Goosehead Insurance, Inc.

Good day and thank you for standing by. Welcome to the Goosehead Insurance first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1 1 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Dan Farrell, Vice President, 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 the 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 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 you all to our recent SEC filings for more detailed discussion of risks and uncertainties that could impact future operating results and financial condition of Goosehead. We disclaim any intention or obligation to update and revise any forward-looking statements except to the extent required by actual law. I would also like to point out that during the 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 period to period by including 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 recent 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 goosehead.com. Now, I'd like to turn the call over to our Chairman and CEO, Mark Jones.

Thanks, Dan, and welcome everyone to our first quarter call. I'm very pleased with the progress we have made toward our goals. Personal lines insurance distribution is a quintessential long-tail business. I tell people all the time that it is not a get-rich-quick business. It's a get-rich-over-time-but-stay-rich business. Driving substantive change in our company generally takes many quarters to achieve, but those changes when made tend to be very sticky and sustained. I am pleased to report that our hard work over the last year and a half bore more fruit in the first quarter. Franchise producer headcount has begun growing again. We ended the quarter with 1,963 producers. Our recruitment efforts to support franchisees that want to add producers are going extremely well, with a total of 168 producers being placed in existing agencies during Q1. As a reminder, when an agency adds a new producer, on average, it improves the productivity of everyone in that agency. So helping our franchise partners add producers remains an incredibly long lever for us and an important area of focus. Our focus on enhancing the quality of our producers is also driving very large productivity gains. First year franchise productivity is up 86% year over year. But the gains are not limited to that cohort. Our existing franchises have delivered 19% same-store sales growth in the first quarter on the heels of 23% same-store sales growth in the fourth quarter. Our franchise network currently accounts for 78% of our premium volume, so productivity gains here can really move the growth and earnings needles over time. We're also proud to have continued to deliver strong margins through smart cost discipline and maniacal focus on productivity. We believe all of these enhancements to be structural and will benefit our business for years to come. As I prepare to hand off the CEO role to Mark Miller, I'm very happy with the capabilities of our senior team and the way they are working so effectively together. While we're excited for these wins, in the short term, we're facing some temporary headwinds. We are operating in the hardest insurance market and macro environment we've experienced in our 20-plus years in business. That being said, we know that insurance is a market that cycles between hard and soft, and these cycles impact product pricing and availability with derivative impacts on client retention. Historically, hard market cycles last two to four years. Our current cycle has been amplified by the COVID black swan event. But we have reason for optimism as carriers report gains in profitability resulting from rate increases to cover inflation's impact on claims costs, as well as product rationalization. When even California's insurance regulators allow carriers to price more rationally, you know that the first steps toward market normalcy are close at hand. An example of how this can affect our business, in March, we saw same-store sales increases of 107% in California. There's a positive to the temporary market challenges we face in strengthening the long-term health of our business because we have been forced to level up our game, enhancing and hardening our skills, and adding to our competitive arsenal. We are seeing very temporary challenges in our retention rates, but are highly confident we will return to our historically high retention as we progress through the current market cycle. While we navigate the current environment, we're committed to continuing to deliver on our earnings growth through aggressive cost management and careful scrutiny on where we invest the dollar of our capital in an hour of our time. Our smartest shareholders, and these are the bulk of our largest investors, understand the dynamics of our business, our structural improvements, and our transitory challenges. They invest for the long term and know these temporary headwinds will have a trivial impact on our long-term results. I'm pleased to announce that our Board of Directors has authorized a substantial stock buyback plan which we will utilize as we see fit to take advantage of market dislocations. You'll hear more about this later on in the call. I believe we are better positioned today to deliver on our long-term goal, which is becoming the largest distributor of personalized insurance in the United States during my lifetime, than we have ever been in our company's history. We will continue to remain maniacally focused on what we do best, deliver world-class service for our clients, deliver the best agent experience, and bring the most favorable and attractive client risks available to underwriters and our carrier partners. Thank you to our team for delivering on another successful quarter. And with that, I will turn the call over to our President and Chief Operating Officer, Mark Miller.