Q1 2025 Goosehead Insurance Inc Earnings Call
Thank you for standing by and welcome to the Goosehead Insurance first quarter 2025 earnings conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session.
To ask a question during this session, you'll need to press star 11 on your telephone If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again
Speaker Change: As a reminder, today's program is being recorded and now I'd like to introduce your host for today's program, Dan Farrell, Vice President [inaudible]
Capital Markets, please go ahead, sir.
Speaker Change: Thank you in good afternoon. Before we begin our formal remarks, I need to remind everyone that part of our discussion today may include board looking statements which are based on expectations, estimates and projections of management as of today.
Speaker Change: Four-looking statements in our discussion are subject to various assumptions, risks, uncertainties that are difficult to predict and which could cause actual results that differ materially from those expressed or implied in the four-looking statements [inaudible]
Speaker Change: 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 FCC violence for more detailed discussion of recent uncertainties that could impact future operating results and financial condition of Goosehead.
Speaker Change: We display many intention or obligation to update or revise any forward-looking statements except to the extent required by applicable law.
Speaker Change: 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.
Speaker Change: Management uses these non-GAAP financial measures when planning, monitoring, evaluating our performance. We consider these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons, period to period.
Speaker Change: by including potential differences caused by variations in capital structure tax position, depreciation, and amurization, and certain other items that we believe are not representative of our core business.
Speaker Change: For more information regarding the use of non-GAAP financial measures, including reconciliations of these measures to the most recent comparable GAAP financial measures, we refer you to today's earnings release. In addition, this call is being webcast and archive version will be available shortly after the call and on the Investor Relations portion of the company's website at Goosehead.com
Speaker Change: Now I'd like to turn the call over to our president and CEO , Mark Miller.
Mark Miller: Thanks, Dan. Good afternoon, everyone. Thank you for joining our Q1 earnings call.
Mark Miller: Since the inception of Goosehead more than 20 years ago, we have had one goal to become the largest distributor of personalized insurance in the U.S. in our founder's lifetime.
Mark Miller: In the pursuit of that goal, we've built a vast distribution network that includes more than 400 corporate agents, 1000 franchises.
Mark Miller: 2500 Total Licensed Agents, and 48 States, and 200 Plus Carriers.
Mark Miller: As impressive as your numbers are, we still have a lot of work to do to accomplish our goal
Mark Miller: Today, we have a premium base of approximately $4 billion.
Mark Miller: To be the largest distributor of personalized insurance in the next 10 years, we need to be roughly 25 times larger than we are today.
Mark Miller: We believe this goal is possible, and we're focused on making it reality.
Mark Miller: In Q1, we delivered solid performance year over year. Total revenue grew 17%.
Core Revenue Group 17% .
Premium Group 22% and Adjusted EBITDA Group 32%
Mark Miller: Over the past three years, we have steadily grown premium, revenue and earnings, while battling what most experts have called the hardest product market in 50 years.
Mark Miller: For Goosehead, this challenging market has been a blessing in disguise .
Mark Miller: We have focused our efforts on learning how to strengthen every aspect of our company [inaudible]
Adversity has only made us stronger.
Just like it has throughout our company's history. Thank you very much.
Mark Miller: We're prepared to systematically expand our reach to deepen and widen our competitive mode as the market inevitably recovers.
Mark Miller: Well, the market is still hard compared to historic norms and some of our key markets such as Texas, California, and Florida. We're seeing some tangible improvement.
and Product Availability, and in many geographies price stability.
Mark Miller: We're thrilled about the shifting market dynamics because the history has taught us price stability is highly correlated to client retention. Improving profitability of auto carriers has led to an aggressive rebound in auto product availability. Improving profitability of auto carriers has led to an aggressive rebound in auto product availability.
Mark Miller: We're beginning to see new home product reenter multiple key markets.
Mark Miller: In the admitted home market, we're seeing products slowly creep back in but the product has more risk sharing features with clients and carriers continue to be highly selective about what risks they will take.
Mark Miller: At the same time, home closing fell to a 30-year low in 2024, but our agents doubled down on their marketing activity and our current lead flow is close to historically high levels.
Mark Miller: However, a bind rate on those leads is still below our historical averages in the future.
Mark Miller: Our buying rate is directly related to product availability and price stability, and we expect meaningful improvement in both over the next six to twenty-four months, given our strong carrier relationships, diversified geographic footprint, and improving carrier economics.
Mark Miller: I get very excited about the business when I think about what it looks like when product fully recovers.
Mark Miller: Until that day arrives, we're building a business hardened for exponential growth.
Mark Miller: Let me give you a few examples of what we have changed and why these changes have positioned us to accelerate into the recovery and move toward the rule of 60 companies that we strive to be.
Mark Miller: First on the franchise side of the business, we have narrowed our aperture on who we want to own franchises and we've tightened our focus on selected geographies. [inaudible]
Mark Miller: Historically, we have indexed toward ex-captive agents located in the handful of states.
This strategy is shifting quickly.
Mark Miller: We are still looking for the best of the best X-Captive agents, but we're aggressively targeting business professionals with capital that want to build multi-agent, multi-location businesses.
