Q1 2025 TWFG Inc Earnings Call
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Operator: Good day, ladies and gentlemen. Welcome to the TWFG First Quarter 2025 Earnings Conference Call. Today's call is being recorded. A replay will be available on our Investor Relations page following the conclusion of the call. Before we begin, please note that today's remarks may contain forward-looking statements and references to non-GAAP financial measures. Please refer to our press release and SEC filings for a discussion of risk factors and reconciliations to GAAP measures.
Speaker Change: Good day, ladies and gentlemen, welcome to the GW. After the first quarter 2025 earnings Conference call. Today's call is being recorded a replay will be available on our Investor Relations page following the conclusion of the call.
Speaker Change: We begin please note that today's remarks may contain forward looking statements and references to non-GAAP financial measures. Please refer to our press release and SEC filings for a discussion of risk factors and reconciliations to GAAP measures I'd now like to turn the conference over to Gordy bunch, Chief Executive Officer.
Gordie Bunch: I'd now like to turn the conference over to Gordie Bunch, Chief Executive Officer. Sir, please begin. Thank you, Operator, and good morning, everyone. I appreciate you taking time to join us today.
Speaker Change: Sir please begin.
Speaker Change: Thank you operator, and good morning, everyone.
Speaker Change: I appreciate you taking time to join US today, joining me is Janice Wang our Chief Financial Officer. After our remarks, we'll open the call for your questions.
Janice Zwinggi: Joining me is Janice Zwinggi, our Chief Financial Officer.
Gordie Bunch: After our remarks, we'll open the call for your. First, I want to thank all of our employees, agents, carrier partners, and clients for their ongoing support. Their hard work and loyalty continue to drive our TWFG started 2025 with strong momentum. We delivered total revenue growth of 16.6%. $53.8 million. Organic revenue growth of 14.3% and expanded adjusted EBITDA margins to 22.6%. Total written premiums rose 15.5% to $371 million. reflecting sustained strength across both new business and renewal production. Importantly, our business continues to demonstrate the scalability and resilience of our platform. Adjusted EBITDA increased 35.3% year-over-year to $12.2 million.
Speaker Change: First I want to thank all of our employees agents carrier partners and clients for their ongoing support.
Speaker Change: Their hard work and loyalty continue to drive our success.
Speaker Change: <unk> started 2025 with strong momentum we delivered total revenue growth of 16, 6% to.
Speaker Change: To $53 8 million.
Speaker Change: Organic revenue growth of 14, 3%.
Speaker Change: And expanded adjusted EBITDA margins to 22, 6%.
Speaker Change: Total written premiums rose 15, 5% to $371 million.
Reflecting sustained strength across both new business and renewal production.
Speaker Change: Importantly, our business continues to demonstrate the scalability and resilience of our platform.
Speaker Change: Adjusted EBITDA increased 35, 3% year over year to $12 2 million.
Gordie Bunch: reinforcing our ability to drive profitable growth even as we invest heavily in expanding our national footprint. During the quarter, we added 17 new branch locations. expanded into New Hampshire, completed two new corporate acquisitions in Ohio and Texas. The new locations are in line with our acquisition expectations for both revenue and EBITDA. Our M&A pipeline is stronger than ever, and our branch prospect lists continue to grow. As always, it's important to note that newly onboarded agents typically take two to three years to reach full productivity.
Speaker Change: Enforcing our ability to drive profitable growth, even as we invest heavily in expanding our national footprint.
Speaker Change: During the quarter, we added 17, new branch locations expanded into New Hampshire completed two new corporate acquisitions in Ohio and Texas.
Speaker Change: Our new locations are in line with our acquisition expectations for both revenue and EBITDA.
Speaker Change: Our M&A pipeline is stronger than ever and our branch prospect list continues to grow.
Speaker Change: As always it is important to note that newly on boarded agents typically take two to three years to reach full productivity. We're confident that todays investments will continue to fuel our future growth trajectory.
Gordie Bunch: We're confident that today's investments will continue to fuel our future growth trajectory.
Gordie Bunch: Turning to the broader market environment, personal lines continues to soften and carrier capacity remains stable in most jobs. The first quarter saw the Palisades and Eaton fires in California further shift the property market in that. TWFG has been able to navigate the difficult California property market utilizing several core emitted carriers. added additional surplus line markets and placing risks with the California Fair Plan when necessary. Private passenger auto has normalized across the country with many national markets looking to accelerate their new business growth. TWFG expanded our private passenger auto portfolio by adding GEICO to additional states.
Speaker Change: Turning to the broader market environment personal lines continues to soften.
Speaker Change: And carrier capacity remains stable in most geographies.
Speaker Change: First quarter saw the Palisades and Eaton fires in California further shift the property market in that state.
Speaker Change: <unk> has been able to navigate the difficult, California property market utilizing several core admitted carriers.
Speaker Change: Added additional surplus land markets and placing risks with the California fair plan when necessary.
Speaker Change: Private passenger auto is normalize across the country with many national markets looking to accelerate their new business growth.
Speaker Change: <unk> expanded our private passenger auto portfolio by adding geico to additional states.
Gordie Bunch: We are seeing early success with the addition of another major national private passenger auto market. We are expecting moderate rate increases in 2025, and all carriers are keeping a close eye on how potential tariffs may increase loss costs. With personal lines returning to a more stable environment, retention rates across our platform have all normalized to our historic average of 88% this quarter. With markets opening up for growth, our growth will see more new business in the overall mix for growth as our agents will now have more options, a way to place new business and renew it.
Speaker Change: We are seeing early success with the addition of another major national private passenger auto market.
Speaker Change: We are expecting moderate rate increases in 2025, and all carriers are keeping a close eye on how potential tariffs may increase loss costs.
Speaker Change: With personal lines, returning to a more stable environment.
Speaker Change: Retention rates across our platform have also analyzed to our historic average of 88% this quarter.
Speaker Change: With markets opening up for growth our growth, we'll see more new business and the overall mix for growth as our agents will now have more options awarded place new business and renewals.
Janice Zwinggi: Now I'd like to turn it over to Janice for a more in-depth discussion of our results for the quarter. Thank you Gordy and good morning everyone.
Speaker Change: Now I'd like to turn it over to Janice or a more in depth discussion of our results for the quarter.
Janice Wang: Thank you Gordon and good morning, everyone.
Janice Zwinggi: Before diving into the quarter results, I want to note a couple of items. One, beginning this quarter, branch conversions are no longer treated as a comparative variance. They were converted in January 2024, so year-over-year comparisons are now apples-to-apples. And two, interest income was moved from the revenue line down to other income, so we will be comparable to prior and future.
Janice Wang: Before diving into the quarter results I want to note a couple of items. One beginning this quarter branch conversions are not are no longer treated as a comparative variance that were converted in January 2024, so year over year comparisons are not apples to apples.
Janice Wang: Interest income was moved from the revenue line down to other income.
Janice Wang: Will be comparable to prior and future periods.
Janice Zwinggi: Starting with our top KPI, written premium. Total written premium increased by 50 million or 15.5% over the prior year period to 371 million. Within our primary offerings, insurance services grew 40.7 or 14.7% and TWFGMGA grew 9 million or 20.1%. This increase was a result of growth in both renewals and new business. During the first quarter of 2025, within both of our product offerings, we saw new business growth of 26% or $18.4 million, as well as renewal business growth of 12.5% or $31.3 million over the prior year period.
Janice Wang: Starting with our top API written premium total written premium increased by $50 million or 15, 5% over the prior year period to $371 million within our primary offerings insurance services grew 47, or 14, 7% and Gws Gmg I agree.
Janice Wang: $9 million or 21%.
Janice Wang: This increase was a result of growth in both renewals and new business. During the first quarter of 2025 within both of our product offerings, we saw new business growth of 26% or $18 4 million as well as renewal business growth of 12, 5% or 31 3 million over the prior year period within our.
Janice Zwinggi: Within our insurance services offering, we saw a shift in renewal and new business growth as compared to Q1 2024. New business growth was 17%, up from 13% in Q1 2024, while renewal premium growth was more modest at 14% compared to 29% in the prior year period. The higher renewal business in the first quarter of 24 included an initial influx of premium from the 2023 corporate store acquisitions, resulting in an elevated renewal growth rate in that period. In our MGA offering, we saw a healthy uptick in new business growth of 89% or $8 million over the prior period, primarily from the expansion of a key MGA program.
Janice Wang: Insurance services offering we saw a shift in renewal and new business growth as compared to Q1 2024.
Janice Wang: New business growth was 17% up from 13% in Q1 2024, while renewal premium growth was more modest at 14% compared to 29% in the prior year period.
