Q4 2024 TWFG Inc Earnings Call
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Judy: Good morning, My name is Judy and I will be your conference operator today at this time I would like to welcome everyone to the T. W. F G fourth quarter 'twenty 'twenty four conference call.
Judy: All lines have been placed on mute to prevent any background noise.
Judy: After the Speakers' remarks, there will be a question and answer session.
Judy: If you would like to ask a question. During this time simply press Star then one one on your telephone keypad. If you would like to withdraw your question. Please press star one wanted again.
Judy: This call is being recorded and will be available for replay on the company's website.
Judy: Before we begin.
Judy: Let me remind you that today's discussion may contain forward looking statements and actual results may differ materially from those discussed.
Judy: For more information regarding forward looking statements. Please refer to the company's press releases and S. E C filings.
Judy: Also on today's call our speakers will reference certain non-GAAP financial measures, which we believe will provide useful information for investors.
Judy: The company has posted reconciliations of the non-GAAP financial measures discussed during this call in the tables accompanying the company's earnings press release located on the investors section of the company's website at Www Dot T. W. F G dotcom.
Judy: Got.
Speaker Change: It is now my pleasure to introduce Mr. Gordy bunch, founder Chairman and CEO of T. W. F G. Sir the floor is yours.
Speaker Change: Thank you operator, and good morning, everyone.
Speaker Change: I appreciate you taking time to join US today to discuss TWD <unk> fourth quarter and full year 2024 results. Joining me on the call is Janice swinging our Chief Financial Officer. After my remarks, Janice will review our financial results in detail and then we'll open up the call for your questions.
Speaker Change: I want to start by thanking our employees agents and clients and business partners for their ongoing support.
Speaker Change: <unk> continues to establish itself as one of the fastest growing independent insurance distribution platforms with industry, leading organic growth and margin expansion.
Speaker Change: Our model provides agents with cutting edge tools technology and operational support ensuring they succeed in an evolving insurance landscape.
Speaker Change: Before we dive into our 2024 results I want to briefly acknowledge the January 'twenty twenty-five wildfires that caused significant devastation and parts of Los Angeles.
Speaker Change: These events are a stark reminder of evolving catastrophic risk and its impact on reinsurance pricing, while TWC does not bear direct balance sheet exposure. We are closely monitoring reinsurance market trends and carrier responses, we remain confident in our ability to adapt to changing conditions and sharing our agents have.
Speaker Change: Access to stable and competitive capacity in key markets.
Speaker Change: Before diving into our fourth quarter results I wanted to highlight TWD <unk> strong performance in 2024.
Speaker Change: Total revenue for the year grew by 18, 4% to $203 8 million with organic revenue growth of 14, 5%, reflecting both sustained momentum and new business production and strategic expansion efforts.
Speaker Change: Adjusted EBITDA increased 44, 7% to $45 3 million demonstrating the scalability of our platform and operational efficiencies.
Speaker Change: <unk> 24 was a transformational year for <unk>, we successfully completed our IPO in July raising $192 9 million in net proceeds.
Speaker Change: This capital provides us with significant flexibility to accelerate growth.
Speaker Change: Through acquisitions, expanding geographically and investing in technology to enhance agent productivity and client experiences.
Speaker Change: We have been focused on growing our national footprint and in 2020 for TD <unk> expanded into 15, New states and added a 144, new retail locations, bringing our total to 520 retail locations across 34 states.
Speaker Change: In addition, our MGA now supports agents across.
Speaker Change: 42 states at year end.
Speaker Change: Total written premium for 2024 reached one 5 billion, an 18, 3% increase year over year.
Speaker Change: Reinforcing our ability to drive growth in both our retail and wholesale channels.
As we continue to enhance agent productivity through technology and strategic acquisitions, we remain confident in our ability to sustain high levels of organic growth.
Speaker Change: It is important to note locations take time to mature and contribute meaningfully to revenue and profitability. Historically it takes two to three years for new agencies to reach profitability and longer to realize our full growth potential.
Speaker Change: We remain committed to supporting our new locations to ensure long term success.
Speaker Change: Our M&A strategy continues to be a core part of our growth plan as we evaluate M&A opportunities our focus remains on acquiring high quality agencies that align with our culture and strategic vision.
