Goosehead Insurance, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Goosehead Insurance 3rd Quarter 2021 Earnings Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Dan Farrell, VP Capital Markets. Please go ahead.

Thank you, and good afternoon. With us today are 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, 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. 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 the 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. I would also like to point out that during this call, we will discuss certain financial measures that are not prepared in accordance with GAAP. Management uses these non-GAAP financial measures when planning, monitoring, and evaluating our performance. We consider these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period by excluding potential differences caused by variations in capital structure, tax position, depreciation, amortization, and certain other items that we believe are not representative of our core business. For more information regarding the use of non-GAAP financial measures, including reconciliations of these measures to the most comparable GAAP financial measures, we refer you to today's earnings release. In addition, this call is being webcast. 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 like to turn the call over to our CEO, Mark Jones.

Thanks, Dan, and welcome to our third quarter 2021 results call. We had another outstanding quarter with continued strong growth, significant talent acquisition, and notable enhancements to our technology platform. On the call, I will provide a summary of our key results in the quarter and highlight some of the continued investments we're making today that will drive our growth for years to come. President and Chief Operating Officer Mike Colby will discuss the launch of our digital agent platform during the quarter and further improvements we've made to our products and technology. CFO Mark Colby, We'll then go into greater detail on the quarter financials and our outlook for the remainder of the year. During the third quarter, growth in all areas remained powerful against a very strong year-ago comparison, further validating our dynamic and unmatched platform that puts the client at the center of our universe. Let me take a moment to highlight some of the substantial accomplishments during the quarter. Premium growth, the key leading indicator of future revenue growth, continues to be very robust. In Q3, premiums grew 44% compared to the year-ago quarter. Policies in force were also up 44%. Our premiums in the franchise channel grew 50% for the quarter, and this growth provides excellent visibility into strong, embedded, and highly profitable revenue growth as those policies reliably convert to renewal after one year, And our commission share jumps to 50% from the 20% we earn on new business. Our core revenues increased 41% over the prior year period. Total franchise count at the end of the third quarter was up 55% compared to a year ago. Operating franchises grew 38% during the quarter. Operating franchises outside of Texas grew 45% year over year. while Texas franchises increased 20% as we achieve more diversification in our book of business. Nearly 62% of our total franchise base is either in their first year or preparing to onboard. While this cohort provides minimal premium and revenue today, their predictable launch and production ramp combined with our increasing retention rates should fuel significant growth over the next decade and beyond. Also, While our franchise unit count is growing rapidly, the unit productive capacity is also growing, as some of our more seasoned franchises are beginning to scale their business with new producer additions. This will be an important growth lever going forward. Our corporate agent team is up 35% year over year, and this is particularly impressive against the extraordinary growth we experienced in 2020, where we benefited from COVID effects in the job market and hired aggressively when unemployment was nearly 15%. Continued investments in the corporate channel remain critical to our long-term success as efforts in training, mentoring, and beta testing of new technology and processes helps drive our extraordinary growth and improve productivity of the more leveraged franchise channel. As a reminder, our corporate agents produce at approximately four times industry best practice, providing critical training, mentoring, and research and development functions for the company. Our data shows that franchises within close proximity to corporate offices gain benefits in their business ramp up and overall productivity. During the quarter, we expanded our offices in Westlake, Houston, and the Woodlands, Texas. By year end, we plan to complete the office openings in Columbus, San Antonio, Austin, as well as a second office in Chicago. In addition to providing support to franchisees, these corporate offices help us scale nationally and enhance our college recruiting and career advancement opportunities in both the short and the long term. We expect these new offices to support our near-term headcount growth, and they should scale very nicely through 2022. I'm particularly proud of our continued strength in the areas of client retention and net promoter score, which were 89% and 92% respectively. This is a similar strong level to last quarter and higher than the year-ago level of 88% and 91% respectively. These improvements have taken place in a challenging environment of active weather and increasing premiums. It is also noteworthy that we are driving retention improvement despite some level of drag from new business bias, given our exceptional growth rates and strong new business production. Once a policy renews, the likelihood that it will renew again grows significantly. With new business accounting for so much of our total, overall retention rates are currently lower than we anticipate long-term. Our industry-leading and improving performance on retention and NPS are is a testament to our best-in-class service efforts, which continue to benefit from investments in product, people, and technology, and the client-first approach we bring to all aspects of our business. Even small improvements in retention provide material economic benefits for our business over time as the overwhelming majority of our profits are in renewal revenue. A significant highlight of the third quarter was the launch of our digital agent platform, and we are extremely excited with the favorable response we've received from our clients, agents, and carrier partners. We are highly confident that this tool will allow powerful new revenue opportunities over time, and in the near term will enhance our existing go-to-market strategy and strengthen our agents' other referral business efforts. This is absolutely a completely unique offering to clients in the marketplace that provides an effortless, seamless, fast, and accurate shopping experience. I continue to encourage you to try as many other competitor offerings as you're willing to endure and then try our digital agent. You will be amazed. Mike will go into greater detail on the launch of the digital agent as well as additional technology and product enhancements we're making to the platform. The digital agent is a new powerful tool for us. It is just one piece of the enormous total value proposition we bring to the entire marketplace, clients, agents, and carriers. Our consistent and significant investments across product, people, and technology over nearly two decades is key to what makes us unique. Investors frequently ask us, what's the most important thing that drives your business success? The answer is everything we do around the three pillars of our business, a choice product offering, the very best sales and service agents, and unmatched technology. There are some companies with reasonable access to product, some with good technology, not as good as ours, and some which use agents. But no company in the market brings all three of these critical elements to bear for clients with the expertise that we have. And no company has come close to delivering results like you said. Building this incredible business required the benefit of time, which provides the advantages of vast and valuable accumulated experience that can only be achieved through hard work earned with clients for nearly two decades. This is the driver of our significant and expanding competitive moat. Our company has been built with laser focus on the needs of the client, and I maintain that if our model could be replicated, it would have been by now. I couldn't be more excited for the future of Goosehead. We are by far the best positioned company in the marketplace, and we're only getting better. Our runway for growth is expansive, and our ability to take sizable market share continues to improve. We will remain consistently externally focused and maniacally driven towards our long-term goal of U.S. personal lines industry leadership. I would like to thank our amazing employees and franchisees for the tireless efforts and enthusiasm in our march toward our goals. With that, I'll turn it over to Mike.