Janice Wang: The higher renewal business in the first quarter of 'twenty. Four included an initial influx of premium from the 2023 corporate store applications, resulting in an elevated renewal growth rate in that period.
Janice Wang: In our MGA offering we saw a healthy uptick in new business growth of 89% or $8 million over the prior year period, primarily from the expansion of our key MGA programs.
Janice Zwinggi: Our consolidated written premium retention was 88% as compared to 94% in the prior year period. This decrease is correlated to the shift in renewal business growth as previously discussed and as a result of carriers moderating rate increases and opening up for new business after a period of restricted capacity and aggressive rate increase.
Janice Wang: Our consolidated written premium retention was 88% as compared to 94% in the prior year period.
Janice Wang: This decrease is correlated to the shift in renewal business growth as previously discussed and as a result of carriers moderating rate increases and opening up for new business. After a period of restricted capacity and aggressive rate increases.
Janice Zwinggi: Our total revenues increased $7.7 million, or 16.6%, over the prior year period to $53.8 million. The increase of 16.6% was mainly due to commission income, which represented 13.5% of the total growth. The remaining 3.1% included fee income of 1.7%, contingent income 1.3%, and other income of 0.1%. Commission income increased $6.2 million, or 14.7%, over the prior year period to $48.8 million, driven by new business growth and solid retention levels. Insurance Services contributed 11.9% growth or 10.4% of the total, while the MGA delivered 33.7% growth or 4.3% of the total growth. Contingent income increased 0.6 million or 54.6% over the prior year period to 1.7 million, tracking closely with our written premium growth.
Janice Wang: Our total revenues increased $7 7 million or 16, 6% over the prior year period to $53 8 million.
Janice Wang: The increase of 16, 6% was mainly due to the commission income, which represented 13, 5% of the total growth the remaining three 1% including <unk>.
Janice Wang: One, 7% and Tianjin and kind of one 3%.
Janice Wang: Other income of <unk>, 1%.
Janice Wang: Commission income increased $6 2 million or 14, 7% over the prior year period to $48 8 million driven by new business growth and solid retention levels.
Janice Wang: Insurance services contributed 11, 9% growth or 10, 4% of the total while the MGA delivered 33, 7% growth or four 3% of the total branch.
Janice Wang: And Tien Tsin, and Tom and Chris <unk>, 6 million or 54, 6% over the prior year period to $1 7 million tracking closely with our written premium growth.
Janice Zwinggi: The income was up 0.8 million or 34.9% to 3 million, largely driven by higher policy volume from increased business in the NGA.
Janice Wang: Fee income was up <unk> 8 million or 34, 9% to $3 million largely driven by higher policy volume from increased business in the engine.
Janice Zwinggi: Organic revenues increased $6.2 million, reaching $49.2 million for an organic growth rate of 14.3% compared to 13% in the prior year period, which depicts our continued success in our core business.
Janice Wang: Organic revenues increased $6 2 million, reaching $49 2 million for an organic growth rate of 14, 3% compared to 13% in the prior year period, which depicts our continued success in our core business.
Janice Zwinggi: Now turning to expenses, commission expense increased $5.4 million, or 20.3% over the prior year period to $31.8 million. The increase represents $3.9 million, or 13.9% growth, which is consistent with commission income growth, and a one-time favorable adjustment related to the grants conversions of $1.5 million. Total salary and benefits increased by $1.9 million or 31.1% over the prior year period to $8.2 million, reflecting our scale in the IPO transition, which was driven by a $1.2 million increase from the RSUs issued in connection with the IPO, and the remaining $0.7 million due to the growth of business and corporate store equity.
Now turning to expenses.
Janice Wang: <unk> expense increased $5 4 million or 23% over the prior year period to $31 8 million. The increase represents $3 9 million or 13, 9% growth, which is consistent with commission income growth and a one time.
Janice Wang: Favorable adjustment related to the branch conversions of $1 5 million.
Janice Wang: Hello salary and benefits increased by $1 9 million or 31, 1% over the prior year period to $8 2 million, reflecting our scale and the IPO transition, which was driven by a $1 2 million increase from the RAC is connect issued in connection with the IPO and the remaining $7 million due to the growth.
Janice Wang: Business in corporate store acquisitions.
Janice Zwinggi: Other administrative expenses increased $1.6 million, or 50.9%, over the prior year period to $4.7 million, with approximately $0.4 million related to professional and consulting fees associated with being a public company. We also had $0.3 million in increase in IT costs, $0.3 million in underwriting fees, which were due to growth, and the remaining $0.6 million was tied to ongoing growth and acquisition integration. Appreciation and amortization increased .3 million or 11.5% to 3.4 million, primarily from the branch conversions and prior corporate short.
Janice Wang: Other administrative expenses increased $1 6 million or 59% over the prior year period to $4 7 million.
Janice Wang: With approximately <unk> 4 million related to professional and consulting fees associated with being a public company.
Janice Wang: Also had <unk> 3 million increase in it costs $3 million in underwriting fees, which were due to growth and the remaining 6 million was tied to ongoing growth and acquisition integration.
Janice Wang: Depreciation and amortization increased <unk> 3 million or 11, 5% to $3 4 million, primarily from the branch conversions in prior corporate store acquisitions.
Janice Zwinggi: Net income for the quarter was $6.9 million, up 3.4% over the prior year period. Adjusted net income increased 14.3% to $9.2 million, driven by earnings growth and partially offset by higher public company costs, and a $2.7 million increase in taxes.
Janice Wang: Net income for the quarter was $6 9 million up three 4% over the prior year period.
Janice Wang: Adjusted net income increased 14, 3% to $9 2 million driven by earnings growth and partially offset by higher.
Janice Wang: Public company costs at $2 7 million increase in tax expense.
Janice Zwinggi: EBITDA was $9.1 million and Adjusted EBITDA was $12.2 million, up 35.3% over the prior year period. Adjusted EBITDA margin expanded to 22.6%, compared to 19.5% in T1-24, reflecting both top-line growth and operating level. While we continue to manage the ramp up in public company costs, we are confident in our ability to expand margins further as we scale.
Janice Wang: EBITDA was $9 1 million and adjusted EBITDA was $12 2 million up 35, 3% over the prior year period adjusted.
Janice Wang: Adjusted EBITDA margin expanded to 22, 6% compared to 19, 5% in Q1, 'twenty four reflecting both topline growth and operating leverage.
Janice Wang: While we continue to manage the ramp up in public company costs, we are confident in our ability to expand margins further as we scale.
Gordie Bunch: With that, I'll turn it back over.
Janice Wang: With that I'll turn it back over to <unk>.
Gordie Bunch: Thanks, Janice. Looking ahead, we remain confident in our ability to deliver on our 2025 goal. Therefore, we are modestly adjusting upward our 2025 guidance to organic revenue growth 12% to 16%. adjusted EBITDA margin between 20% and 22% and total revenues between $240 million and $255 million. We are mindful of the broader macroeconomic uncertainty, including tariff discussions and interest rate sensitivity. But rather than pulling back, we are seeing increased demand for insurance options and workable solutions. Periods of economic complexity highlight the value of a trusted local advisor and TWFG is well positioned to support clients through those transitions.
Speaker Change: Thanks, Janice looking.
Speaker Change: Looking ahead, we remain confident in our ability to deliver on our 2025 guidance.
Speaker Change: Therefore, we are modestly adjusting upward our 2025 guidance to organic revenue growth, 12% to 16%.
Speaker Change: Adjusted EBITDA margin between 20, and 22% and.
Speaker Change: In total revenues between $240 million and $255 million.
Speaker Change: We are mindful of the broader macroeconomic uncertainty, including tariff discussions and interest rate sensitivities.
Speaker Change: But rather than pulling back we are seeing increased demand for insurance options and workable solutions.
Speaker Change: With economic complexity highlight the value of a trusted local advisor and <unk> is well positioned to support clients through those transitions.
Gordie Bunch: Going into the second quarter with a robust M&A pipeline, $196 million in cash on hand, and a fully available credit revolver, we retained significant balance sheet flexibility to invest where opportunities are strong. Our focus remains squarely on expanding our national footprint, investing in agent success, maintaining operational efficiency, and executing on our strategic growth priority.
Speaker Change: Going into the second quarter with a robust M&A pipeline, a $196 million in cash on hand, and a fully available credit revolver.
Speaker Change: We retain significant balance sheet flexibility to invest where opportunities are strongest.
Speaker Change: Our focus remains squarely on expanding our national footprint investing in agent success, maintaining operational efficiency and executing on our strategic growth priorities.