Speaker Change: While acquisitions will be a key driver of long term growth, we are maintaining financial discipline prioritizing organic expansion technology investments and balance sheet flexibility.
Speaker Change: We remain committed to keeping leverage within a prudent range, ensuring financial strength as we scale.
Speaker Change: Technology is at the core of GWG as different age differentiated approach our constant investment in technology combined with our agency and our box model equip agents with enhanced client engagement tools and management tools.
Speaker Change: From a market perspective, we are seeing stabilization in carrier appetite and improvement in loss ratios, which have opened up new opportunities for growth.
Speaker Change: Carriers are once again accepting new business in areas, where capacity had been previously constrained. While this presents an opportunity for growth we remain mindful of the importance of diversification and maintaining flexibility in our strategy.
Speaker Change: As Janice will discuss GWG delivered a strong financial result for the fourth quarter highlighted by.
Janice: 38% total revenue growth compared to the prior period, 25% organic revenue growth driven by increased new business production and higher premium rates.
Janice: And an adjusted EBITDA margin of 26, 8%, reflecting margin expansion from the economies of scale and our efficient operating model.
Janice: Our Q4 margin outperformance was primarily due to higher contingent commission income and a timing related delay in certain public company expenses.
Janice: We expect a normalized adjusted EBITDA margin in 2025.
Janice: <unk>, our long term operating efficiency targets, we continue to focus on scaling our platform, while optimizing cost structures to drive sustainable margin expansion overtime.
Janice: Looking ahead, our priorities remain clear.
Janice: We'll continue integrating recent and future acquisitions and supporting the growth of our new locations, we will focus on expanding geographically, while enhancing our technology and agent support systems.
Janice: We will be disciplined in capital allocation as we pursue both organic and acquisition driven growth.
Janice: These efforts position dws <unk> for continued success in 2025 and beyond.
Janice: Now I'll turn it over to Janice to provide more detail and our financial performance.
Janice: Thank you Gordon and good morning, everyone. We will start with the top line written premium, which increased by $60 million or 20% over the prior year period to $361 4 million within our primary offerings insurance services grew to $51 3 million or 20% and the MGA grew $8 six.
Janice: Nine or 19, 2% over the prior year period.
Janice: This growth was driven by a combination of new business acceleration and normalized retention levels.
Janice: During the fourth quarter of 2024, we saw a healthy uptick in written premium new business growth of 45% or $27 million over the prior year period, as well as renewal business growth of 14% or $33 million over the prior year period within both of our product offerings. We are also maintained steady returns.
Janice: <unk> levels of 91% quarter over quarter.
Janice: <unk> of the growth was primarily due to higher premium rates written premiums from our 2023 acquisitions rolling into the current year and new business growth as carriers opened up for new business in regions, where they had previously restricted.
Janice: So I'd like to revenues, our total revenues increased $12 2 million or 38% over the prior year period to $51 7 million.
Janice: The increase of 38% was mainly due to commission income representing 18, 9% of the total growth contingent income representing 10% of the grout and BN com, representing one 9% at the remaining total crowd.
Janice: Commission income increased $7 5 million or 27% over the prior year period to $43 7 million driven by higher premium rates accelerating new business activity solid economic growth in our core states and the rollout of our 2023 book of business acquisition in terms of the current period.
Janice: Insurance services offering increased 19% over the prior year period and represented 16, 1% of the total increase.
Janice: <unk> offerings saw growth of 29, 5% over the prior year period and represented four 6% of the total growth.
Janice: Contingent income increased $3 9 million or 371% over the prior year period to $5 million benefiting from loss ratio improvement late in the year and continued growth in total written premium.
Janice: Fee income was up $8 million or 39, 8% to $2 8 million.
Janice: <unk> due to higher policy counts and increasing business through our marketing activities with <unk> 6 million students coming from that's white glove program in our MGA offering.
Janice: Organic revenues increased $8 8 million, reaching $43 6 million for an organic growth rate of 25% driven by rate increases and strong new business growth.
Janice: Turning to expenses there are some key considerations here due to the acquisition of nine of our independent branches.
Janice: Branches were previously part of our agency and our box model, but has now been converted into corporate branches, which shifted costs from commission expense the salary and benefits.
