Goosehead Insurance, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Goosehead Insurance fourth quarter 2021 earnings call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Dan Farrell, VP of 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 fourth quarter and full year 2021 results call. I will provide a summary of our key results in the fourth quarter and full year and highlight important investments we've been consistently making that give our business tremendous resiliency to drive strong, long-term, and consistent growth. President and COO Mike Colby will then go into greater detail on some of our technology and operating platform enhancements And then our CFO, Mark Colby, will go into greater detail on our quarter financials and outlook for 2022. We had a solid fourth quarter, which capped off another strong year of consistent and reliable growth, combined with substantial investments that positioned us exceptionally well for the future. Our total written premiums, the key leading indicator of future revenue growth, increased 43% for the fourth quarter and 45% for the full year, bringing full year 2021 premium to $1.56 billion. Policies in force for the full year were up 42%, and we reached an important milestone for our company by surpassing 1 million policies in force. Our corporate sales headcount increased 39% for the year, while total franchises increased 47%, and operating franchises grew 34% for 2021. This tremendous growth was not a recent phenomenon, but has been achieved year after year, both as a private and public company. Over the last four years as a public company, we've increased our premiums placed at a compound annual growth rate of 45%, and our policies in force at a compound annual growth rate of 44%. Our corporate headcount and operating franchise count have both increased at a 40% CAGR over that same period. We believe strongly the best long-term interests of our shareholders are served by our continuing to responsibly invest in growth to capture as much market share as possible, which will also serve to strengthen our strategic position and competitive moat. We have no intention of dumping piles of advertising money down the drain. We haven't needed to do anything like that historically, and we have still achieved extraordinary organic growth that delivers profits at the same time. There is no question that there is a trade-off between growth and profitability for Goosehead, but I would like to remind everyone that we deliver a level of profitability which is more than sufficient to self-fund our growth investments. Over the long term, we're confident that our business can deliver EBITDA margins in the 40s. The opportunity cost to chase those kind of margins over the next several years, however, is just too high. We want to maximize total profit dollars over time and believe our strategy is the right way to do that. Around the time of our annual meeting of employees and franchisees, I like to reflect on how far we've come. I'm pleased with the many substantial accomplishments that expanded our already significant competitive moat. When we went public in early 2018, we were already a very strong company, with a reliable track record, but with significant investments in people and technology we've made since then, our platform is more exceptional, nimble, and resilient than ever before, and it is truly unmatched in the market. From a talent perspective, the number and quality of people added to our organization has been profound. Our overall employee count is almost 1,300, up from 280 at the beginning of 2018. At the end of 2021, we had over 500 corporate sales agents across 15 offices compared to 100 across seven offices four years ago. And our operating franchise count stands at 1,200 compared to less than 300 at the start of 2018. Additionally, our market reach is greatly enhanced with a presence in almost all the lower 48 states in relationships with over 140 carriers. compared to just 23 states and over 80 carriers at the time of our IPO. In states that we were just entering a few years ago, we have now built the scale and track record to drive continued strong growth and attract increasingly high quality talent in those markets. In early February, we held our annual meeting in Dallas. After a two-year break due to the pandemic, it was fantastic to get over 2,000 corporate and franchise team members together in person as well as a number of our carrier partners. The energy and excitement towards the future from this group was palpable and further solidified my extremely positive view for our path forward. Looking at our technology platform, in 2018 we launched our Mortgage Referral Partner Database to map out individual mortgage lender activity and more efficiently target this attractive area of the market to tactically support our rapid agent growth. We've continued to refine this database, adding real estate agent activity, bringing further value to agents and mortgage referral partners. In 2018, we also launched our proprietary rater for agents to significantly improve quoting time and efficiency. The ability for agents to quote across multiple carriers while entering just a handful of data points did not exist in the market before we built this platform. Our work on the internal facing client radar provided the foundation for our externally facing digital agent, which we launched last year. With as little as three data points, clients can now access accurate quotes for home, auto, condo, renters, flood, and life insurance products. And these quotes are highly accurate, powered by agent-informed machine learning, using our history of over 30 million quotes. There is nothing like it in the market today. In the near term, this platform will continue to strengthen our existing go-to-market strategy, enhance other referral marketing, and improve our cross-selling efforts driven by enhanced digital marketing efforts. Longer term, the potential of this platform is significant as we build out and continue to invest in digital marketing and explore possible partnership opportunities. The next phase of our digital agent work is to provide a full online quote-to-bind experience for clients who prefer to shop in this way. We expect to have several carriers that could fully bind coverage through the digital agent by the end of this year. All of these investments put us in an incredibly powerful position to deliver consistently high levels of profitable growth in any operating environment, and our runway for growth remains substantial with our premiums accounting for less than half of 1% of the U.S. personal lines market and our go-to-market strategy accounting for roughly 3% of mortgage transactions nationally. Our cash generation is significant. Our balance sheet is rock solid with few intangible assets and low debt leverage relative to our high rates of growth. This strong financial position gives additional levers to add value to shareholders and be opportunistic in an evolving marketplace. Having strong leadership and governance is an important aspect of our evolution as a public company. I'm pleased to highlight that we recently announced the expansion of our board of directors from five to seven individuals, adding Waded Cruzado, president of Montana State University, and Tom McConnan, managing director, head of public equities, and chief economist at Wildcat Capital Management. These individuals will bring significant and diverse experience to our already strong group of external board members. I look forward to the contributions they will bring going forward to our organization. I'm also pleased to highlight that we will soon be publishing our first ESG sustainability report that you'll be able to find on our investor relations website. Our organization has always been driven by core values and operating principles, including integrity, unparalleled client experience, continuous investment in our people, innovation, excellence, meritocracy, and servant leadership. Issues around sustainability have always been an important focus of our organization, even before garnering the attention of the investment community that it does today. We hope this report will give you a greater sense of our incredibly unique, energized, and diverse corporate culture that is relentlessly focused on delivering for our clients and community. I want to thank our employees and franchise agents for their tireless efforts in delivering another year of incredible growth in 2021. a year that presented numerous macro challenges that we overcame. I'm excited to prosecute our highly enviable runway for sustainable growth of both revenue and earnings that we have going forward. With that, I'll turn the call over to Mike.