Gordie Bunch: In closing, I want to thank the entire TWFG team for their dedication and our shareholders for their ongoing support. We are energized by the opportunities ahead and confident in our ability to deliver long-term value.
Speaker Change: In closing I want to thank the entire <unk> team for their dedication and our shareholders for their ongoing support.
Speaker Change: We're energized by the opportunities ahead and confident in our ability to deliver long term value.
Operator: With that, Janice and I will be happy to open the line for questions. Ladies and gentlemen, if you have a question or comment at this time, please press star one one on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press star 118. Again, if you have a question or comment at this time, press star one one on your telephone keypad. Please stand by while we compile the Q&A.
Speaker Change: With that Jonathan and I will be happy to open the line for questions.
Ladies and gentlemen, if you have a question or comment at this time. Please press star one on your telephone keypad.
Speaker Change: Western has been answered or you wish to remove yourself from the queue simply press star one again.
Speaker Change: Again, if you have a question or comment at this time.
One one on your telephone keypad. Please.
Speaker Change: Please standby, while we compile the Q&A roster.
Pablo Singzon: Our first question or comment comes from the line of Pablo Singzon from JP Morgan. Your line is open. Hi, good morning.
Tableau Singsong: Our first question or comment comes from the line of Tableau Singsong from Jpmorgan. Your line is open.
Speaker Change: Hi, good morning.
Gordie Bunch: First question, is the first quarter expense fully loaded for public company costs or do you think there could be incremental costs from here beyond the usual expenses you'd, you know, incurred to operate? I'd say, uh... There will be future public company expenses as we move towards complying long-term with internal audit functions and other public-related obligations we pick up over time. So the first quarter is not fully loaded with all future public company expenses.
Speaker Change: First question.
Speaker Change: The first quarter expense fully loaded for public company costs or do you think there can be incremental costs.
Speaker Change: From here beyond the usual expenses incurred.
Speaker Change: Encourage you to operate the business.
Speaker Change: I'd say.
Speaker Change: There will be future public company expenses as we move towards complying long term with internal audit functions and other.
Speaker Change: Public related obligations, we pick up over time.
Speaker Change: The first quarter is not fully loaded with all future public company expenses.
Pablo Singzon: Gotcha.
Gordie Bunch: And then, second question, just on retention, and I know you referenced that you're sort of at the historical level, which makes sense, but what gives you comfort that retention bottoms out here, right? And what I have in mind is, you know, it's a premium retention number, right? So there can be some pressure from price moderation, but then maybe you're getting some offsets from, you know, better per policy or per customer retention. So just sort of your perspectives on, you know, why this retention level is a good number to think about moving forward. Yeah, if you go back to last year's Analyst Day, this was the target we had set for our long-term average.
Speaker Change: Gotcha.
And then.
Speaker Change: Second question just on retention.
Speaker Change: And I know you referenced yourself at.
Speaker Change: At the historical level, which.
Speaker Change: Which makes sense, but what gives you comfort that retention bottoms out here right and what I have in mind.
Speaker Change: Your retention number alright, so there could be some pressure from price moderation, but then maybe youre getting some offset from better per policy are for customer retention. So just.
Speaker Change: For your perspectives on.
Why this retention level.
Speaker Change: A good number to think about moving forward. Thanks.
Speaker Change: Yes, if you go back to <unk>.
Speaker Change: Last year.
Speaker Change: The analyst day.
Speaker Change: Was the target we had set.
For our long term average.
Gordie Bunch: It just took a few quarters longer for us to end up where we expected. That 88% premium retention number was our long-term average, so taking into account previous market cycles of our core personalized portfolio. To your point, it is a softening market. That does mean rates will suppress, and that gives us the ability to shift clients on their renewals into possibly favorable pricing compared to their expiring term, which would lead to more client retention, but at a lower average premium. Plus, with the markets opening up in the vast majority of geographies, we're able to place more new business risks where previously the market had been constrained.
Speaker Change: It just took a few quarters longer for us to end up where we expected that 88% premium retention number was our long term average.
Speaker Change: It would take.
Speaker Change: In the account.
Speaker Change: <unk> market cycles of our core personal lines portfolio.
Speaker Change: To your point.
Speaker Change: It is a softening market that does move right now.
Speaker Change: And that gives us the ability to shift clients on their renewals.
Are you, possibly favorable pricing prior to it.
Speaker Change: Compared to their expiring term.
Speaker Change: It would lead to more client retention, but at a lower average premium.
Speaker Change: With the markets opening up.
Speaker Change: Vast majority of geographies, we are able to place for your business risks, where previously the market has been constrained.
Gordie Bunch: So, we're fairly confident in that 88% premium retention number that's been our long-term average. Right now, that's what we're seeing.
Speaker Change: So we're fairly confident in that 88%.
Speaker Change: Premium retention number that's been our long term average.
Speaker Change: Right now that's what we're seeing.
Pablo Singzon: If we see anything dipping or improving, we'll make that update in the next quarterly call. Thanks, Jordi. Thank you, Pablo.
Speaker Change: Yes.
Speaker Change: We see anything dipping ore or improving we'll make that update in the next quarterly call.
Marty: Thanks Marty.
Marty: Okay. Thank you Pablo.
Pablo Singzon: Thank you.
Tommy McJoint: Our next question or comment comes from the line of Tommy McJoint from KBW. Your line is open. Hey, good morning, guys. Thanks for taking our questions. When we look at the question rate, you know, that is That's the commission income as a percentage of written premium. I know there's a lot of moving input, like the mix of surplus and, you know, mix of insurer of last resort. But I guess how would you characterize the commission rates in the quarter? Does everything sort of balance out in one cue? Is a good number to use going forward or is there upside or downside?
Speaker Change: Thank you. Our next question or comment comes from the line of Tommy <unk> joined from K B W. Your line is open.
Tommy: Hey, good morning, guys. Thanks for taking our questions.
Speaker Change: When we look at the attrition rate.
Speaker Change: The commission income as a percentage of written premium.
Speaker Change: I know theres, a lot of moving endpoints like the mix in surplus.
Speaker Change: The mix of insurer of last resort.
Speaker Change: I guess, how would you characterize the commission rates in the quarter does everything sort of balance out in <unk> is that a good number to use going forward or is there upside or downside in your head.
Gordie Bunch: I would frame it as... fairly stabilizing. You know, as far as the commission rate as a percentage of premium, you're correct. When it goes to an E&S marketplace, that's going to have a lower average commission. If it goes into a state-backed insurer, that's going to have a lower average commission percentile as a percentage of premium. But the market opening up on private passenger auto, you're seeing now new business incentives. So you're going to see some enhanced new business compensation that will skew upward the percentage of commission relative to new business premium. And then on the homeowner's side, you're seeing more stability around, you know, the current rates that are out there.
Speaker Change: I would frame it is.
Speaker Change: Fairly stabilizing.
Speaker Change: As far as the commission rate as a percentage of premium Youre correct. When it goes to an E&S marketplace. That's going to have a lower average commission to goes into a state bank insurer thats going to have a lower average commission percentile as a percentage of premium, but the market opening up on private passenger auto.
Speaker Change: Youre seeing now new business incentives, so youre going to see some have enhanced new business compensation that will skew upwards.
Speaker Change: The percentage of commission relative to new business premium.
And then on the homeowner side Youre seeing more stability around.
Speaker Change: The current rates that are out there. So I think it's a good indicator.
Gordie Bunch: So I think it's a good indicator.
Tommy McJoint: The first quarter, again, you know, as in anything, if we see anything trending differently, we'll make those adjustments in future guidance and on the next call. Great, thanks.
Speaker Change: The first quarter.
Speaker Change: Yes.
Speaker Change: Anything if we see anything trending differently, we'll make those adjustments in future guidance.
Speaker Change: On the next call.
Tommy McJoint: And then you called out the 17 branch additions in the quarter. Was that a gross number or a net number? And then, you know, if so, I guess just how does this compare to, you know, the outsized growth and branches that you added the last few quarters? I know that was really driven by a single carrier, you know, pulling back from operations in certain geographies. So just want to get a sense of how this compares to the prior the prior Correct. I mean, it's not really comparable to prior quarters. To your point, we had the influx of agents from a singular captive market that was being disruptive.
Speaker Change: Great. Thanks.
Speaker Change: And then you called out the 17 brand positions in the quarter was that a gross number.
Speaker Change: Or a net number and then.
Speaker Change: So I guess just how does this compare to the outsized growth in branches that you added in the last few quarters I know that was really driven by a single carrier.
Speaker Change: Going back to the operations in certain geographies. So I just wanted to get a sense of how this compares to the prior the prior quarters.
Speaker Change: Correct.