Janice: <unk> expense increased $3 9 million or 11, 2% over the prior year period to $28 9 million.
Janice: The increase represents one a $5 1 million increase related to the growth in business offset by a $3 2 million decrease related to the branch conversions of which $2 1 million shifted to salary and benefits.
Janice: Total salary and employee benefits increased by $3 8 million or 97, 8% over the prior year period to $7 7 million. This was driven by a $2 1 million increase from the branch conversion shift from commission expense.
Janice: $8 5 million increase related to the 2023 corporate store asset acquisitions, and a $1 2 million increase from the RFP is issued in conjunction with the IPO.
Janice: Other administrative expenses increased $2 million or 69, 9% over the prior year period to 5 million. This increase was mainly due to public company costs, including professional fees and consulting services, representing one 2 million or 40% of the total increase and the remaining increase of <unk> 9 million or 20.
Janice: Nine 9% was driven by the continued growth of our business and branch conversions.
Janice: Amortization, and depreciation increased $1 5 million or 101% to $3 1 million driven by amortization of intangibles from branch conversions and the 2023 corporate store asset acquisition.
Janice: Net income for the quarter was $8 2 million, a $2 9 million or 56, 3% increase over the prior year period.
Janice: On an adjusted basis net income increased $3 8 million or 57, 2% of the prior year period to $10 5 million, including an increase in income of $2 9 million increase in stock based compensation of $1 3 million increase in amortization expense related to.
Janice: Missions and branch conversions of $2 9 million offset by a $3 1 million increase in tax expense on an adjusted net income.
Janice: <unk> EBITDA and adjusted EBITDA was strong at $10 2 million and $13 8 million, respectively, representing growth of 91, 7% for adjusted EBITDA.
Janice: Adjusted EBITDA margin was 26, 8% compared to 18, 3% in the prior year period.
Janice: This expansion was driven by overall growth, but also benefited from outsized contingent commission and investment income somewhat offset by the ongoing ramp up of public company costs, which we expect to normalize over the next few quarters.
Janice: With that I will turn it back to Gordon.
Gordon: Thank you Janice before we open the call for questions I want to reiterate how proud we are of the progress <unk> has made over the past year.
Gordon: Our strong fourth quarter performance capped off a transformational year in which we executed on our IPO expanded into new states and strengthened our platform through both organic growth and strategic acquisitions as.
Gordon: As we move into 2025, we remain focused on executing our strategy expanding our national footprint enhancing agent support and maintaining financial discipline, while pursuing both organic and acquisition driven growth.
Gordon: Investments, we are making today are building a strong foundation for long term success.
Gordon: We began 2025, requiring two new corporate locations in Ohio and Texas.
Gordon: The new locations are in line with our acquisition expectations for revenue and EBITDA.
Gordon: Our robust pipeline provides us many quality acquisition targets to achieve the remainder of our 2025 M&A goals.
Gordon: Our M&A models included beginning 2025 with acquiring $3 million of revenue and 700000 of EBITDA with an additional $20 million of revenue and $5 million of EBITDA being acquired with a mid year convention.
Gordon: For the full year 2025, we expect total revenue to be between 235 and $250 million with organic revenue growth in the range of 11% to 16%.
Gordon: This growth will be driven by our expanding distribution network deepening carrier relationships and favorable industry trends.
Gordon: We also anticipate an adjusted EBITDA margin in the range of 19% to 21%, reflecting our commitment to operational efficiency, while continuing to invest in future growth.
Gordon: We are confident in our ability to drive our strong performance in 2025 and beyond leveraging our scale and deep industry expertise to create long term value.
Gordon: With that we'd be happy to take your questions. Operator, Please open the line.
Gordon: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced.
Gordon: Draw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Gordon: Okay.
Speaker Change: And our first question comes from Tommy Mccoy of <unk>. Your line is open.
Dan: Hi, This is Dan on for Tommy.
Speaker Change: Kind of EBITDA multiples are you guys seeing in the acquisitions that you have in your pipeline and how is that competition for those acquisitions trended compared to the prior quarter.
Speaker Change: So the prior quarter, we did not have any acquisitions in 2000.
24 was it pencils down year for us.
