Goosehead Insurance, Inc.

Good day, and thank you for standing by. Welcome to the Goosehead Insurance fourth quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your speaker today, Dan Farrow, 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 expectations, estimates, and projections of management as of today. Forward-looking statements in our discussion are subject to various assumptions, risks, uncertainties 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 on them. We refer all of you to our recent SEC filings for more detailed discussion of risks and uncertainties that could impact future operating results and financial condition of GUSED. We disclaim any intention or obligation 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 period to period by including potential differences caused by variations in capital structure, tax position, depreciation, and 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 and 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 President and CEO, Mark Miller.

Thanks, Dan. Good afternoon, everyone, and welcome to our fourth quarter 2024 earnings call. Before we dive into the results, I want to take a moment to acknowledge those affected by the devastating California wildfires. Our thoughts are with the individuals and families impacted by this tragedy. These events serve as a powerful reminder of the critical role insurance plays in rebuilding lives, and we're deeply thankful for our agents who are on the ground supporting clients during these most challenging times. Throughout 2024, we saw many powerful reminders of why insurance is more than a product. It's a lifeline when it matters most. It was a year of significant natural catastrophes and insurance market challenges, which underscore the critical role we play for clients, agents, and carriers. A recent report by Gallagher-Rhee estimated that U.S. catastrophe-related insured losses were $117 billion in 2024, 27% higher than the five-year average. U.S. economic losses were estimated at $222 billion, leaving a substantial insurance coverage gap. For many years, households have treated personalized insurance as a commodity, a decision based solely on cost. But extreme events of 2024 and the recent California wildfires remind us of the risks of inadequate coverage. At the same time, premiums have increased rapidly, and certain geographies have product limitations. This has left the consumer confused on where to turn. Fortunately, Goosehead was uniquely built for this challenging market. This is why we exist. Our expert agents, backed by a strong network of top-tier insurance carriers, simplify the complexities of insurance to find the right coverage at the best possible price. Our agents evaluate proper deductibles, replacement costs, and key perils such as fire, wind, flood, liability, and personal policy terms. And we accomplish this while providing a true shopping experience with access to over 200 carriers. Our value proposition is equally compelling for carrier partners. By leading with home, Goosehead brings high-quality bundled clients to carriers who retain well, which drives favorable loss ratios. We work with each carrier to understand their risk appetite and then leverage technology to deliver the exact type of client they're looking for. Delivering profitable growth for carriers allows them to open up for us, even when they're closed for other distribution partners. We're not just a partner. We drive growth and profitability for their businesses where and when they need it most. Turning to market conditions, over the past two years, we have successfully navigated unprecedented product challenges. I'm pleased that the market is now continuing to show gradual signs of improvement. Through the first nine months of the year, the industry statutory auto direct loss ratios were 64.5%, down from 74.8% a year ago. And homeowners direct loss ratios were 66.8% versus 81% a year ago. And fourth quarter results for publicly traded personal lines companies have generally improved. Auto premium increases are slowing, and in some instances, we're seeing modest decreases as more carriers are continuing to open up auto product capacity and look for growth. Homeowners' products remain tight in Q4, but we're seeing signs of carriers starting to open capacity or indicate they intend to open more product as the year progresses, although this varies by carrier and state. An improving market will allow us to better serve clients and lean more heavily into technology rollouts in areas such as quote to issue that have been limited to some extent by carriers' appetite for growth. Turning to our results, we delivered an outstanding 2024 with 20% total revenue growth, 17% core revenue growth, 29% premium growth, and EBITDA near $100 million, up 43% year over year, with a record margin of 32%. Delivering these numbers in this market speaks to our team's no excuses mindset to deliver results. Here's how we got there. We re-accelerated growth by increasing producer headcount, which drove year-over-year PIF growth to 13% in Q4, up from 12% in Q3, and 11% in Q2. We believe this momentum signals even stronger growth ahead in 2025. We enhanced profitability through disciplined cost management and achieved record margin, all while continuing to make critical investments in our people and technology. We extended our leadership in technology innovation by expanding and refining proprietary tools like our quote to issue capability, Aviator agent platform, and referral partner marketing technology. With these advancements, we're setting a new standard for tech-enabled insurance. We strengthened our talent by onboarding over 800 top-tier sales agents across corporate, enterprise, and franchise distribution, a record recruitment effort. We continue to transform our largest piece of business, franchise distribution, which accounts for 83% of our producer force. Franchise progress included scaling of existing franchises, with average