Speaker Change: It's not really a comparable to prior quarters to your point, we have the influx of agents from a singular.
Speaker Change: A market that was being disruptive so 2020 fours onboarding count.
Gordie Bunch: So 2024's onboarding count was significantly above our average year of onboarding new agencies. The 17 agencies were gross, gross added, not net. We will in any period have agents that retire or to existing locations. As a reminder, the portfolios never leave. They just move into another office or new principal steps into the position of the exiting principal. But 17 was gross. That compared to first quarter of 2024, 17 new offices in the first quarter of 25 is higher than our pre-singular carrier disruption from 2024. Thanks.
Speaker Change: Significantly above our average.
Speaker Change: Year of Onboarding two agencies, the 17 agencies were gross.
Speaker Change: Gross added not net.
We will in any period stages that retire emerge into existing locations. As a reminder of the portfolio is never leaves they just move into another office.
Speaker Change: Or new principal steps into the position of the exiting principles. So.
Speaker Change: But 17 was gross.
Speaker Change: That compared to first quarter of 2024.
Speaker Change: 17, new offices in the first quarter of 'twenty five is higher than ours.
Speaker Change: <unk>.
Speaker Change: And going to a carrier.
Speaker Change: Disruption from 'twenty to 'twenty four.
Gordie Bunch: And then just last question. When we look at the full year guidance for 2025, is there a certain amount of dollars of revenue or, you know, bottom line EBITDA, that's the inorganic contribution from acquisitions? Is there a number that we can back into from this guidance? I think the guidance that we're using today is still along the lines of what we had in the analyst model as the acquisitions we've made to date follow that trend line. So in the first quarter, you'll notice in the details provided. Our revenue from the first two acquisitions was slightly under the projected, you know, $3 million that would have been acquired at the beginning of the calendar year.
Speaker Change: Thanks, and then just last question when we look at the full year guidance for 2025.
Speaker Change: Is there a certain amount of dollars of revenue or bottom line EBITDA.
Speaker Change: The inorganic contribution from acquisition.
Speaker Change: Are there a number that we can back into from this guidance.
Speaker Change: I think the guidance that we're using today is still along the lines of what we had in the analyst model as the acquisitions. We've made to date follow that trend line.
Speaker Change: In the first quarter, you'll you'll notice in the <unk>.
Speaker Change: Details provided our revenue from the first two acquisitions was slightly under the projected $3 million that would've been acquired at the beginning of the calendar year.
Gordie Bunch: Subsequently, we've made additional acquisitions that will plug that run rate hole for the first half of calendar year 2025. What we have in our pipeline and in our queue, we believe, will satisfy the second tranche of the analyst model from July forward, which would then, you know, give us the confidence to raise the guidance that we provided in the earnings release. Supplementing that, we could have additional activity that would even take it beyond where we've already guided towards. So, today, what's in the current guidance is still the original analyst model, but with a little bit more of a confidence factor, and we're achieving and closing and signing transactions that are bringing that modeling into fruition.
Speaker Change: Subsequently, we've made additional acquisitions that.
Speaker Change: We will plug that that run rate coal.
Speaker Change: For the first half of calendar year 2025, what we have in our pipeline and in our Q, We believe will satisfy the second tranche.
Speaker Change: The analysts model.
Speaker Change: July forward.
Speaker Change: Which would then give us the confidence to raise.
Speaker Change: The guidance that we provided.
Speaker Change: In the earnings release.
Speaker Change: Supplementing that we could have additional.
Speaker Change: Activity that would even take it beyond where we've already guided towards so today, what's in the current guidance is still the original analysts model, but with a little bit more of a confidence factor and we're achieving in closing and signing.
Speaker Change: The transactions that are.
Speaker Change: Bringing that modeling into fruition.
Tommy McJoint: Great. Thanks, Cordae. Thank you.
Speaker Change: Great. Thanks Courtney.
Speaker Change: Yes.
Paul Newsome: Our next question or comment comes from the line of Paul Newsome from Piper Sandler. Mr. Newsome, your line is open. Good morning.
Speaker Change: Thank you. Our next question or comment comes from the line of Paul Newsome from Piper Sandler Mr. Newsome. Your line is open.
Paul Newsome: I was hoping you could go one more time because I get this question a lot about why new additions in terms of agents for TDOFG tends to become more productive. Scott Heleniak, Pablo Singzon, Dean Criscitiello, Janice Zwinggi, Richard Bunch I get the question quite a bit. Yeah, so off the off the top, you know, the goose head business model is around bringing in agents that may not have as much experience as our existing sales force is coming into our channel. So our agents we recruit are typically coming out of a captive relationship. So take any of the national brands that have captive distribution.
Speaker Change: Good morning.
Speaker Change: I was hoping you could go one more time because I get this question a lot about why.
Speaker Change: New additions in terms of agents for <unk>.
Speaker Change: <unk> tends to take become more productive.
Speaker Change: A little bit slower than it appears some other distribution systems I think you said.
Speaker Change: Do you just pure agent by agent Count maybe you could just talk about the model differences and why that is the case.
Speaker Change: Sure.
Speaker Change: I get the question.
Speaker Change: Yes, so I'll have to off the top.
<unk>.
Speaker Change: <unk> business model is around bringing in.
Speaker Change: Agents that may not have as much experience.
Speaker Change: As our existing sales force thats coming into our channels. So our agents. We recruit are typically coming out of the captive relationships. So take any of the national brands that are captive distribution when those agents exit those business models. They are bound by non compete clauses, so theyre under a restricted sales.
Gordie Bunch: When those agents exit those business models, they're bound by non-compete clauses. So they're under a restricted sales agreement with the prior employer. When they start with us, they're not allowed to bring over any of their clientele, which means they're starting from zero. If you go into a goose head franchise, many of the folks they're bringing in may not even be from insurance backgrounds, as they're willing to bring in less experienced folks, train them up. They also have their lead gen mortgage referral program that helps their newer agents launch with some referral flow from those initiatives.
Speaker Change: <unk> with the prior employer.
Speaker Change: When they start with us they are not allowed to bring over any of their clientele, which means theyre starting from zero.
Speaker Change: If you go into a <unk> franchise many of the folks they are bringing and may not even be from insurance background.
Speaker Change: They are willing to bring in less experienced folks trained them up.
Speaker Change: They also have their lead gen.
Speaker Change: Mortgage referral program that helps their newer agents launch with some.
Speaker Change: Referral flow from those those initiatives.
Gordie Bunch: Our agents tend to be hunters and gatherers, ones that already have centers of influence in the marketplace. They're going to have to reposition and relaunch themselves from zero in force portfolio. So it just takes a little bit more time to build up a portfolio of business when you're bound by non-compete and having to reestablish yourself.
Speaker Change: Our agents tend to be hunters and gatherers ones that already have centers of influence in the marketplace.
Speaker Change: We're going to have to reposition and re launch themselves.
Speaker Change: Zero.
Speaker Change: <unk> portfolio. So it just takes a little bit more time to build up.
Speaker Change: Okay.
Speaker Change: Portfolio of business when you are bound by non competes.
Speaker Change: And having to reestablish yourself.
Paul Newsome: Fantastic.
Gordie Bunch: Could you talk maybe a little bit more about the new additions of GEICO and how is that, just try to size how important adding one more product is to folks and maybe as a corollary to that, is there potentially more to come? products already. Yeah, I think GEICO is a significant addition and having an additional market within our portfolio. We're doing commercial auto, personal lines, auto specialty lines launched in Ohio this month. And so what that is providing is another national branded product to our distribution at favorable pricing to our customers and at favorable commission rates that I think helps stabilize the commission reductions we've all seen over the past decade.
Speaker Change: That's fantastic.
Speaker Change: Could you talk maybe a little bit more about the.
Speaker Change: The new additions of Geico and how is that just trying to size how important.
Speaker Change: Adding one more product is two two folks and.
Speaker Change: And maybe as a corollary to that.
Speaker Change: Is there potentially more to come.
Speaker Change: You will see a broad range of.
Speaker Change: Projects already I think.
Speaker Change: Yes, I think geico.
Speaker Change: A significant addition in having an additional market within our portfolio.
Speaker Change: We're doing commercial auto personal lines auto specialty lines launched.
Speaker Change: Ohio This month.
Speaker Change: And so what that is providing.
Speaker Change: As another national branded product to our distribution at favorable pricing to our customers.
Speaker Change: Favorable commission rates that I think helps stabilize the <unk>.
Speaker Change: Emission reductions, we had all seen over the past decade.