Mark Miller: These professionals recognize the power of a recurring revenue model with low capital intensity and high retention rates.
Mark Miller: The future growth of the franchise network is also tightly integrated with a strategic geographic dispersion plan.
Mark Miller: We have rebuilt the strength of our franchise development team, and they're scouring the country to find the best owners in every town in City and America in America.
Mark Miller: One powerful component of our new franchise strategy is helping Goosehead corporate agents move into franchise ownership.
Mark Miller: Many of our most successful, new-urventage franchises are ex-corporate agents.
Mark Miller: As we continue to focus on quality of new franchises versus quantity, we have discovered that our corporate agent to franchise owner program is one of the best ways to ensure quality, quantity, angiographic dispersion.
Mark Miller: The opening of the new office in Tempere, Rizona is a major step forward on the strategic initiative.
Mark Miller: We seated the office with experienced corporate agents from several other offices, which has resulted in this office being 20% more productive than the next best corporate office.
Mark Miller: As a reminder, our corporate team remains 2.8 times more productive than industry best practice.
Mark Miller: This shows the power of our corporate team when located in a geography with a robust product offering.
Mark Miller: Going forward, this office will be staffed with recruits from local universities.
Mark Miller: These new corporate agents will then be on what is effectively a paid apprentice program where they learn to sell insurance and more importantly, manage people and build a business.
Mark Miller: Many will return home to open franchises in California, Washington, Oregon, Nevada, and Utah.
Mark Miller: Based on the early success of this office, we expect to strategically place additional smaller footprint corporate offices across the US over the next several years.
Mark Miller: We're using this new office as a blueprint for how we recruit and develop the highest quality franchise owners in the future.
Mark Miller: We expect it up to 10% of our corporate agents annually will ultimately launch high velocity agencies across the country. These owners tend to be growth-oriented and in some cases up to 10 times more productive than our traditional franchise owners.
Let me give you one recent example. [inaudible]
Mark Miller: Grant Sheets, who was previously a successful sales manager in our Houston Corporate Office, launched an agency in June of last year.
Mark Miller: He very quickly scaled his agency and made his first hire last July .
Mark Miller: Grant's agency currently has five agents with two more in training and plans to continue to scale up to 12 agents by your end.
Mark Miller: On the production front, Grant and his team have made the Goosehead history by becoming the fastest agency to ever cross $100,000 in new business revenue production in a single month.
Mark Miller: We're extremely proud of Bram and we expect to see more exciting growth from him and his peer group of ex-corporate agents turn franchise owners over the next several years.
Mark Miller: To support this franchise' grow strategy, we have built a world-class recruiting machine that can attract high caliber college graduates to our corporate offices.
Mark Miller: As of today, we have over 90% of our corporate sales openings already filled for 2025, and our corporate agents from last year's class are retaining well and moving up the 10-year curve.
In addition, our growth strategy includes our enterprise business [inaudible]
Mark Miller: We're large and medium-sized companies with an existing base of clients want to embed an insurance offering into their model.
These companies need what Goosehead has to offer. [inaudible]
A client first.
Choice Model with Superior Technology and Exceptional Service .
Mark Miller: The relative strength of our carrier portfolio and national geographic footprint provide powerful strategic advantages relative to any other insurance agency and make Goosehead the logical choice for many companies looking to participate in the personalized ecosystem and add value to their clients.
Mark Miller: Over the past six months, we have implemented new technologies that allow our systems to ingest lead flow from multiple partners.
Mark Miller: and routed to the best available agent to meet the client's unique needs.
Speeding up the time to action and increasing close rates
Mark Miller: Over time, we believe the enterprise sales and partnership business will turn our core business from hand-to-hand combat to a hyperscale platform using generative AI to remove many of our traditional bottlenecks.
Mark Miller: Leveraging the high-quality client base of mortgage servicers allows us to reach a population that is both highly attractive to our carrier partners and is a high-close rate.
Mark Miller: We believe the direction we are headed with tangible AI achievements will deliver extraordinarily profitable growth.
Mark Miller: Even a remarkable relative to what we have delivered over the last 22 years
Mark Miller: We have made outsized investments in technology over the last several years compared to our competitors, and we're adding new types of talent to our team to accelerate the transformation in all aspects of our business. [inaudible]
Mark Miller: One great example of this is the addition of Bill Wade to our Board of Directors. Thank you very much.
Mark Miller: Bill has a proven track record with over 25 years at Bane & Company, driving transformation with technology innovation.
Mark Miller: He's exactly the type of thought leader we need to win the AI race in the insurance industry.
Speaker Change: In the quarter, we continue to make progress on our technological advantage by rolling out our Goosehead mobile app.
Speaker Change: To ensure a smooth roll-up, we are introducing the app in stages through an invite-only process.
Speaker Change: Currently, the app displays and explains coverage information, allows for live chats with our service team, and will soon display renewal information in the option to explore other quotes with your agent.
Speaker Change: We expect to continue to launch technological advancements that improve our client experience and strengthen our service team.
Speaker Change: The insurance landscape is evolving and the demands on our client service team are higher than ever.