Speaker Change: So <unk>.
Speaker Change: I'm not going to have a trend over prior quarter, but were seeing on the smaller revenue size transactions youre looking at 9% to 10 times EBITDA.
Speaker Change: On larger revenue drags attractions and Youre going to see 10 to 12 times EBITDA range.
Speaker Change: When you get into the micro sized producer portfolios Youre now dealing at multiples of revenue rather than EBITDA and those rare and range between one and a half to three times revenue.
Speaker Change: Which can be a five to seven to nine times EBITDA conversion.
Speaker Change: Okay. That's helpful.
Speaker Change: Yeah very helpful. Thank you and then my follow up.
You, obviously did a lot of onboarding of new branches.
Speaker Change: Second half of last year I was just hoping for an update about.
Speaker Change: How the new basis sort of trended versus your expectations and then.
Speaker Change: If theres been any churn in that business as well.
Speaker Change: Yes, So I think we've mentioned on previous calls it takes several years for newly onboard and scratch agencies to really mitigate any meaningful production. So theyre not really driving any of the results in 2024.
Speaker Change: A modest contribution in 'twenty five.
Speaker Change: And more so in 'twenty six.
Speaker Change: There hasnt been a lot of churn of the Onboarding agents.
Speaker Change: A while for them to get their footing.
Speaker Change: There may be some consolidation of agents that are in proximity to each other.
Speaker Change: For efficiencies they may.
Speaker Change: Merge locations and ended up being one location instead of three.
Speaker Change: See that occurring.
Speaker Change: But as far as far as it goes right now it's too early to tell a real trend off of those newly Onboarding agents.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Mike <unk> of BMO. Your line is open.
Charlie: Hey, Good morning, this is Charlie on for Mike.
Charlie: First question is on your organic growth guidance of 11% to 16%.
Speaker Change: Healthy level for sure.
Charlie: Just a.
Charlie: A little bit of a wide range, especially since we're almost through the FERC quarter.
Charlie: Can you talk us through one or two biggest variable.
Charlie: And that could cause organic growth to bring in either direction.
Charlie: Sure ill point out a couple of variables first on private passenger auto we're seeing a moderation on rate.
Charlie: 25.
Charlie: There's also the potential that may shift upward given the concerns about the impacts of tariffs on materials.
Charlie: Parts for the private passenger auto repair.
Charlie: There could be if there is any realization of increased loss costs.
Charlie: That could put pressure on carriers to go back to a little more aggressive rate increase which would swing the organic.
Charlie: Yes.
Charlie: If things stay where they're at right now we're kind of in that midpoint of the range that we've provided.
Charlie: Conversely, if theres a continuation of historically profits.
Charlie: Profitable business and carriers choose to lean into growth.
Charlie: That could end.
Charlie: We end up with a rate decrease which we're not predicting that to occur, but we have to put that out there is a possibility that as carriers sustain their fourth quarter results.
Charlie: And to growth than that good.
Charlie: Matt circumstance, so thats, where you get that range on the on the property side of the equation you still have capacity.
Charlie: Constraints in some geographies.
Charlie: It is starting to soften across a broader part of the United States.
Charlie: But out west.
Charlie: We're all acutely aware.
Charlie: California still doesn't have stabilization in the property market.
Charlie: That tends to drive more business into the California Fair plan.
Charlie: Which has less favorable economics.
Charlie: We have secured numerous secondary and tertiary property providers.
Charlie: To give our agents access to stable capacity.
Charlie: But then there.
Charlie: <unk> or pricing that California, if airplane has could undermine the natural market. So looking for California fair plan to hopefully get some rate discipline.
Charlie: Has the rate increases are their own and that can have a another secondary impact.
Charlie: As we get into reinsurance renewal cycles the 6171.
Charlie: We are hearing.
Charlie: The moderation in not a great impact.
Charlie: <unk>.
Charlie: Yeah.
Charlie: As we all know things happen and so we're always cautiously optimistic and Thats why we give you the high the low range.
Charlie: What could impact ultimately rates to the inflow into our commission revenues.
Charlie: Got it thank you and then.
Charlie: On the EBIT margin.
Charlie: Guidance.
Charlie: You mentioned, the public company costs being pushed out.