Gordie Bunch: I think new competition in the IA channel is going to create more stability around comp and also is going to incentivize other markets to come out with new business incentives, retention incentives in order for them to maintain their market share. As you guys know, GEICO's combined ratio has been excellent the last few quarters. That gives them a pricing position that is favorable. And that also will play into, as we talked to with Pablo, some of our premium retention. We'll now have another market for our customers to consider as they go into their renewals as they're seeing rate increases from other markets.
Speaker Change: I think new competition in the channel.
Speaker Change: Is going to create.
Speaker Change: More stability around comp and also going to incentivize other markets to come out with new business incentives retention incentives.
Speaker Change: In order for them to maintain their market share.
Speaker Change: As you guys know Geico's combined ratio has been excellent the last few quarters.
Speaker Change: That gives them a pricing position that is favorable.
Speaker Change: That also will play into as we talk to with Pablo some of our premium retention.
Speaker Change: We will now have a.
Speaker Change: Another market for our customers to consider as they go into their renewals.
Speaker Change: As you are seeing rate increases from other markets.
Gordie Bunch: Progressive and GEICO both have some pricing advantages that gives our customers the ability to be retained, albeit at a lower average premium. So I think GEICO is going to be a significant player in the IA channel. and so far with us, we're seeing great early.
Speaker Change: Progressive Geico boat have some pricing advantages that.
Speaker Change: That gives our customers the ability to be retained albeit at a lower average premium so.
Speaker Change: Geico is going to be a significant player in the <unk> channel.
Speaker Change: And so far with us were seeing.
Speaker Change: Great early success.
Paul Newsome: Thank you very much. Appreciate the help. Thank you.
Speaker Change: Thank you very much I appreciate the help.
Speaker Change: Yes.
Brian Meredith: Our next question or comment comes from the line of Brian Meredith from UBS. Mr. Meredith, your line is now open. Hey, thanks. Morning, Gordy. A couple ones here.
Speaker Change: Thank you. Our next question or comment comes from the line of Brian Meredith from UBS. Mr. Meredith. Your line is now open.
Brian Meredith: Hey, Thanks, Good morning, Greg.
Gordie Bunch: First, just want to follow up on Pablo's questions on the margin outlook. When should we expect some of the additional IPO expenses to start to hit just because as I look at the guidance, you're obviously margined in the first quarter or kind of higher the winter guidance range. I think the timing is really going to be like, you know, we're just now getting line of sight to our audit expenses for 2025 and the additional recommended infrastructure around those audit functions, our future needs for infrastructure that then support compliance requirements that don't really hit us until, you know, three or four years down the road.
Brian Meredith: Couple of ones here first just wanted to follow up on <unk> questions on the margin outlook.
Brian Meredith: When should we expect somebody additional IPO expenses to start to hit just because as I look at the guidance, obviously margins in the first quarter were higher than what your guidance ranges.
Brian Meredith: Okay.
Brian Meredith: I think the timing is really going to be but.
Brian Meredith: We're just now getting line of sight to our.
Brian Meredith: Audit expenses for 2025 and the additional.
Brian Meredith: Recommended infrastructure around those audit functions our future.
Brian Meredith: Needs for.
Brian Meredith: Infrastructure that then support compliance requirements that don't really hit us until.
Gordie Bunch: So we're working internally on building out those timetables of when are we going to be onboarding some of these additional functions that we're not currently required to have, but we will be in the out years. And so I think the timing of that for us, I think we want to be thoughtful and probably get to that layer level of compliance and infrastructure well in advance of the actual date we're required to do so.
Brian Meredith: Three or four years down the road. So we're working internally on building out those timetables are when are we going to be onboarding. Some of these additional functions that were not currently required to have that we will be in the out years and so I think the timing of that for US I think we want to be thoughtful.
Brian Meredith: And probably get to that layer level of compliance and infrastructure.
Brian Meredith: Well in advance of the actual date, we're required to do so.
Gordie Bunch: And so I think I don't really have a great answer right now, Brian, on what timing that those expenses will be incurred. We haven't baked into our base forecast. So, yes, we are seeing some positive variance from what we had forecasted for the first quarter from those expenses not being incurred, but that's not the entire driver of why we had a margin beat. We have improved economics on contingencies. That's also driving margin up. That's one of the reasons we raised the lower end of our margin going forward for 2025 guidance is there's more confidence in our ability to attain a higher margin and inclusive of absorbing those public company costs.
Brian Meredith: And so I think I don't really have a great answer right now Brian on what timing that those expenses will be incurred we havent baked into our base forecast. So yes, we are seeing some positive variance.
Brian Meredith: From what we had forecasted for the first quarter from those expenses not being incurred but thats not the entire driver of why we had a margin deep.
Brian Meredith: We had.
Improved economics on contingencies.
Brian Meredith: Also driving margin up.
Brian Meredith: That's one of the reasons, we raised the lower end of our margin.
Brian Meredith: Going forward for 2025 guidance as there is more confidence in our ability to attain a higher margin than <unk> and.
Brian Meredith: And inclusive of absorbing those public company costs.
Gordie Bunch: So. They probably are not going to be the dragger that we've that we probably have seen in our previous projections, but they are going to be onboarded. They are going to have some impact and then that timing of as as when those come in, they will be really dependent upon the outcome of our implementation strategy we're working on with Deloitte and others to make sure we have the infrastructure we need three years from now sooner.
Brian Meredith: So.
Brian Meredith: They probably are not going to be the drag or.
That we've that we probably have seen in our previous projections, but they are going to be onboard and they are going to have some.
Brian Meredith: Impact.
Brian Meredith: The timing of when those come in I think it will be really dependent upon the outcome of our implementation strategy and we're working on with Deloitte and others.
Brian Meredith: To make sure we have the infrastructure, we need three years from now.
Brian Meredith: gotcha gotcha so there was nothing unusual in the first quarter because like I said you're you're 22-6 and their guidance is for 20 to 22. So then I don't recall there's any seasonality in margins. Now we had an uptick in contingencies that was significant and contingencies are directly dropped to the bottom line. I think that's indicative of the improved combined ratio as we're seeing across the industry. So our profitability projections are up and we're recognizing those in the current quarter too. Great, that makes a lot of sense.
Brian Meredith: Got you got you said so there was nothing unusual in the first quarter, because like I said it.
Speaker Change: You're at 26% in your guide for 'twenty to 'twenty, two so Dan I don't recall or is there any seasonality in margins.
Speaker Change: No we had an uptick in contingencies that was significant and contingencies are done correctly dropped to the bottom line.
Speaker Change: That's indicative of the improved combined ratios were seeing across the industry.
Speaker Change: So our profitability projections are up and we're recognizing those in the current quarter too.
Speaker Change: Great that makes a lot of sense and second question, Greg I'm, just curious as the homeowners market and maybe some of the other markets at least opens up or an auto softens should we expect the wholesale business our MGA wholesale to start moderating the growth rates there is that your expectation.
Gordie Bunch: And second question, Gordon, I'm just curious, as the homeowners market, maybe some of the other markets, you know, at least opens up and auto softens, should we expect the wholesale business to start, MGA wholesale, to start moderating the growth rates there? Is that your expectation? No, I would expect that our program side will actually expand. Even as, you know, the auto market might be stabilizing, the homeowner's market is still highly fragmented, especially in cap prone geographies. So I would be, you know, looking at us leaning into those opportunities where rate and competition provide advantageous deployment of those programs. Thank you.
Speaker Change: No I would expect that our program side will actually expand.
Speaker Change: Even as the.
Speaker Change: The auto market might be stabilizing the homeowners market is still highly fragmented.
Speaker Change: Especially in cat prone geographies.
Speaker Change: So I would be looking at us leaning into those opportunities were right and competition.
Speaker Change: Advantageous deployment of those programs.
Speaker Change: Makes sense. Thank you.
Brian Meredith: No problem. Thanks, Brian. Thank you.
Speaker Change: Thanks, Brian.
Mike Zaremsky: Our next question or comment comes from the line of Mike Zaremsky from BMO. Mr. Zaremsky, your line is Hey, good morning. Thanks.
Speaker Change: Thank you. Our next question or comment comes from the line of Mike Zaremski from BMO. Mr. Zarefsky. Your line is open.
Mike Zaremski: Hey, good morning. Thanks.
Mike Zaremsky: Um, so, um, question on, on organic growth and, you know, maybe tell me why, um, why my question is, is maybe naive, but, um, if I look at the, um, branch count growth and over the past year plus, last year, you know, 27, I think, percent. I know this might be a growth basis, not a net, so that might be part of the answer. And then, you know, 1Q, you've got to annualize the numbers, also tracking in the low doubles. You know, I know that the folks from American National, you know, probably need a ramp up.
