Goosehead Insurance, Inc.

Greetings and welcome to the Goosehead Insurance second quarter 2019 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I'd like to turn the conference over to your host, Garrett Edson. Thank you. You may begin.

Thank you and good afternoon. With us today are your hosts, Mark Jones, Chairman and Chief Executive Officer of Goosehead, Michael Kolbe, President and Chief Operating Officer, and Mark Kolbe, 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 Thanks, Garrett, and welcome to our second quarter 2019 earnings call. As we've done on previous calls, I will provide an overview of the quarter and year-to-date, as well as

as discuss 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 latest technology enhancements and how our ongoing innovation continues to support our high levels of sustained, rapid, organic growth and profitability. Our CFO, Mark Colby, will then follow and provide more details about our second quarter and year-to-date results. During the second quarter, we continued to demonstrate the effectiveness of our strategy and our execution capabilities with growth continuing to accelerate. We delivered revenue growth of 31% to $19.4 million and written premium growth of 46% to $194 million compared to the second quarter of 2018. The largest contributor by far to the difference between revenue and premium growth was the mix of new business being more heavily weighted to the franchise channel. As a reminder, our share of first term revenues earned in the franchise channel is 20%, while our share of renewal revenues grows to 50%. With the franchise channel contributing 73% of new premiums for this quarter, we have spring-loaded future revenue and earnings growth as that business converts to renewal revenue next year. We also continue to invest heavily in our talent and technology enhancements with terrific results. Mike will discuss our progress with our key technology initiatives in a minute. Total franchise unit count grew 55% from the second quarter of 2018 to 765 as our franchise sales team had another strong quarter and operating franchises grew 39% to 535. We are very encouraged by the growth in productivity we are seeing in the franchise channel where unit productivity is up in Texas and nationally compared to the prior year, which is a combination of four things. One, we are recruiting higher quality agents over time. Two, our investments in prelaunch training and development are bearing fruit. Three, our training programs continue to improve. And four, Post-launch agency support enhances the ability of new franchises to become productive quickly. Corporate sales headcount grew 44% from 2018 to 213. As a reminder, our corporate channel is a crucial element of our competitive advantage. This channel is where our technology, our sales processes, and our best practices are tested and refined and are then rolled out to our franchises nationwide. We could not accomplish what we do in the franchise channel in the absence of our corporate channel. For the second quarter, adjusted EBITDA grew 17% to $4.7 million, as profits generated by our renewal business more than offset our investments in technology and talent. Policies in force increased 45% from the prior year to $408,000, and we maintained our industry-leading client retention rate of 88%, and world-class net promoter score of 90 year-to-date. As we look to the back half of 2019, we feel like we are firing on all cylinders. Premium and top-line growth in the first half of 2019 has been excellent and we've made significant strides in onboarding new talent across the company. We also continue to innovate on the technology side and all of this is done to further position Thank you for joining us today. As I've said before, our management team is devoid of mercenaries out to make a quick buck and then jump ship. We have worked together for a very long time to build this company to what it is today and intend to continue to be fully invested in reaching our full potential. Industry leadership during my lifetime. Our premium growth continues to accelerate and we've seen continued improvement in the productivity of our franchise channel. We grow more and more confident each day Thanks, Mark, and hello to everyone.