Speaker Change: We're committed to living out radiously good client experience and plan to point outsized resources to ensure the client remains at the center of our universe.
Speaker Change: As we look ahead, we remain laser focused on the path to becoming the largest distributor of personalized insurance in the country in the country.
Speaker Change: We know this journey will not be easy and we don't expect it to be, but we're confident we have the people, the platform and the plan to get there.
Speaker Change: We build a resilient foundation and we're investing ahead of the curve so that when the market returns, we're not just participating in the recovery, we're leading it [inaudible]
Speaker Change: I want to thank our agents, franchise owners, carrier partners, and employees across the country who continue to drive our mission forward.
Speaker Change: We're just getting started in the best chapters of our story or still to come.
Speaker Change: Thank you for your continued support and we look forward to sharing more progress with you in the quarters ahead.
Speaker Change: Now hand the call over to our CFO , Mark Jones, Jr. You're here.
Speaker Change: Thank you, Mark, and good afternoon to everyone on the call.
Speaker Change: As Mark Miller mentioned, we've been working diligently on several initiatives aimed at building the foundation for a hyperscale platform that has the potential to further revolutionize how personalized insurance is distributed and serviced.
Speaker Change: These innovations are designed to deliver value across all key stakeholders.
Speaker Change: offering clients access to the right products, enabling carriers to achieve profitable growth, enhancing the agent experience through greater efficiency, and maximizing client retention and lifetime value from Goosehead.
Historically, this industry has struggled to attack a track top-tier talent.
Speaker Change: However, we've been fortunate to succeed in doing just that which has been instrumental in creating the exceptional business we have today . . .
Over the past several months, we've doubled down on this approach.
Speaker Change: Bringing in highly skilled individuals who were drawn to our company for several compelling reasons.
The resilience of our business model against varying macroeconomic conditions [inaudible]
Speaker Change: The enormous market opportunity, more than 500 billion in annual premiums.
Speaker Change: The lack of a strong competitive set, and our significant head start within the industry.
Speaker Change: We're channeling this exceptional talent towards solving some of our most exciting and complex challenges in both our business and the industry at large.
Speaker Change: These efforts include streamlining the complexities of back-end service functions with an nationwide diversified distribution model.
leveraging automation and AI to reduce service costs.
Speaker Change: Unlocking the value of our data to direct smarter decision making across the value chain and developing disruptive go-to-market strategies that are entirely unique in the U.S. today.
Speaker Change: We believe these initiatives position us as the clear leader in redefining how personal lines insurance is delivered, creating meaningful long-term value.
Speaker Change: I'm incredibly excited about the future of Goosehead and the unique opportunity we have in front of us.
Speaker Change: In the first quarter of 2025, we observed some underlying momentum in several KPIs that should drive continued growth through this year and beyond.
Speaker Change: Well, this is not fully visible in the financials yet. We're very optimistic about the future.
Speaker Change: Our franchise community continues to add more producers and get more productive Thank you.
Speaker Change: At quarter end, total franchise producers were 2,097 up 7% from a year ago, and productivity per agency was up 21%
Speaker Change: The investments we've made in our franchisees to shift the focus from solving the challenges of an insurance agent to build in a long term and sustainable business are truly taking home.
Speaker Change: We're seeing the natural evolution of our franchise's domesticatures [inaudible]
Speaker Change: Our top performing franchises are acquiring some of the smaller, less productive, less proficient franchises and injecting better business practices into their operations.
Speaker Change: We've always had a liquid market within our franchise community, and that remains true today.
Speaker Change: of the 41 franchises that exited the system during the first quarter, only nine of those determinations with the remainder being purchased by another operating agency.
Speaker Change: The acquiring agency then takes that opportunity to introduce themselves to the existing client base, hunt for cross-sales and referrals, and use the cash flow off of that agency to fund new producer growth.
Speaker Change: We believe the liquid market for our franchises also increases the value proposition for new potential agencies as they can realistically calculate an attractive IRR on the business opportunity, which in turn helps us continue to grow up the gene pool of our franchise base.
Speaker Change: During the quarter, we launched 36 new franchises across 16 states, the highest launch quarter since the second quarter of 2023.
Speaker Change: We continue to expect growth in operating franchise count from the full year 2025 as our franchise development team targets high quality candidates in the right geographies.
Speaker Change: Our enterprise sales business, while still small at 89 total producers, continues to grow very rapidly, producing 60% more new business in the first quarter of this year when compared to the prior year.
Speaker Change: With the pipeline we have for new strategic partnerships, we expect that growth to accelerate throughout the year.
Speaker Change: These partnerships are the stepping stone to unlocking the value of a true direct to consumer marketplace that does not exist in the United States today.
Speaker Change: By integrating with a partner, we can be very targeted in which potential clients would be best suited to purchase insurance through a guided flow based on various data points in which would have a better experience being handled directly with an agent. Our model allows us to provide both options.
Speaker Change: This means we can optimize outcomes not only for our clients, but also for our carrier partners.