Charlie: Or I guess delayed.
Charlie: Was that a push out.
Charlie: As you guys push out the cost or is it that they didnt I guess is there extra costs that.
Charlie: In the 25 guidance.
Charlie: So there is yes.
Charlie: Yes, if we think through the margin comparisons of 2024.
Charlie: Versus 2025.
Charlie: First of all we were only public for half of the year of 2024. So we did not have the full public DNO expense.
Charlie: The increased audit expenses that come post IPO.
Charlie: And additional legal expenses that are public company related so theres, a little bit of a blend. So if you look at the full year 2024.
Charlie: You were to add some of those expenses on an annualized basis that would have brought the 2024 margin down.
Charlie: Where it's at today.
Charlie: We may be aggressively estimating forward cost and 25 just to be conservative.
Charlie: We want to make sure that we put out a very thoughtful guidance.
Charlie: Thats achievable.
Charlie: So there could be some margin upside as we overestimated those impacts, but that's that's why there's a variance and thats similar you didn't ask but I'll volunteer.
Charlie: Our EBITDA margin for 2004.
Charlie: Was benefited by a outsized.
Charlie: <unk> thousand four contingent.
Charlie: Revenue that came in largely due to the fourth quarter performance, which most of the public companies reported as their best fourth quarter.
Charlie: And as far as anybody can remember so we did benefit by that.
Charlie: Not using the full repeated.
Charlie: EBITDA for 2025.
Charlie: If loss ratios from our large trading partners day, where they ended the year.
Charlie: They are currently out there could be EBITDA upside on the contingent revenue again in 'twenty five we felt it was a little bit too early in the year to try to bake that into guidance.
Charlie: As we get through the year.
Charlie: If we start seeing that the trend line continues and we may update the guidance.
Charlie: As it becomes clearer to us and that can provide us EBITDA margin upside.
Charlie: The other piece of our equation.
Charlie: I know, it's not a question, but I'll preempt it.
Charlie: On the M&A guidance or the M&A, we put out in the earnings release.
Charlie: When we talk about the early years. So we did close the two transactions at the beginning of January one.
Charlie: We have.
Charlie: Why is that or.
Charlie: Signed and are looking for some second quarter closings.
Charlie: That would get us.
Charlie: Ahead of the actual model, but the base model of $20 million of additional revenue acquired 5 million additional EBITDA acquired the midyear convention.
Charlie: That we were closing those transactions on June 30.
Charlie: In 2025 guidance, that's the only showing $10 million of revenue and $2 5 million of acquired EBITDA.
Charlie: <unk> to the to the current forward forecast.
Charlie: I know, we're going to get a lot of questions about M&A, but I just wanted to put it out there that the forward guidance did not include the full annualized $20 million of acquired revenue and 5 million of EBITDA. It was half of that in the 25 guidance.
Charlie: We do have a robust pipeline.
Charlie: That gives us confidence in what we put out in guidance being achieved.
Charlie: There are.
Charlie: Several potential transactions in our pipeline that would put us into significantly exceeding that guidance.
Charlie: Our culture is to provide guidance and what we believe is achievable.
Charlie: Your line of sight.
Charlie: We didn't want to give you the.
Charlie: Bird in the bush versus the burden hand view.
Charlie: We will update as things materialize, but there is additional margin upside on the M&A coming in at a faster pace or in larger sizes than what we currently put into the model.
Charlie: Yes.
Charlie: Super.
Charlie: Super helpful. If I could just sneak in one more on the contingent outlook contingent Commission outlook.
Charlie: Are those all based on all in loss ratio underlying loss ratios.
Charlie: So as we think about that for 'twenty five.
Charlie: So with a number of markets we deal with there is no one answer on how contingencies are calculated.
Charlie: Many of them are on a portfolio wide basis.
Charlie: Some of those are actual isolated to I'll, just say one particular national market is the entire country with the exclusion of California.
Charlie: It has its own separate calculation from the rest of the country.
Charlie: Some carriers have down to the actual location level incentives.
Charlie: And bonuses, which are then isolate their portfolio and then the result comes from now that individual's portfolio.
Charlie: <unk> for the full calendar year.
Charlie: We do have some fixed base.
Charlie: Bonus opportunities, where it's more driven by.
