Goosehead Insurance, Inc.

Ladies and gentlemen, and welcome to the Goosehead Insurance fourth quarter and full year 2018 earnings conference call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will be given at that time. If anyone should require assistance during the call, you may press star, then zero on your touchtone telephone. As a reminder, this call is being recorded. It is now my pleasure to introduce Senior Vice President, ICR, Mr. Garrett Edson. Please go ahead, sir.

Thank you, and good afternoon. With us today are your hosts, Mark Jones, Chairman and Chief Executive Officer of Goosehead, Michael Colby, President and Chief Operating Officer, and Mark Colby, Chief Financial Officer. By now, everyone should have access to our earnings announcement, which was released prior to this call, and which may also be found on our website at ir.gooseheadinsurance.com. Before we begin our formal remarks, I need to remind everyone that part of our discussion today may include forward-looking statements, which are based on the expectations, estimates, and projections of management as of today. The forward-looking statements in our discussion are subject to various assumptions, risks, uncertainties, and other factors that are difficult to predict and which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not guarantees of future performance and, therefore, undue reliance should not be placed upon them. We refer all of you to our recent filings with the SEC for a more detailed discussion of the risks and uncertainties that could impact the future operating results and financial condition of Goosehead Insurance. We disclaim any intentions or obligations to update or revise any forward-looking statements except to the extent required by applicable law. In addition, this call is being webcast and an archived version will be available shortly after the call ends on the investor relations portion of the company's website at www.gooseheadinsurance.com. With that, I'd now like to turn the call over to CEO Mark Jones. Please go ahead.

Thanks, Garrett, and welcome to our full year and fourth quarter 2018 earnings call. Today, I'll provide an overview on the year and the quarter as well as our long-term strategy. I'll then hand the call over to our President and Chief Operating Officer, Mike Colby, who will update you on our technology investments and efforts that are facilitating earnings are competitive advantage and ongoing rapid organic growth and profitability. Our CFO, Mark Colby, will then follow and provide more detail about the fourth quarter and full year results. Overall, 2018 was an exceptional year for Goosehead. In addition to executing one of 2018's most successful IPOs, we continued to deliver on the rapid organic growth we stated we could achieve. Thank you for joining us. We're energized and committed to Goosehead achieving its full potential. I want to thank the entire Goosehead team for their hard work and effort in making 2018 a landmark year for our company. We continue to accelerate our organic growth in 2018 while maintaining strong profitability. We accomplish this by adding a large volume of new business and by maintaining industry-leading renewal rates. This enabled us to fund significant investments in talent, technology, and public company expenses and to record adjusted EBITDA margins equal to the prior year when we were privately held. For 2018, revenue grew 41% versus 2017, and we hit the $60 million mark, and we did it all organically. By comparison, we grew revenue 36%, From 2016 to 2017. Accordingly, we grew at a faster rate off a larger base in 2018. For the fourth quarter, our revenue in EBITDA grew to $14.7 million and $2.3 million, respectively. This represents year-over-year organic growth for the quarter of 32%, driven by both our corporate and franchise channels. as we continued to invest in our technology and talent to position ourselves for significant long-term top and bottom line growth. Total written premiums rose 50% and policies enforced grew 47% from the prior year as we continued to execute and win throughout the quarter. We maintained our industry-leading retention rate of 88% and once again increased our world-class net promoter score to 89%, continuing to raise an already high bar. and the Dynamic Technology Platform, which allows us to adapt very quickly to market conditions. I'm excited to share that during the fourth quarter, we more than successfully navigated these challenges and exited the quarter having fully recovered our lead volume while continuing to gain market share. I also noted on our last call that we began to focus extra effort on adding more referral partners to our network in order to pick up additional lead volume and market share. Just to give you a sense of the effectiveness of our efforts, in January 2018, we activated 184 new referral partners in a normal housing market. In January of this year, we activated 530 new referral partners, nearly tripling our total from the prior year despite a more challenging housing market. We can trace this considerable improvement back to the recent technology investments we've made, which have allowed our agents to become much more efficient targeting referral partners. We told you that we would overcome the housing market headwinds, and we did just that. And that has clearly allowed us to head into the first quarter of 2019 well-positioned to continue delivering on our rapid organic growth with strong profit margins. On the talent side, we added 33 net new operating franchises in the quarter. We parked back slightly on our corporate agent headcount as we reallocated some of that capacity to training and franchise support and made additional investments in sales management to facilitate what we expect to be strong growth in both channels in 2019 and beyond. Thank you for joining us today. As I mentioned on our prior call, onboarding top talent and investing in our people are key drivers of our success, setting us on the path toward continued long-term sales growth as well as expanded margins and profitability. Looking ahead to 2019, our overall long-term strategy remains unchanged. We will continue to focus on rapid and responsible organic growth through hiring corporate agents, Opening new franchises and investing in our disruptive technology. We will continue to provide our clients with the broadest possible choice for their personal lines insurance needs. As a critical enabler of our success, we've developed a world-class service team to help ensure that once we win a client, they remain with Goosehead, providing us with steady, high-margin renewal revenue. Finally, we've noted consistently that we will use a sharp pencil to evaluate the cash needed to execute our growth strategy and that excess cash balances will return to the people to whom that cash belongs, our shareholders. To that end, I'm pleased to announce that we have completed this analysis for 2019 and our board has approved a special dividend of $15 million or 41 cents a share to be paid to April 1, 2019 to shareholders of record on March 18, 2019. At the risk of being repetitive, I would like to point out that our business is not one where growth can be further accelerated by throwing more money at it. We are growing as fast as we believe is responsible given the need to absorb new people, i.e., human beings, into our organizations. John O'Connor, and opportunity to remain steadfast in our mission to redefine the personal lines insurance industry and to create one of the truly great American business success stories. With that, I'll turn the call over to Mike Colby to update you on the progress of some of our recent technology initiatives.