Paul Newsome, Brian Pattillo, Michael Zaremski
Speaker Change: Moving to the corporate sales force, we ended the quarter with a total of 337 traditional corporate sales agents bringing the total combined with the enterprise sales team to 426 corporate producers up 46% from a year ago.
Speaker Change: With the success of the launch of our Phoenix Office, we expect to continue this strategy through select geographies over the coming years with smaller footprint offices.
Speaker Change: This allows us to populate a variety of product-rich locations with our most talented producer force and accelerate the growth of top-design franchises.
Speaker Change: Full of written premiums, the leading indicator for future revenue growth were $1 billion for the quarter, up 22% from a year ago.
Speaker Change: This included franchise premiums of 824 million, up 27% and corporate premiums of 177 million, an increase of 5% from a year ago.
Speaker Change: As a reminder, the first quarter is seasonally our lowest premium and revenue quarter for the year, which implies our business should now be generating well over a billion dollars of premium quarterly, showing forward. A tremendous milestone for the organization.
Speaker Change: I want to reflect for a moment on how far our business has come over the last several years.
Speaker Change: Prof. 1 billion of annual premium for the first time in 2020.
Speaker Change: 2 billion of annual premium in 2022 to now over a billion dollars in premium each quarter.
Speaker Change: Today, we're roughly 10 times the size we were at the time of our IPO in 2018, and we're still in the very early innings.
Speaker Change: Total revenue for the quarter was $75.6 million, an increase of 17%, with poor revenue also up 17% to $69.1 million.
Speaker Change: We're beginning to see client retention improve, and while still at 84%, we have an upward trajectory and a line of sight to improving client retention in the year.
Speaker Change: At the year-over-year increases in premiums have begun to obey. We've seen the expected improving trend in client retention.
Speaker Change: to give you a data point on how sensitive retention is to pricing actions.
Speaker Change: Renewals with premium increases of less than 25% retain 25 percentage points higher than those that have higher premium increases.
Speaker Change: As the current statutory rate violence, which document much lower premium increases
Blow through our book, particularly in Texas. [inaudible]
We expect our upward momentum and client retention to accelerate.
Speaker Change: I'm very proud of how our team has handled this historically hard product and pricing market and we're coming out of the other side stronger organization.
Speaker Change: Intentive Commissions for the Quarter were $4.5 million compared to $2.7 million a year ago.
Speaker Change: As a reminder, typically the first quarter of each year includes some revenues that were uncertain as of the previous year. [inaudible]
Speaker Change: We are continuing to forecast contingent commissions for the full year of approximately forty to sixty five basis points of total written premium. While there is still potentially upside in that forecast depending on carrier underwriting performance and catastrophic losses.
Speaker Change: Cost Recovery Revenue, which is mainly comprised of initial franchise fees
Speaker Change: was $1.5 million compared to $2.5 million a year ago. As franchise turnover is down significantly in the year-to-year, this results in less accelerated recognition of initial franchise fees.
Speaker Change: We expect the first quarter run rate to be an appropriate forecast guide post for the rest of the year.
Speaker Change: Over time, revenue from initial franchise fees should grow with new franchise models.
Speaker Change: policies in four-step quarter-end for $1.7 million, a 13% increase over the previous year.
Speaker Change: We expect to drive acceleration in the Paul Susan Force growth rate throughout the year as new business generation increases and client retention improves.
Speaker Change: Adjusted EBITDA for the quarter through 32% to $15.5 million, up from $11.7 million in the prior year period.
Speaker Change: Adjusted EBITDA margin for the quarter was 21%, and Adjusted EBITDA margin excluding the effect of contingent commissions was 16%, expanding over 80 basis points compared to the prior year period to the end of the year period.
Speaker Change: As I mentioned, we've onboarded some very high-powered human capital which resulted in faster employee compensation and benefits growth for the quarter than in previous years.
Speaker Change: We believe these human capital investments will pay dividends as they roll out initiatives to drive costs out of the organization throughout the year, ultimately paying for themselves multiple times over.
Speaker Change: As of quarter end, we had $70.2 million of cash and cash equivalents and total debt outstanding of $300 million million dollars.
Speaker Change: As a reminder, our philosophy on debt has been to add leverage to the point where it never impacts the business decision through either the debt service cost or the covenants.
Speaker Change: Our strategy since 2016 has been consistent, leveraging up to three to four times adjusted of EBITDA and delivering naturally through earnings growth.
Speaker Change: During the quarter, we generated $15.5 million of cash flow from operations, a 28% increase over the prior year period
Speaker Change: Because our business has such high quality earnings, generating significant cash flow from operations, that provides us with optionality of how to deploy capital in the way that best drives long-term shareholder value.
Speaker Change: Today, our Board of Directors approved a $100 million share repurchase authorization.
Speaker Change: We plan to be opportunistic when there is a market dislocation in our evaluation and drive shareholder value by repurchasing our stock, accelerating the compounding of earnings for shared growth.
We are reiterating our guidance for the full year.
Speaker Change: Total revenues are expected to be between $350 million and $385 million, representing organic growth of 11% at the low end of the range, and 22% on the high end of the range.
Speaker Change: Total written premiums for the full year are expected to be between $4.65 billion and $4.88 billion [inaudible]
Speaker Change: representing organic growth of 22% on the low end of the range and 28% on the high end of the range.
