand, the call back over to Mark Miller for closing remarks.

Mentation work, but they're really waiting for underwriting profitability. So I expect that thats going to be the way our agents distributed in the future and I think thats best for both clients as well as agents, but also for carrier partners, because we can be really specific.

Mark Miller: Okay I just want to thank everybody for taking the time to join US today on the call. We appreciate your continued interest and support and.

Speaker Change: And we're looking forward to talking to you again in April.

Speaker Change: Who gets to what carrier and make sure. We're meeting all of their underwriting guidelines really better than any independent agent out there.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: And the key is you don't you don't really connected for a carrier and just done with it you go carrier by state and so we just continue to add more carriers and more states and it will take a while to get it completely embedded across the whole organization.

Speaker Change: We see a big uptake from our agents that they really like it and it saves a lot of time and it is the backbone to build out everything else that we want to do with direct connections to the carriers.

Speaker Change: Okay. It sounds like it was a big year for it.

Speaker Change: Thanks for the detail.

Speaker Change: Thank you and I'm currently showing no further questions at this time I'd like to hand, the call back over to Mark Miller for closing remarks.

Mark Miller: Okay I just want to thank everybody for taking the time to join US today on the call. We appreciate your continued interest and support and.

Speaker Change: And we're looking forward to talking to you again in April.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Q4 2024 Goosehead Insurance Inc Earnings Call

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