producers per franchise at 1.9 versus 1.6 a year ago, and franchise producers up 7% year over year, dramatically increasing our franchise new business productivity, which was up 49% in 2024, significantly reducing franchise terminations given higher quality across our network, improving the onboarding time and performance of new franchises, Just to give some data on overall franchise health, total average gross pay to franchises in 2024 was up 47% when compared to 2023. Our franchises got stronger and more successful across the board despite the market getting more difficult. Building on our achievements in 2024, we're excited to accelerate momentum in key areas for 2025. Franchise distribution expansion will be driven by expanding recruiting of producers and onboarding of franchises as an increasing percentage of our franchise base will look to scale their businesses. Today, roughly 38% of our franchise base has multiple producers compared to 27% two years ago. Increasing franchise launches through expanded franchise development resources. In 2024, we doubled the size of our franchise development team to position us for more rapid expansion as market conditions improve. And attracting larger middle market franchises, the types of franchises we are adding are changing. More and more we're looking for franchises with larger growth potential and built-in lead flow. This includes businesses like mortgage servicers and realtors that want to access insurance economics by embedding a franchise in their business. We had early success in 2024 and will ramp these efforts in 2025 with a continued focus on support, training, and resource allocation to help franchises maximize growth. We also expect to continue to convert successful corporate agents to franchises. In corporate distribution, we will be growing across both traditional corporate agents that work with referral partners and enterprise sales agents, which handle inbound digital and partnership leads. Our corporate agent count at year end was 417, an increase of 39%. of which 65 were enterprise sales agents. We'll likely grow corporate agent count at a slower pace in 2025, given our larger starting base, particularly in enterprise sales, which doubled in 2024. Texas continues to have our largest concentration of corporate agents, but we are quickly diversifying our footprint to capitalize on changing market opportunities. For example, we successfully launched our new Phoenix, Arizona office in Q4, and initial production per agent has been strong. New corporate offices will help revenue in under-penetrated regions and provide a consistent stream of highly skilled future franchise owners. Enterprise sales should continue to grow faster than total corporate producer count as we're building capacity to ultimately capitalize on a robust partnership pipeline. On the technology front, we will be launching the Goosehead mobile app, empowering clients with unprecedented self-service functionality from proof of insurance to claim tracking. And we'll continue our expansion of our quote-to-issue technology across carriers and states. This technology is quickly becoming the standard that will allow the broker, carrier partner, or client to seamlessly transact business and ultimately deliver a direct-to-client experience that opens up new pools of clients. We strongly believe that knowledgeable and independent agents will always play a major role in personalized insurance for those clients that want and need agent expertise. These tools allow those agents to be more productive while giving us access to new clients. Additionally, we believe AI will impact virtually every aspect of how we sell and service personalized insurance in the future. To capitalize on these opportunities, we're investing in our data infrastructure, sophisticated AI tools, and the talent necessary to design and build these capabilities. We currently use AI in a variety of ways. For our service and sales teams, we use AI to assist in auto-drafting emails to more effectively and efficiently communicate with clients. We also utilize AI to draft code that is used in the testing of our current software. In the near term, we expect to use AI to capture and summarize conversations with clients for our service center. which will allow us to analyze sentiment and identify service improvement opportunities in real time. In addition, on the sales side, we intend to leverage AI to create a policy recommendation engine, creating a better experience for both the sales agents and the clients. Ultimately, AI tools are becoming ubiquitous, but the data and accumulated experience are proprietary to Goosehead. That is why we believe we have a unique opportunity to widen our moat and create a sustained AI competitive advantage. Our company is built for sustained profitable growth, and we're just getting started. We're continuing on our trajectory toward becoming a rule of 60 company where the combination of revenue growth and profit margin exceeds 60%. In 2024, we ended the year as a rule of 50 company delivering 20% revenue growth and 32% EBITDA margin. an impressive result amidst challenging market conditions. I'm confident that our investments in innovation, people, and operational excellence will propel us toward and sustain Rule of 60 performance for many years to come. Although we're pleased with our success thus far, Goosehead is just beginning its journey. As a reminder, we are still less than 1% of the U.S. personal lines market share. Backed by a clear strategy, unparalleled capabilities, a relentless commitment to precision execution, and an ever-expanding competitive moat, we are poised to redefine what's possible in the insurance industry. Goosehead's future is brighter than ever, and I want to thank our employees, agents, and partners for their tireless efforts. Your dedication and innovation fueled everything we achieve. Now I'll hand it over to our CFO, Mark Jones, Jr., to review the financial details. Thank you.