Speaker Change: Thank you to everyone at Goosehead, our agents, our clients, and our carrier partners for helping us drive towards industry dominance.
With that, let's open up the line for questions. Operator?
Speaker Change: Our first question for today comes from the line of Tommy Mcjoynt from KBW, your question please Thank you very much.
Tommy McJoint: Take it afternoon. Thanks for taking our question. So last quarter you talked a little bit about the strategy of
Speaker Change: of partnering with some of the large mortgage services out there. And when we look at the sort of the roster of mortgage services, there are some really large names out there. Can you talk about the potential for partnering with some of those large names? Do you guys have the operational capacity to do so through your enterprise offering? Just to elaborate a little bit around that?
Speaker Change: Yeah, thanks Tommy. This is Mark Jr. Yeah, there's a lot of really interesting things going on especially in the mortgage servicing space.
Speaker Change: Several groups that could make meaningful differences in how our enterprise sales team produces over this year and into the future.
Speaker Change: So we're feeling really good about that. Now there's plenty that we can continue to do to drive efficiency in that team both from a technology and then just a people in process standpoint. So feel very optimistic about our ability to capture significant market share in the mortgage space.
Speaker Change: especially as the need for that continues to be really material for these servicers were you know the interest is higher than ever we've seen before so feel really excited about it but we're not going to talk about specific names right now.
Speaker Change: Got it. And then pushing over as we think about the the opportunity for adjusted even a margin expansion, perhaps looking at it on a on a basis, excluding contingent commissions, can you talk about that maybe the cadence of the opportunity for expansion in the remaining quarters this year?
Speaker Change: Yeah, so I think similar to comments we've made in the past, our objective is always to grow core revenue faster than the expense base. Now the timing of that throughout the year kind of depends on when we onboard people, when specific initiatives roll out. So I don't think we're going to give specific guidance on a quarterly basis of when you should expect earnings expansion, but we talk about a more in a full year. Our plan is to drive core revenue faster than the expense bar. [inaudible]
Great. Thank you.
Speaker Change: Thank you. Our next question comes from line to Pablo Singzon from JP Morgan. Your question, please.
Speaker Change: Hi. Thank you. Courage, sorry, GNX has been running at about 16 to 17 million per quarter over the past four or five periods.
Speaker Change: Is that a good running to think about for the go-forward here? It's been sticky, I'm wondering if there are any insatives that might bring that number up or down?
Speaker Change: Yeah, Pablo, good question. The real threat of GNA in the first quarter is lower than I think you should expect for the remainder of the year. We have some
Speaker Change: Really interesting things going on, especially in technology and ways that can drive automation that in theory should be reducing head count costs throughout the year. So I would expect you to see the pace of GNA pick up. Not going to give you a specific number at this time, but we got some really interesting tech initiatives that should both enable.
Speaker Change: Cross Reduction, but a better client experience. And then in the longer term, I'll actually be able to apply that to the Go Forward motion to really capture market share of the rapid pace.
Speaker Change: Got it. And then the second question is on the benefit of
Pricing, right, so if he's...
Do the rough math that's being grotesque
Speaker Change: That's fifth growth. It seems like the benefit of pricing this quarter was 8% that's down from mid-teens last year.
Speaker Change: And, you know, we heard your comments and what's happening with the market, right? So clearly, first of all, I don't get it more competitive competitive.
Speaker Change: But I was under the impression that most insurers are still taking a rate on homeowners, so you just want to get it and recognizing that there's a mix in your book too [inaudible]
Speaker Change: So, you know, just wanted to unpack that a bit more, right? Like, you know, are you seeing rate in the homeowners? Is auto just, you know, are your capacity providers taking down rate there? Just anything you can provide to be helpful. Thank you.
Speaker Change: Yeah, the auto rates are really flattening out on a year-to-year basis and some of this is geography dependent. The home rates are still considerably higher than the auto rates, but you can see in our whole book just looking at the premium growth.
Speaker Change: versus the policy and force growth rate that generally pricing is coming down, which we ultimately think is a good thing for the business that allows. [inaudible]
Speaker Change: Basically, more product access broadly also helps improve client retention. And so we mentioned that and the prepared remarks are starting to see the upward trajectory and client retention which [inaudible]
Speaker Change: That should be a really meaningful contributor to revenue growth in the longer term as well and we're doing a great job keeping clients on the books and just as more product opens up, it'll be easier for our agents to go out and continue to win business. So generally we're feeling relatively optimistic about how the product market is moving. [inaudible]
Thank you
Thank you. Bye-bye.
Speaker Change: Thank you. And our next question comes from the line of Brian Meredith from UBS. Your question please. Yes, thanks, Mark. I'm just curious in your guidance when you're thinking about, you know, making the guides for the year.
Brian Meredith: What are you thinking about with respect to the macro environment? And if we go into a recession of some kind with that at all affect your revenue guidance and premium guidance and also maybe you can add to that the tariffs [inaudible]
Brian Meredith: that are going through, when you're discussing that with carriers, how do you think they'll react to it? Could that actually maybe cause retention to slip a little bit if we get another pricing cycle here for auto? No.