Speaker Change: So question on on organic growth.
Mike Zaremski: Tell me why.
Mike Zaremski: Hi, My question is maybe not but.
Mike Zaremski: Look at the.
Mike Zaremski: The branch count growth.
Mike Zaremski: Over the past.
Mike Zaremski: Year plus.
Mike Zaremski: Last year.
Seven I think percent I know this might be on a gross basis not a Nazi.
Mike Zaremski: That might be part of the answer and then <unk> got annualize the numbers also tracking in the low doubles.
Mike Zaremski: I know that the folks from American national and they probably need to ramp up.
Gordie Bunch: But, you know, just on branch count growth, you know, you get to a significant double-digit number. Pricing softening, but still, you know, you know, well into the high singles, I'm assuming. So, I guess, you know, why wouldn't we plug in a higher organic growth number for, you know, on a go-forward basis? What am I missing, high level?
Mike Zaremski: But just just on branch count growth.
Mike Zaremski: We'll get to a significant double digit number.
Mike Zaremski: Pricing softening, but still.
Mike Zaremski: <unk>.
Mike Zaremski: Well in the high singles I am assuming.
Mike Zaremski: So I guess why.
Mike Zaremski: Why wouldn't we plug in.
Mike Zaremski: A higher organic growth.
<unk> four.
Mike Zaremski: On a go forward basis.
Mike Zaremski: What am I missing level.
Gordie Bunch: Yeah, so I'll just expand on the agents that came from the market that you mentioned. They're still in a straddled contracting position, so they still have active agreements with the prior market. So they have some restrictions in what they currently can produce. Right now, for all states except for California, those agents are restricted to personal lines only. The product that's being non-renewed out of their portfolio is their homeowner's product. In some of the geographies, their private passenger auto rate in the incumbent carrier is substantially below market, which is making it more difficult for them to rewrite those policies.
Mike Zaremski: Yes, so I'll just expand on the agents that came from from the market that you mentioned.
Mike Zaremski: They are still in a straddled contracting position so they still have active agreements with the prior market. So they are.
Mike Zaremski: They have some restrictions on what they currently can produce.
Mike Zaremski: Right now for all states, except for California, those agents are restricted to personal lines only.
Mike Zaremski: The product that's being non renewed out of their portfolio is their homeowners product.
Mike Zaremski: And some of the geographies they are private passenger auto rate and the incumbent carrier is substantially below market, which is making it more difficult for them to rewrite those policies as their properties non renewing we were able to replace the home elsewhere within our portfolio, but the auto may stay will be retaining was the incumbent marketplace.
Gordie Bunch: As their property is non-renewing, they're able to replace the home elsewhere within our portfolio, but the auto may still be retaining with the incumbent market. So they're not the same type of agency as one that comes to us less encumbered by ongoing covenants and agreements. As they get past certain time periods, some of those restrictions may lift, and that's why we put them into the out years of being more meaningfully contributing.
Mike Zaremski: So they're not the same type of agency as one that comes to us.
Mike Zaremski: Less encumbered by ongoing covenants then agreements.
Mike Zaremski: As they get past certain time periods some of those restrictions may lift.
Mike Zaremski: And that's why we put them into the out years of being more meaningfully contributed contributing.
Gordie Bunch: So I, and we've talked about this before, using store account metrics is not a great way to model our business. We can have an existing, you know, one of these new agents can come to us and, you know, in the next two months, we can buy another agency with them and fold that into their agency in a box branch, that would skew all cohort analysis because that inbounded portfolio wasn't organically produced, it was acquired. And so, you know, we try to steer away from trying to use, you know, a number of stores, a number of agents.
Mike Zaremski: So and we've talked about this before using store count metrics is not a great way to model our business.
Mike Zaremski: We can have an existing one of these new agents can come to us and in the next two months, we can buy another agency with them.
Mike Zaremski: And fold that answer there.
Speaker Change: <unk> seen a box branch that would skew all cohort analysis, because that in both inbound and portfolio wasn't organically produced it was acquired.
Mike Zaremski: So.
Mike Zaremski: We tried to steer away from trying to use.
Mike Zaremski: A number of number of stores number of agents.
Gordie Bunch: If you take our wholesale brokerage side, we may add significant numbers of wholesale brokerage agents in any kind of period. They don't produce all their business through our markets, so it's not a good metric to use agent counts. are agency counts because they're not all equally yoked. They're also not all producing the same lines of business. We have some branches that are commercially oriented and only do commercial lines. We have multi-line agencies. We have personal lines only agencies. We have some that have a financial services flair. And so it's not a good metric, would be one reason why.
Mike Zaremski: Our wholesale brokerage side, we may add significant numbers of wholesale brokerage agents.
Mike Zaremski: And any kind of any kind of period. They don't produce all of their business through our markets. So it's not a good metric to use agent counts are agency counts.
Mike Zaremski: Because they're not all equally yoked.
Mike Zaremski: They are also not all producing the same lines of business. We have some branches that are commercially oriented and only do commercial lines. We have multiline agency personal lines only agencies, we have some that have a financial services player.
Mike Zaremski: And so it's not a good metrics would be one reason, Mike, but really the reason you don't take the gross numbers from last year and tried to come up with a higher organic is the vast majority of those onboard last year still have a foot in another companies camp.
Mike Zaremsky: But really the reason you don't take the gross numbers from last year and try to come up with a higher organic is the vast majority of those onboarded last year still have a foot in another company's camp and they are restricted from writing all lines at the moment. Okay, yeah, okay. Gave me a lot of reasons to, I guess, you know, walk back my comment that that's helpful. You know, it's more of a question we get also from investors too, so it's not just coming from me.
Mike Zaremski: They are restricted from riding all lines at the moment.
Mike Zaremski: Okay, Yes, and gave me okay.
Mike Zaremski: Give me a lot of reasons I guess.
Mike Zaremski: Walk back my comment.
Mike Zaremski: That's helpful.
Mike Zaremski: It's more of a question we get also from from investors too so not just coming from me.
Gordie Bunch: Just switching gears really quick, I know you gave a lot of color on kind of the market opening up and softening. You know, just Texas specific, you know, we can see kind of year-end loss ratio data for home. It felt like, you know, it was in kind of spitting distance of back to kind of As long as everyone gets right this year and there's not significant catastrophes, it feels like the loss ratios will get back to normal. Is that a fair comment or are there nuances about the Texas market we should be thinking about? Yeah, my expectation is Texas should be in a favorable position on property on a going forward basis as reinsurance renewals clear for 6-1 and 7-1.
Mike Zaremski: I guess really quick I know you gave a lot of color on kind of the market opening up and softening.
Mike Zaremski: Yes.
Mike Zaremski: Texas specific we can see kind of a yearend loss ratio data for home it felt like it was in.
Mike Zaremski: Kind of spitting distance of.
Mike Zaremski: Back to kind of.
Mike Zaremski: As long as everyone gets right. This year end and Theres not significant catastrophes. It feels like the loss ratios will get back to normal is that.
Mike Zaremski: A fair comment or are there nuances about the Texas market, we should be thinking about.
Speaker Change: Yes, my expectation is Texas should be in a favorable position on property.
Speaker Change: On a going forward basis as reinsurance renewals clear for 6171.
Gordie Bunch: There probably will be some more capacity within existing markets. I still think you're going to have PML aggregate management initiatives from the major national markets. So they may not come in, you know, full throttle trying to do growth on the property side. But the regionals, which, you know, we have access to and one that is our own program, should have the expanded capacity in the state, giving the improving economic conditions. Got it.
Speaker Change: Probably will be some more capacity within existing markets I still think you're going to have PMO aggregate management initiatives from the major national markets. So they may not come in full problem, we're trying to do growth on the property side, but the regionals.
Speaker Change: Which we have access to and one that is our own program should have expanded capacity in the state.
Speaker Change: The improving economic conditions.
Gordie Bunch: And on a follow up on Texas, there's just one major national saying that they're implementing meaningfully higher deductibles on all Texas businesses. Is that a phenomenon you're seeing in your portfolio? And if it is, how is it impacting kind of the, I guess, your, your, your, your revenues? Yeah, so essentially, most of our carriers on the property side have been at 2% wind hurricane hail deductibles for the last several years. That's pretty much baked into the average homeowner premium across the state at this point. It started off probably a decade ago more coastally, and then as severe convective storm frequency continued to hit the outer coastal bands, that 2% wind hurricane hail deductible started to expand in inland.
Speaker Change: Got it and.
Speaker Change: A follow up on Texas.
Speaker Change: Major national saying that.