Charlie: Revenue growth or pill count growth.
Charlie: Retention metrics that can give you kickers.
Charlie: Being in certain bands within their organization of size.
Charlie: I know that's not the clearest answer, but when it comes to variable comp contingencies.
Charlie: They really run the gamut of metrics, which makes it very hard to estimate with any accuracy we.
Charlie: We do get a much clearer line of sight to what we expect when you get through the third quarter.
Charlie: Usually the larger markets.
Charlie: Tober provide us with lock in options. If we are what we consider to be in the money that means that our loss ratio and growth metrics are achieving a bonus through the first nine months. We then have the optionality of locking in that bonus metrics.
Charlie: For a discounted contingency so we do take a haircut on the ultimate payout for that guarantee the outcome.
Charlie: But that doesn't become clear until we get into October and sometimes early November before the carriers provide us that information.
Charlie: To give you a little bit more flavor.
Charlie: 2020.
Charlie: <unk> came in at five 9%.
Charlie: Premium as far as the contingent received and right now in our forecast we are using 45. So if we were just two beers the same metrics from 2004.
Charlie: It dropped down to our bottom line and our EBIT margin projections would be higher.
Charlie: Again, we prefer to be conservative until we have more definitive information that shows that as the future outcomes.
Charlie: Thank you.
Charlie: Thank you.
Operator: And our next question comes from Brian Meredith of UBS. Your line is open.
Brian Meredith: Yes. Thanks, a couple of ones here for you first one is it possible to give us what agency and inbox kind of written premium growth would have looked like maybe fourth quarter 2024.
Brian Meredith: If we adjust for the once it became corporate branches just to kind of get a kind of decent organic.
Brian Meredith: Premium growth run rate there.
I believe janice might be able to parse that out for you.
Brian Meredith: Yeah.
Brian Meredith: Okay.
Brian Meredith: That's fine Okay got it.
Brian Meredith: Yeah, so for the quarter agency in Iraq was 18, 4% Brian.
Brian Meredith: Sure.
Speaker Change: Without Brian that's excluding branch conversions perfect. That's what I was looking for thank you and then the second one.
Speaker Change: Gordon you talked a little bit of California, what about Florida, we're hearing that.
Gordon: Business is being transferred out of citizens is that going to be a potential tailwind for you. All in 2025 is the stuff that goes from citizens into the regular market.
Gordon: So Florida is an opportunity for expansion for us we have been intentionally small in Florida.
Gordon: Pre <unk> litigation legislation reform.
Gordon: Florida was a very volatile state who is dealing with repetitive and numerous insolvencies.
Gordon: The stability there just didn't exist.
Gordon: Most.
Gordon: There will be legislation.
Gordon: The frequency of frequency of claims in litigated.
Gordon: Finally on homeowners' losses substantially shrunk.
Gordon: So we are starting to see to your point.
Gordon: Citizen Takeouts startup markets.
Gordon: And we are looking out east for opportunities in Florida, now or in the past we have been avoiding the state.
Gordon: So I do think that's an opportunity.
Gordon: The downsize I saw legislation filed in Florida, I think earlier this week, where they are trying to put back in some litigation rates for consumers, which I'm not sure.
Gordon: That will go through given that they've already been living underneath the new rules that is softening in the market benefiting consumers.
Gordon: For the last really year and a half two years.
Gordon: But we are looking at at Florida, There is a number of different opportunities for us in that space.
Gordon: Our MGA side to look at programs could look at partnering with some of these new risks.
Gordon: Super will take Alex rather than stock company Takeouts for.
For distribution and underwriting.
Gordon: So I do think Florida does have potential upside for <unk> and in 'twenty five.
Gordon: Nothing that's materialized, yet, but we are certainly open now to Florida, where in the past we had been avoiding them.
Gordon: Got it that's great and I think you briefly mentioned in your comments, maybe you can talk a little bit about the MTA opportunity in California.
Gordon: Post the fires.
Gordon: How youre thinking about that.
Gordon: That's a good evolution I think.
Gordon: It really is coming down too.
Gordon: The wildfire exposures.
Gordon: Confidence in wildfire models.
Gordon: Reinsurance support around the new modeling that's been create.