Brian Meredith: Thanks, Brian . I'll tackle the guidance portion of that first. I don't really think a recession or kind of tear up concerns impact away. We're thinking about guidance. Good news is our business is really insulated from kind of broader macro effects like that. You still have to buy the product if you live somewhere or drive something and so much of the revenue of the business is built into the renewal book.
Brian Meredith: and what the way we're seeing pricing trends right now in generally the upward movement in client retention don't have any concerns right now about the guidance numbers.
Brian Meredith: I just add, Brian , I mean, we see the same thing that you probably see in the press about auto repair costs and some additional home cost increases as a result of tariffs, but we don't believe it's going to significantly impact our business, especially not like what we've seen in the last three years.
Brian Meredith: and like Mark Jr. said, we feel like we're pretty recession-proof. People need what we offer, both on home and hot-out.
Speaker Change: Gotcha. Next question. I'm just curious. I saw your NPS score kind of declined again. Anything behind that and what's going on there?
Speaker Change: Yeah, I'll think that's Mark Miller. I would say generally our MPS still remains above industry standards and very good.
Speaker Change: As an industry, you know, recent studies, if you've seen them indicate that there's a decline in client service just in general and the interns industries is client.
premiums are going up significantly.
Speaker Change: And we'll always keep the client at the center of our universe and we're making improvements in the service function every single day.
Speaker Change: In the last several years, I think we've taken significant strides forward in our ability to service clients.
Speaker Change: But at the same time, the product's gotten more complex. We've gotten more geographically dispersed, which makes our job harder. And we're just leaning into it with everything we have. And we have a lot of confidence that we can continue to keep up with the demand on the service side. So I'm not in summary. I'm not concerned about the NPS score.
Speaker Change: Yeah, and Brian , I would just add on to that just given that the NPS number that we report is a really 12 number and how pricing has flowed so aggressively for the last couple of years.
Brian Meredith: You shouldn't be surprised if you see that tick down a little bit more. Now, remember, 80, 87 where we reported today is still phenomenal in the context of really any industry including service industries like the four seasons out there. So I think we're doing a world class job. It is challenging when you're fighting against a 30% price increase to make people feel like they've really been taking care of. I think we're doing a great job on the service side. We're doing a great job on the service side. I think we're doing a great job on the service side.
Brian Meredith: Great, let me squeeze one more in here quickly. I should be quick one. Given the authorization you just got throughout, I'm assuming you think your stock price is pretty attractive here.
Brian Meredith: Yeah, Brian , I would say we want to have the optionality and the good news is we just generate so much cash that we have the ability to act when the right time is to there and you saw what we did last year.
Brian Meredith: We thought we were very undervalued. We went and bought back a significant amount of stock and we want to have that dry powder and that optionality and the ability to do so. So that's why the board approved that today.
Great. Thank you.
Brian Meredith: Thank you and our next question comes from the line of Katie Sakys from Autonomous Research, your question please.
Speaker Change: Thanks, good afternoon. My first question is kind of expanding upon the carrier dynamics you guys are seeing right now. Would you guys mind giving us some color as to, you know, what percentage of your
Brian Meredith: Geographical footprint is seeing pricing stability and what present is seeing new product come online versus your end.
Yeah, I would say, you know, we're still
Brian Meredith: Texas density has dispersed pretty dramatically over the last couple of years as we've been really intentional in putting agents in geography. The underwriters really want us to be in. Texas still has the highest price increases year over year compared to any other state in the country, and that is where we have.
Brian Meredith: at least the polarity of our agents and the majority of our premium. So we are still seeing new product come online in Texas, not seen big national brands come in in a broad way yet. But there is new entrance in that are seeing the attractive market here in Texas, which is helping us feel really confident about our 2025 plan.
Speaker Change: In a lot of this more ignored, a lot of the price increases from the prior year are still rolling through as policies were new, but based on the fairfiling that we've seen recently in Texas, we expect prices to be more stable in Texas where the majority of our agents are.
Speaker Change: Okay, and then maybe shifting slightly, I mean, it was a decent pickup in PIF growth, this.
Quarter, you've definitely spoken to the...
Speaker Change: Actions that carriers are taking to sort of help support that, but I'm wondering if you could expand a little bit on your previous comments about you know Goosehead's own client service and you know what
Speaker Change: Goosehead is doing to keep clients within the ecosystem, especially as they start to have increased optionality and the ability to shop around.
Speaker Change: And as you've seen, other large players who may not be on our platform, pull in around specific geographies that gives us
Speaker Change: A greater ability to go win, so I think we're doing a good job of capitalizing on those opportunities.
Speaker Change: On the service side, we're trying to make sure we're here for our clients whenever they need anything, whether that be a renewal or a policy change to add drivers, things like that. We've done a great job of that so far, and we're starting to feel the effect of that in an upward trajectory in client retention, which we expect that to continue throughout this year.
Speaker Change: I just add, I think the best way to keep our clients is to have the best product at the best price in every single market and that's what we try to do every single day and layer on top of that is the service function and one thing that we just talked about on the call was the mobile app.