Speaker Change: Implementing meaningfully higher deductibles on all Texas business is that a phenomenon you're seeing in your portfolio and if it is how is it impacting kind of the.
Speaker Change: I guess you are.
Speaker Change: Your revenues.
Speaker Change: Yes, so essentially most of our.
Speaker Change: Carriers on the property side has been at.
Speaker Change: 2% when hurricane hail deductibles for the last several years.
Speaker Change: That's pretty much baked into the average homeowner premium across the state at this point.
Speaker Change: It started off probably a decade ago more closely and then as severe convective storm frequency continued to hit the <unk>.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: 2% wind hurricane hail deductibles starting to expand in inland.
Gordie Bunch: It's now essentially everywhere. You have very few markets that will ride a 1% wind deductible anywhere in the state. There are a few companies that will do it. But as far as our current average premium, that's pretty much baking in with a 2% wind hurricane hail deductible. If you're talking about a market that's trying to go in above a 2% wind hurricane hail deductible, probably not going to be sellable. There's plenty of capacity at a 2% wind hurricane hail deductible, so I would think that would be a market that would be stressed by loss of clientele, given the fact that there is an open marketplace that would write that business on a lower deductible.
Speaker Change: It's now essentially everywhere.
Speaker Change: You have very few markets that will write a 1% wind deductibles anywhere in the state there are a few companies that will do it.
But as far as our current average premium thats pretty much baking in with a 2% when hurricane deal deductible, if youre talking about a market that's trying to go in.
Speaker Change: Above the 2% when hurricane he'll deductible, probably not going to be sellable.
Speaker Change: There is plenty of capacity at a 2% when hurricane Irma deductible. So I would think that would be a market that would be.
Speaker Change: Stressed by loss of clientele.
Speaker Change: Given the fact that there is an open marketplace.
Speaker Change: That business has been lower deductible.
Speaker Change: Okay.
Mike Zaremsky: Got it. That's helpful.
Speaker Change: Got it that's helpful and just lastly.
Gordie Bunch: Just lastly, a follow-up to your insights on GEICO. Thanks for those comments. You know, I think it's surprising to some here, kind of, you feel GEICO will be a strong force within the IA channel because they're kind of a monoline carrier and, you know, it's thought that agents usually try to sell bundled. So just curious, is there something, is it more specific to TWFG, the Woodlands, where you, you know, you all just, you know, are more willing to do business with a monoline writer or maybe you guys? work harder to find solutions than others? Or is your comment kind of a broad comment?
Speaker Change: Follow up to your insights on geico, thanks for those comments.
Speaker Change: I think it's surprising to hear kind of your feel geico will will be.
Speaker Change: Strong.
Speaker Change: For us within the IAA channel, because they're kind of a mono line carrier.
Speaker Change: And it is thought that that our agents using try to sell a bundle. So just curious is there something is it more specific to tw FTE will then.
Speaker Change: You all just.
Speaker Change: What are more willing to do business with.
Speaker Change: Our monoline right or maybe you guys.
Speaker Change: Work harder to find solutions, so than others or is this as you comment kind of a broad comment do you think the AIA, China will embrace geico.
Gordie Bunch: Do you think the IA channel will embrace GEICO? Yeah, so I think if you look at the IA channel in whole, bundling for an independent agency is having the client's home and auto with our agency, not necessarily a specific market that's combined. So we have long been packaging, you know, progressive auto with, you know, another homeowner part homeowners product, or even, you know, travelers auto with another homeowners product, especially when you get into cat geography, where most carriers don't have, you know, open capacity in cat prone geography. So as a channel, we've always been packaging auto with a disparate home, home, you know, and vice versa, the programs that we have for TWFG, where we're underwriting and issuing from RMGA, they have companion discounts, built into that property product.
Speaker Change: Yes, So I think if you look at the IAA channel and a whole bunch.
Speaker Change: Bundling for an independent agency is having the client's home and auto with our agency not necessarily a specific market that's combined.
Speaker Change: So we have long been packaging progressive motto.
Speaker Change: Another.
Speaker Change: Owners homeowners product or even travelers auto with another homeowners product, especially when you get into cat geography, where most carriers don't have.
Speaker Change: Open capacity.
Speaker Change: Cat prone geography, so as a channel we have always been packaging auto with a disparate home.
Speaker Change: Advisor versus the programs that we have <unk>, where we are.
Underwriting in issuing.
Speaker Change: From our MGA they have companion discounts.
Built into that property product.
Mike Zaremsky: So we can actually bundle, you know, our Twico program with any of our auto markets within our agency distribution. So we do have a competitive advantage there, and that we can give our customers a discount on that homeowners product with GEICO, with progressive, with travelers, with Allstate, with any of the markets that are in our portfolio. Interesting. Thank you.
Speaker Change: We can actually bundle.
Speaker Change: Our Waco program with any of our auto markets within our agency distribution. So we do have a competitive advantage there and that we can give our customers a discount on that homeowners product with geico and progressive with travelers with Allstate with any of the markets that are in our portfolio.
Speaker Change: Interesting. Thank you.
Operator: Again, ladies and gentlemen, if you have a question or comment at this time, please press star 1 1 on your telephone keypad.
Speaker Change: Thank you again, ladies and gentlemen, if you have a question or comment at this time. Please press star one one on your telephone keypad.
Pablo Singzon: We have a follow-up question for Mr. Pablo Singzon from J.P. Morgan, your line is open. Hi, thanks for taking my follow-up. So first, I just want to get some perspective on how much incremental expenses needed as you expand from here, just putting aside public company costs, right? So just to give a simple example, if you get 20% in gross commissions from a new corp of 100 agents, how much of that 20% would you need to spend in OPEX or CAPEX or maybe even marketing to support these agents, recognizing that, you know, they're unlikely to be fully productive in day one for the reasons you've cited, Gordy.
Speaker Change: We have a follow up question from Mr. Pablo sur from Jpmorgan. Your line is open.
Pablo Sur: Hi, Thanks for taking my follow up so first I just wanted to get some perspective on how much income on expenses you guys. As you expand from here just putting aside public company costs right. So just to give a simple example.
Pablo Sur: You get 20% and gross commissions from a new cohort of 100 agents how much of that 20% could you just spend in opex or capex or maybe even marketing to support these agents recognizing that they are unlikely to be fully productive on day, one for the recent subsided and Gordy.
Pablo Singzon: And I guess what I'm really trying to get to is, you know, is there a way to think about incremental margin you can generate for each new agent or cohort you onboard, you know, versus the all-in, you know, I guess at this point, 20% to 22%, even the number you prefer. Pablo, I'll try to answer that best as I can. For us, the onboarding of a new agency is not a profit center, so we do have the internal infrastructure that is designed for ongoing adding of new locations, agents, and ongoing training of the same. Those same resources are utilized to support the existing over 500 locations and 2,000 independent agencies, so it's kind of like a sunk cost on the agent onboarding activities because we're utilizing personnel across channels in order to be efficient with our resources.
Speaker Change: I guess, what im trying to get through this.
Speaker Change: Is there anything incremental margin you can generate for each new agent or cohort onboard versus the all then.
Speaker Change: I guess I'm, just by 20% to 22% EBIT number you've provided.
Speaker Change: Pablo I'll try to answer that.
Speaker Change: Ken.
Ken: For us the Onboarding of a new agency is not a profit center so.
Ken: We do have the internal infrastructure that is designed for ongoing adding a new locations agents and ongoing training of the same the same resources are utilized to support the existing over 500 locations and 2000 independent agencies. So that's kind of like a sunk cost.
Ken: On the agent Onboarding activities, because we're utilizing personnel across channels.
Ken: In order to be efficient with our resources.
Gordie Bunch: There's not a lot of CapEx related to onboarding of new agents. Last year we had a lot of CapEx and creating the facilities that we have now that's supportive of those initiatives. So, as far as infrastructure, adding some additional business development managers that could help grow our recruiting pipeline and maybe increase the average size of our quarterly onboarding of agents. That would be more of a P&L direct expense, so that would be a margin hit, but not significant in order to get the growth and additional productive units. And then I think the second part of your question was related to trying to get to how are we going to sustain this now higher level EBITDA margin?
Ken: Theres not a lot of capex related to Onboarding of new agents last year, we had or last.
Ken: Last year, we had a lot of capex and creating the facilities that we have now that supportive of those initiatives.
Ken: So as far as infrastructure.
Ken: Adding some additional business development managers that can help grow our recruiting pipeline and maybe increase the average size of our quarterly.
Ken: Onboarding of agents that would be more of a P&L direct expense.
Ken: So that would that would be a margin hit but not significant in order to get the growth and additional productive units.
And then I think the second part of your question as it was related to.