Gordon: Created we've been fortunate to partner with others that have already created.
Gordon: Surplus lines homeowners capacity.
Gordon: I don't know that we're going to be looking at rolling out a program in California, given that we've had a number of strategic partners initiate their own.
Gordon: Already gotten the.
Gordon: Paper, they have already got in the reinsurance and the already underway writing.
Gordon: If we feel like capacity is going to get constrained.
Gordon: Then we might look at creating a product that wraps around the California Fair plan.
Gordon: I mentioned earlier, California third plan is becoming like Florida citizens in Louisiana citizens and their hardest markets were.
Gordon: They are writing a disproportionate amount of the business.
Gordon: I don't know, if California plans too.
Gordon: <unk> rate changes within the California fair plan, but that undermines.
Gordon: The natural marketplace, which makes it harder to create.
Gordon: Viable program, if youre competitions the state.
Gordon: So we do have good viable.
Gordon: National markets that are still taking in new business.
Gordon: And then we do have secondary and tertiary markets that are supporting.
Gordon: There are peripheral those of those risk and high hazard places.
Gordon: As it replaces and across a broad spectrum of coverage.
Gordon: <unk> J sizes. So at this point.
Gordon: But we do have that.
Gordon: Muscle to flex.
Gordon: Necessary to come in with a market.
Gordon: But we do need to have.
Gordon: More confident wildfires modeling tools too and Tysons.
Gordon: The reinsurers and the paper to enter that marketplace.
Speaker Change: Great. Thank you.
Gordon: Yes.
Gordon: Thank you.
Speaker Change: And our next question comes from Pablo <unk> of Jpmorgan. Your line is open.
Speaker Change: Hey, guys. This is Justin on for Pablo I thought maybe just you could first drill back down on the agency growth I know you guys mentioned that the new agencies weren't exactly driving any any results in 2024. So I guess first maybe could you clarify if you mean from a premium perspective or profitability.
Speaker Change: If it's the latter what the contribution maybe from first year agencies, Scott is in 2024 to premiums.
Speaker Change: Sure.
Speaker Change: Good question I don't have contributions of premium from the newly Onboarding agents on hand that can provide that to you and Pablo.
Speaker Change: On our subsequent one on one.
Speaker Change: I would put it back to.
Speaker Change: Not significant.
Speaker Change: When you onboard a new agency that has no existing premium.
Speaker Change: We're starting from scratch, we're going through an onboarding process.
Speaker Change: In 2024, if you recall a disproportionate number of these agencies came from a singular carrier.
Speaker Change: That had been prior captive.
Speaker Change: Allowed them to contract with us they had a foot in two camps.
Speaker Change: So part of their portfolio was being non renewed.
Speaker Change: The other part of your portfolio was being retained by their incumbent market.
Speaker Change: The timing of those non renewals was not equal across all the geography, we expanded into so some of those states that we on boarded.
Speaker Change: Not yet started their non renewal process. So.
Speaker Change: So for the most part those when we onboard at agencies have not.
Speaker Change: Contributed much yet.
Speaker Change: Earlier states that had already started the renewal process.
Speaker Change: <unk>.
Speaker Change: We have made more progress and being productive.
Speaker Change: If that's beneficial.
Speaker Change: Yes. Thank you very much and then I guess, just second Capex was a little bit elevated. So I guess, maybe you could you just talk about what exactly you all were investing into in the fourth quarter and how 2020 Four's results in that line item might compare to what you think of as like run rate capital investment to the business going forward.
Speaker Change: Sure the largest part of the Capex for 2004 was.
Relocation into our new facilities.
Speaker Change: We had been located in the same office for 20 years.
Speaker Change: Go back and look at it.
Speaker Change: Our prior Capex.
Speaker Change: Didn't have a lot because we have been in the same aged facility for so long.
Speaker Change: So we moved our home office.
Speaker Change: Fourth quarter.
Speaker Change: That capex was tied to that the new facilities, new technology, new infrastructure to support us as a public company going forward.
Speaker Change: We have some capex in 'twenty five as the expansion of our facilities in the Philippines, allowing us to onboard additional virtual assistance.
Speaker Change: To help our retail agencies control labor cost within their environment provide overflow support.