Speaker Change: You know, time will see how that plays out, but I think that could be a great retention tool and a great client service function to be able to have your policies that your fingertips and be able to chat with your agent.
Carter, thank you
Speaker Change: Thank you, and our next question comes to the line of Mike Zaremski from BMO, your question please.
Okay, thanks. First question.
Speaker Change: If we look at core revenue as a percentage of premium, the ratio is down to the pad year over year. Any comments on the drivers there or if that's a trend?
Speaker Change: Generally, we feel like we're doing the right things in both of those areas to drive growth. We've got a nice, good class of corporate agents that are coming up to ramp now. The retention of those corporate agents is up dramatically versus the previous year. So they're getting more productive. Our franchisees continue to hire more people. You saw, again, growth and producer count this year. But if you're just looking at core revenue versus premium, it really makes a franchise versus corporate that drives that. That's what we're talking about. [inaudible]
Speaker Change: Okay, got to know, no good to hear, no kind of underlying, you know, other trends. Okay.
Speaker Change: Tiveting to the Franchise channel if you can comment on less than one of your productivity and kind of what what's going on there and any kind of insights into how that might turn around.
Speaker Change: Yeah, I mean, less than one year of productivity in the franchise side of the business is still at a really good level. And some of that just depends on which agents we launched during that quarter. You know, if we had a crop of corporate agents, previous corporate agents that have launched, you would see those numbers be higher. We have a good class of corporate agents that are going to launch franchises this year in the summer across a variety of geography. So I don't think that's anything to be concerned about. It is multiples of industry best practice. So we feel really good about. [inaudible]
Speaker Change: I think there's upward movement there potentially throughout the rest of the year.
If we look, seasonally, at one cues.
Speaker Change: The quarter of a quarter of one-cuse, written premium growth was slower than historical one-cuse. Maybe we could take it offline, but it just kind of cares if there was any.
Speaker Change: Bucking of the seasonality trend that we should be that took place this quarter.
Speaker Change: Yeah, I mean, it's just seasonally the first quarter is typically the lowest revenue and premium quarter for the year so you can have more like little things that can impact that just from a year-over-year basis.
Speaker Change: We're seeing that gap between poor revenue and premium growth converged, like we've been talking about for the last couple of years, so it just makes it a little bit easier to model the business.
Speaker Change: So as the franchise side continues to produce at a consistent level, as opposed to like we had seen from the 2020-20-20-23 period.
You see those things normalize.
Speaker Change: In the first quarter, the 17% core revenue growth, there's a couple of little nitpicky things that can impact that things as simple as just business days in the quarter. So this year there was three less business days in Q1 when compared the last year. I know that may sound a little nitpicky, but that does drive an impact in terms of total new business production. [inaudible] be doing a lot of work, and we're going to be doing a lot of work, and we're going to be doing a lot of work,
Speaker Change: You can even look at things at the timing of holidays, whereas last year Christmas and New Year's were both on a Friday this year, they're on a Wednesday. So that can impact the amount of time people take off during those holiday seasons, which can drive a slight new business variance on a year-over-year basis.
Speaker Change: So, those are just some of the things we saw in the quarter.
Speaker Change: Okay, thank you, you're probably getting at well, but I didn't appreciate. I just lastly, I just lastly,
that you've talked about.
Speaker Change: Liquidity of Franchise Agency, so if you don't typically hear your peers, obviously very different your peers talk about.
Just curious.
Speaker Change: You bring that up because something's changed, or you're just bringing up the fact that the less performing agencies have...
Speaker Change: I guess a better route to finding some liquidity these days as you have more higher performing a franchise as they're willing to divide them out or just kind of curious if there's anything behind why you brought that up today.
Speaker Change: So I think it's a natural maturation of our franchise system and you see this across other businesses as well.
Speaker Change: and also we brought it up specifically to call out that we don't have really franchises failing as much anymore at this point.
Speaker Change: The agencies that are in the system are doing a good job of continuing to generate new business, and the ones that are leaving the system are people that are ultimately opting to liquidate and basically get the cash value out of their franchise. Now a lot of those people are then staying in and continuing to work for the acquirer, which I think is ultimately a very positive thing for the franchise network. It continues to reinforce what we've always told people that you're building a generational asset here. [inaudible]
Speaker Change: It allows us to go to a differentiated set of potential new franchisees and say, there is a real liquid market for this business. You're not trapped in here. If you can generate something that looks really meaningful, you actually do have an exit opportunity if that's a path you want to take.
Speaker Change: And what we've said before, the size of the franchise dictates the profitability and production of that franchise, and as we're seeing these franchises consolidate together, they're going to make stronger franchises that produce more per agent. So we look at it as a healthy thing that some of these franchises combine with larger ones.
Okay, I appreciate the tenness in color. Thanks [inaudible]
Speaker Change: Thank you, and our next question comes from the line of Paul Newsome, from Piper Sandler. Your question, please.
Paul Newsom: You have first question a little bit more than the geographic expansion thoughts [inaudible]
Paul Newsom: is the improvement in the Texas and California market, changing how you think about it.
your expansion outside of those markets.