Ken: Trying to get to know.
Ken: Now how are we going to sustain this now higher level EBITDA margin is that that's the gist of it.
Pablo Singzon: Is that the gist of the question? No, so the business model just strikes me as pretty high margin, right? Your point, like, you know, you can basically, you have absorbent capacity, right? You don't necessarily have to hire one for one as you bring in 100 agents. You don't have to hire 100 more people, right? So, you know, that tells me that, you know, the income margin for each new 100 is higher than, you know, your all-in margin was 20 to 20 a day. So I just want to get some, you know, and maybe it's a number we can't talk about at this point, but just some perspective.
Speaker Change: So the business model just strikes me its pretty high margin right. There point, but you can basically you have I'm, sorry, I'm sorry over capacity right you don't necessarily have to hire one for one as you bring in 100 or even if you don't have to hire more people right. So that's correct.
Speaker Change: That wasn't me that.
Speaker Change: Incremental margin for each 100 higher than your all in margin. It was 20% 20 year to date.
Speaker Change: I just wanted to get some and maybe it's a number we can talk about at this point, but just some perspective and I do think that.
Pablo Singzon: And I do think that you sort of got that, Gordy, so that was helpful.
Speaker Change: You start from.
Speaker Change: Got that.
Pablo Singzon: And then the other question, and you might have question in your answer, but I'll just ask it anyway. So from a new agent perspective, right, you haven't had to do much active recruiting, in my opinion, because, you know, your profile was much more visible post IPO, and then there's this disruption at another captive market, which is good, right? But do you think at some point Woodlands will need to spend more money and resources to onboard down? And by this, you know, what I mean, maybe you said, like, business development managers, right? Maybe you need 20 more people to be located across the US and, you know, be just actively recruiting?
Speaker Change: Helpful.
Speaker Change: And then.
Speaker Change: The other question that you might have already especially in your answer but I'll just ask it anyway. So.
Speaker Change: From a new agent perspective, right you haven't had to do much active recruiting my opinion because.
Speaker Change: <unk> profile it was much more visible post IPO and then there's disruption another captive market, which is good right, but do you think at some point once only to spend more money and resources to onboard down then.
Speaker Change: But I mean, maybe you sounds like Mrs development manager striking maybe.
Speaker Change: 20, more people looking at it across the us.
Speaker Change: Actively recruiting are alright.
Gordie Bunch: Or, again, is the answer that just given your infrastructure now, you think you'll be able to achieve your organic growth plans just based on what you already have? So I would say, yes, I think it would be smart for us to expend more resources, expanding our recruiting activities, especially as we open new geography. How impactful those expenditures would be to margin. I don't think it's going to be ultimately that margin dilutive for the upside of adding more productive locations across a broader geography. So I do think that's a smart initiative that we have in our plan down the road is to, yes, add more resources related to recruiting and developing more agencies.
Speaker Change: Again as I answer that just given your infrastructure now you think you'll be able to achieve your organic growth plans just based on what you already have.
Speaker Change: So I would say, yes, I think it would be smart for us to spend more resources, expanding our recruiting activities, especially as we've opened new geography.
Speaker Change: How impactful those expenditures would be to margin I don't think its going to be ultimately that margin dilutive for the upside of adding more productive locations across.
Speaker Change: A broader geography, so I do think Thats, a smart initiative that we have in our in our plan.
Speaker Change: Down the road is to add more resources related to recruiting and developing a more agencies.
Gordie Bunch: And that goes for both, you know, wholesale brokerage, MGA operations, and agency in a box. We will be leaning into those opportunistic programs that help drive both initiatives. So we can add independent agents into our MGA brokerage channel that would actually give us a line of sight to folks that may want to convert into our retail business model, as well as creates a pool of potential downstream acquisitions as those independent agencies look to exit at retirement. I think you'll see investment along all those areas that should help us grow distribution continuously. That is part of our plan.
Speaker Change: And that goes for both.
Speaker Change: Sales brokerage MGA operations.
Speaker Change: And agency in a box.
Speaker Change: We will be leaning into those opportunistic.
Speaker Change: Programs that help drive both initiatives. So we can add.
Speaker Change: Independent agents into our MGA brokerage channel.
Speaker Change: It would actually give us line of sight to folks that may want to convert into our retail business model as well as creates a pool of potential downstream acquisitions as those independent agencies look to exit at.
Speaker Change: At retirement.
Speaker Change: I think youll see investment along all of those areas.
Speaker Change: To help us.
Speaker Change: Grow distribution.
Speaker Change: Continuously so that that is part of our plan.
Gordie Bunch: I don't think it's 20 recruiters, though. I think that would be a little bit overshooting. I think it would be more measured as we build out the processes around that expanding into other geography. We did actually bring in additional recruiting resources last year. We have a position that's called a field manager. So when we talk about all those agencies that came from the carrier that we we've been discussing, they had regional territorial managers. that were also displaced. And those are the managers that hired, recruited, and developed the agents that we ended up onboarding last year.
Speaker Change: It's 20 recruiters, though.
Speaker Change: That would be a little bit overshooting, and they're going to be more measured as we as we build out processes around that expanding into other geography.
Speaker Change: We did actually bring in additional recruiting resources last year.
Speaker Change: We have a position on this call that field manager.
Speaker Change: So when we talk about.
Speaker Change: All of those agencies that came from the carrier that we've been discussing they had.
Speaker Change: Regional territorial managers.
Speaker Change: That were also displaced.
Speaker Change: And those are the managers hired recruited and develop the agents that we ended up onboarding last year.
Gordie Bunch: So we have several field managers now in different geography that came in to TWFG with those agents. They're also going through that transitioning. of Portfolio for the Personal Alliance Market, supporting their agents and learning the new environment that we bring to the table. I think as they get past that near-term distraction of having to rewrite and help their agents rewrite their entire property portfolios, those field manager resources can then be activated for, okay, now that we've stabilized your team, let's turn around now and start building additional agencies like you have for the last 10, 20, 30 years.
Speaker Change: So we have several field managers now in different geographies that came in.
Speaker Change: Tw have chi with those agents.
Speaker Change: They are also going through that transitioning.
Of portfolio for the personal lines market.
Speaker Change: Supporting their agents and learning.
Speaker Change: The new environment that we bring to the table I think as they get past that.
Speaker Change: Near term distraction of having to rewrite and help their agents rewrite their entire property portfolios.
Speaker Change: Those fuel manager resources can then be activated for okay. Now that we've stabilized your team, let's turnaround now and start building additional agencies like you have for the last 10 2030 years.
Gordie Bunch: So we have added field managers in the last 12 months. They're tied to those agencies we brought in en masse, and we expect some of those to turn around and start recruiting for us in those new geographies.
Speaker Change: We have added field managers.
The last 12 months.
Speaker Change: Tied to those agencies, we brought in in mass.
Speaker Change: And we expect some of those to.
Speaker Change: Turnaround and start recruiting for us in those new geographies.
Operator: Great. Thanks, Laurie. No problem. Thank you. I'm sure no additional questions in the queue at this time.
Speaker Change: Great. Thanks Laurie.
Speaker Change: No problem.
Speaker Change: Thank you I'm showing no additional questions in the queue at this time I would like to turn the conference back over to Mr. <unk> for any closing remarks.
Gordie Bunch: I'd like to turn the conference back over to Mr. Gordy Bunch for any closing remarks. Well I'd just like to end with thank you for everybody who attended today. Thank you for all the thoughtful questions. We really are in a great position today as we head into the second quarter, well capitalized, looking at a lot of unique opportunities to help grow our organization across a broader geography. Look forward to updating everybody in our second quarter call as that comes to fruition.
Speaker Change: Well I'd just like to end with thank you for everybody who attended today.
Speaker Change: Q4 for all the thoughtful questions.
Speaker Change: We really are in a great position today as we head into the second quarter well capitalized.
Speaker Change: At a lot of unique opportunities to help grow our organization across a broader geography.
Speaker Change: Look forward to updating everybody.
Speaker Change: Our second quarter call.
Speaker Change: As that comes to fruition.
Gordie Bunch: I just want to say thank you again to all of our analysts, carriers, clients, and TWFG family for being with us throughout the last 24 and a half years. And we are looking forward to a great 2025 and thank you all for being here today.
Speaker Change: Wanted to say, thank you again to all of our analysts carriers.
Speaker Change: Clients.
Speaker Change: And the <unk> families for.
Speaker Change: With us throughout the last 24 five years.
Speaker Change: We are looking forward to.
Speaker Change: Great.
Speaker Change: 25, and thank you all for being here today.
Operator: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.
Speaker Change: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day.
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