Speaker Change: Also back office support in the Philippines, Our current facility in the Philippines, Philippine does that capacity, which is great that means we have strong demand for those services.
Speaker Change: Got a little bit of Capex for the Philippines expansion.
Speaker Change: We will have some capex in 2025.
Speaker Change: Going into technology.
Speaker Change: We do know there are several initiatives we have.
Speaker Change: Around automation.
Speaker Change: So there will be some capex looking at.
Speaker Change: Developing in those tools the integration.
Speaker Change: With.
Speaker Change: And so it has several different workflow optimization that we can achieve through some technology investment, but I would put it I would put it at.
Speaker Change: Probably less than what you saw in the fourth quarter.
Speaker Change: Full year 2025.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: We have a follow up from Mike <unk> of BMO. Your line is open.
Speaker Change: This is Charlie on for Jeremy I, just have one quick question.
Speaker Change: As far as the <unk>.
Speaker Change: New agents kind of consolidating a little bit how long do we see that get.
Speaker Change: Get resolved.
Speaker Change: Okay. Thanks.
Speaker Change: Sure.
Speaker Change: I think we will have that.
Speaker Change: Pretty well ironed out through 'twenty five.
Speaker Change: What occurs is with the mass Onboarding, we had last year.
Speaker Change: These producers and agents from that one carrier.
Speaker Change: All endeavored to try to own their own separate location or operate their own separate location.
Speaker Change: The ones that were smaller in scale.
Speaker Change: Are now realizing that it's more efficient for them to partner with one of their peers and consolidated so we saw a little bit of that in 'twenty. Four we would anticipate seeing more of that in 'twenty five.
Speaker Change: But beyond that.
Speaker Change: Under a year.
Speaker Change: I think that that would be a continuation most of the folks that are starting to hit stride.
Speaker Change: And then getting their foundation or their feet on solid foundation.
Speaker Change: We'll stay their own individual locations and just as a reminder.
Speaker Change: The number of locations is not something that we look at it as a metric.
Speaker Change: If you go back multiple calendar years, our double digit organic growth was achieved with the same store count we had for almost three years great. So.
Speaker Change: <unk> continually have.
Speaker Change: Out of our existing agencies box stores.
Speaker Change: <unk> retire those portfolios consolidate into other existing HCM box stores. So you may see some fluctuation in total store count, but the portfolios are all remaining with the company.
Speaker Change: And it doesn't change our outlook on the organic growth.
Speaker Change: Going forward.
Speaker Change: Thank you.
Speaker Change: I'm showing no further questions at this time I would like to turn it back to Gordon bunch for closing remarks.
Gordon Bunch: Thank you Denise and thank you all for participating in todays call.
Speaker Change: Just wanted to recap.
Speaker Change: Had a inflection point in our business last year.
Speaker Change: Really can't say enough about the team that helped us not just get through the IPO.
Speaker Change: A task into itself, but also the sustain our trajectory of growth.
Speaker Change: And a historic period of time for this organization. So I appreciate all of my executive team all of our managers all of our agents.
Speaker Change: All of our producers that work within our agencies all of our csrs.
Speaker Change: Add members that are answering the phones and all of our carriers that have come alongside as the partner.
Speaker Change: To allow us to have this opportunity to.
Speaker Change: Health insurance distribution in a way that didn't exist a quarter century.
Speaker Change: When we created the company.
Speaker Change: Extremely proud of the results look forward to following up with those that have follow up questions.
Speaker Change: Invite you to our.
Speaker Change: We have our annual meeting.
Speaker Change: Remind me the date for the meeting.
Speaker Change: Okay.
Speaker Change: May 'twenty.
Speaker Change: I apologize I may 28th is our annual meeting.
Speaker Change: Virtual this year, we will provide details.
In the future, but for anybody who wanted to Mark your calendars.
Speaker Change: We intend to how are you doing it so I appreciate everybody's interest in.
Speaker Change: Look forward to a great 2025.
Speaker Change: That's all I have.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.
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Speaker Change: Yeah.
Speaker Change: Okay.
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Speaker Change: So.
Speaker Change: Hum.
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Speaker Change: Uh huh.
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Speaker Change: Okay.
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Speaker Change: Okay.
Speaker Change: Okay.
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