Paul Newsom: on the morning. Paul, I think about it, good question and I think about it the same way that we've discussed on other calls.
Paul Newsom: I still like the Texas market a lot and we have a super strong presence here.
Paul Newsom: But I think the more geographically dispersed we can get the better. Now, not all premiums are the same in all states and every state has its its challenges, but when you just look at it and how carriers come in and out of market it's going to be good.
Paul Newsom: for us to be more diverse across our geographies will represent the population base in the United States, and I think make us more stable and diversified over time, and so there are pockets in the United States that were way underrepresented and I want to get to those and capture that opportunity.
Speaker Change: And then there's a follow up question. I was hoping you could talk a little bit about a little bit more about the retention changes. You know, I would have thought, or maybe this is too simple way to think about it, that retention ultimately is about whether or not you've customer confined. [inaudible]
A better product or cheaper product, typically elsewhere. [inaudible]
Speaker Change: And is that just two simple ways to think about it and is the stability of the market really about?
Maybe some more than competitive actors maybe becoming less.
Aggressive.
I don't know if we know exactly
Speaker Change: Paul, I don't know if we know exactly how much is correlated to service and how much of it is correlated to pricing We believe a large percentage is related to pricing so back to your comment about best product, best price
Speaker Change: Equal Better Retention, and we've seen that outside the state of Texas where we've had more pricing stability, we've seen retention rates come up and we believe retention rates will continue to come up as pricing stability flows through based on what we've seen on rate increases. [inaudible]
Paul Newsom: Paul, you're just less likely to go shop if you get a 9% rate increase versus a 30% rate increase.
Speaker Change: and when you get that 9% rate increase, you're probably more likely to go back to your independent agent that plays your policy with you versus you get that 30% increase. You're just that.
Speaker Change: You want to go look elsewhere. So as the kind of pricing normalizes throughout the year, expectation is we get nice improvement in client retention, which improves the renewal block, which is kind of a different differentiated profitability line of revenue. [inaudible]
Speaker Change: And what we've seen is when the price increases less than 25%, you start getting retention rates that look very similar to what we've had over our historic average for the company, like in the 90s, close to 90.
We always appreciate the help, guys.
Speaker Change: Thank you, and our next question comes from the line of Matt Carletti from Citizens, your question please.
Thanks, F and M.
Speaker Change: Mark, I also hope you could give a little color on as we think about California and going kind of increasingly E&S.
Speaker Change: and you guys thinking about growing there. Can you give us a little color? I'm kind of, you know, kind of wear a kind of EMS capability to do your book. And then numbers wise, you know, if you were to kind of grow that, you know, as a piece of the business, if we would have a, you know, any noticeable impact on.
Commissioner Rates or anything like that? [inaudible]
Speaker Change: Yeah, the ENS product has been a really good arrow with our quiver especially on the coast over the last few years just as there's been product construction. Thank you for your attention.
Speaker Change: That remains true today in California, although I don't think that's a permanent and long term thing, and I don't think it's going to be a big enough impact to actually look like it changes the average commission rate. Now, it might look like it changes the average commission rate for California, but remember, California is like seven to nine percent of our book, so it's not going to make a really material difference on the entire business. Okay, let's get started.
Speaker Change: I do think the admitted market comes back into California over time just as some of this dust settles so I don't really don't think that's a long term phenomenon [inaudible]
Speaker Change: Okay, great. And then a quick follow up. You talked earlier about just product availability getting better, particularly in some tough markets like Texas, and that you expect kind of that to continue. I think you said over kind of the next six to 24 months.
Speaker Change: Do you expect that to be kind of just slow, gradual, linear, whatever kind of the right word is there or is there some sense from talking with carriers that? Yeah.
Speaker Change: You know, I think about Texas, I think about a lot of the Midwest dates where I think...
Speaker Change: some products out in pipe too, and you got spring weather, but you get to kind of mid year, you get past that. Do you expect it to be kind of an opening of the valve of sorts once kind of past that receiving or do you think that that really part of it and it's just more you know open a little see how it goes. Yeah.
Coping a little more so on.
Speaker Change: Yeah, I mean the indications we're getting from our major carriers at this point is there's a little bit of weight and sea on wind and hail season, but there's strong indications that they want to come back into some of our major markets, and I feel really good about what the product is going to look like going forward. [inaudible]
Speaker Change: Yeah, it could be kind of a chunky comeback of product, right? It could look like the second, the third and fourth quarters look much better on a year over your basis than they did kind of the first quarter. We'll see, but I would expect likely after you get through hell season, it's a different market.
Speaker Change: We have seen a real rise in these new entrants coming in to fill the gaps where the products are not covered by the majors, so we still have product, they're just new players.
Gotcha. Thank you
Thank you.
Speaker Change: Thank you, and this does conclude the question and answer session of today's program. I'd like to hand the program back to Mark Miller, Chairman and CEO for any further remarks.
Speaker Change: Yes, I'd like to thank everybody for taking the time to join us on the call today. I appreciate your continued interest and support and we look forward to talking to you again in July .
Speaker Change: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.