Goosehead Insurance, Inc.

Thank you for standing by. This is the conference operator. Welcome to the Goosehead Insurance first quarter 2022 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 Capital Markets. Please go ahead.

Thank you and good afternoon. 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 An archived version will be available shortly after the call ends.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 first quarter 2022 results call. I'll provide a summary of our key results in the first quarter, and we'll discuss some strategic initiatives we have underway to drive continued strong revenue and earnings growth over time. Vice President Brian Petillo will then discuss some of our technology enhancements related to the digital agent. And then Mark Colby, our CFO, will go into greater detail on the quarterly financials and our outlook for the rest of the year. We delivered very solid first quarter results, demonstrating the incredible resiliency and consistency of our business and putting us in a great position for the remainder of 2022 and beyond. Our total written premiums, the key leading indicator of future revenue growth, increased 41% for the first quarter, while policies in force were up 39%. Total revenue and core revenue were up 32% and 37%, respectively, an improvement over fourth quarter 2021 growth rates. And excluding contingent commissions and roughly $2 million of costs related to our Ascend agent conference, which did not take place in 2021, our EBITDA margins improved nearly six points in the quarter. As an organization, we remain laser focused on delivering our core, our three core drivers of growth. Onboarding of high quality agents and franchisees, ramping up their production, and critically, client retention. Our renewal book continues to perform exceptionally well with client retention of 89% up from 88% a year ago, and helping us deliver very strong overall premium and revenue growth. While the macro environment remains challenging for new business generation, I'm encouraged by the improvement in productivity we saw in the first quarter relative to the fourth quarter. The rate of growth in both franchise and corporate productivity improved by mid-single digits versus the fourth quarter. While we cannot predict macro trends in the near term, our year-ago comparison on new business growth does begin to ease meaningfully as we progress through the year. I'm also encouraged by several other underlying factors which remain squarely in our operating control. First, our cross-selling and other referral efforts leveraging the digital agent remain in the early stages, but we're already beginning to see growth. It bear fruit as we leverage our sizable book of business to drive existing growth with minimal acquisition costs. We have seen sequential monthly acceleration thus far in 2022 on our cross-selling measures. Second, given our still tiny share of the market with roughly 3% of mortgage transactions and less than 0.5% of U.S. premium, we continue our efforts to pivot to gaining market share through new referral partner relationships, leveraging additional technology to assist agents in these efforts. During the quarter, we activated 45% more new referral partner relationships than the prior year and saw a reactivation rate of referral partners that hadn't sent us a lead in over 90 days that was three times the prior year. Lastly, our growing number of tenured franchises are continuing to scale their books of business, and our corporate agents continue to provide important support in this area. The benefits of this are just beginning to take hold but will become increasingly material over time as their increasing levels of production convert to renewals at which time both our revenue and earnings increase substantially. Moving to agent count, total franchises increased 41% and operating franchises grew 28% in the quarter. We've been focusing on addressing the elongation we've experienced in the launch process through increased engagement with signed but not yet launched agencies to drive faster launches. We've also shifted compensation for our recruiting team during the quarter towards successful launches of franchises to better align with this objective going forward. I'm encouraged with some of the recent KPIs we have seen and believe this will translate to improved operating franchise growth as we progress through the year. In April, for example, we observed a 44% increase in launched franchises versus a year ago month, and scheduled May and June launches also reflect strong continued momentum. During the height of the pandemic, we temporarily limited terminations of some underperforming franchises, but have begun recently managing them out of our system using our traditional standards and thereby reducing drag on our resources. Accordingly, we experienced a higher number of operating franchise terminations and transfers during the quarter, which slightly reduced operating franchise growth. Importantly, the short-term decrease in operating growth has not materially impacted franchise premium growth, which was up 48% in the quarter. Terminated franchises made de minimis contributions to premium and revenue growth. Corporate agent growth in the quarter was up 35% to 490. As a reminder, we onboard the majority of our corporate agents in the second and third quarters of the year around college recruiting. Corporate channel plays a critical role in supporting the development of the franchise channel through process and tech development, training, and mentoring. While we expect both the corporate and franchise channel to continue to grow, the corporate footprint is beginning to achieve a size where we expect to start achieving some scale benefits over time. We will remain active in recruiting new corporate agents, but we'll also identify strong corporate managers and producers that we feel could be exceptional owners and operators of franchises, and that would be well suited to build your own sales teams and provide a pathway for them to become franchisees. A number of our most productive franchises are owned by former corporate producers. We do not expect this to have a material impact on 2022, but could provide efficiency, and growth benefits in the intermediate to long term. The launch of our digital agent is significantly enhancing our clients' experience and improving our agents' ability to drive revenue beyond our existing go-to-market strategy. There is literally nothing like it in the market. The next phase of our digital agent work is to provide a full online quote-to-buy experience for clients who prefer to shop in this way. We recently launched our first of several carriers with the ability to go quote-to-issue, and Brian Petillo will provide more detail on this in his remarks. As I've said before, we believe the potential of this platform is significant as we build out and continue to invest in digital marketing and actively explore possible partnership opportunities that would embed our digital agent into partners' client acquisition processes. While this new channel is in early stages of development, I have been very encouraged by some of the partnership discussions of which I have been a part. There is nothing remotely competitive to our value proposition in market. I want to thank our employees and franchise agents for their tireless efforts in delivering another strong quarter in an environment that remains challenging. I'm excited for our many long-term strategic initiatives initiatives to take hold as we press along our highly enviable runway for sustainable high levels of both revenue and earnings growth. With that, I'll turn the call over to Brian.