Goosehead Insurance, Inc.

Thank you for standing by and welcome to the Goosehead Insurance first quarter 2025 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 this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Dan Farrell, Vice President, Capital Markets. Please go ahead, sir.

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, 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. An archived version will be available shortly after the call ends on the investor relations portion of the company's website at goosehead.com.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 president and CEO, Mark Miller.

Thanks, Dan. Good afternoon, everyone. Thank you for joining our Q1 earnings call. Since the inception of Goosehead more than 20 years ago, we have had one goal, to become the largest distributor of personal lines insurance in the U.S. in our founder's lifetime. In the pursuit of that goal, we've built a vast distribution network that includes more than 400 corporate agents, 1,000 franchises, 2,500 total licensed agents in 48 states, and 200 plus carriers. As impressive as these numbers are, we still have a lot of work to do to accomplish our goal. Today, we have a premium base of approximately $4 billion. To be the largest distributor of personal lines insurance in the next 10 years, we need to be roughly 25 times larger than we are today. We believe this goal is possible, and we're focused on making it a reality. In Q1, we delivered solid performance year over year. Total revenue grew 17%. Core revenue grew 17%. Premium grew 22%. and adjusted EBITDA grew 32%. Over the past three years, we have steadily grown premium, revenue, and earnings while battling what most experts have called the hardest product market in 50 years. For Goosehead, this challenging market has been a blessing in disguise. We have focused our efforts on learning how to strengthen every aspect of our company. Adversity has only made us stronger, just like it has throughout our company's history. we're prepared to systematically expand our reach to deepen and widen our competitive moat as the market inevitably recovers. While the market is still hard compared to historic norms, in some of our key markets, such as Texas, California, and Florida, we are seeing some tangible improvement in product availability and in many geographies' price stability. We're thrilled about these shifting market dynamics because the history has taught us price stability is highly correlated to client retention. Improving profitability of auto carriers has led to an aggressive rebound in auto product availability. We're beginning to see new home product reenter multiple key markets. In the admitted home market, we're seeing products slowly creep back in, but the product has more risk-sharing features with clients, and carriers continue to be highly selective about what risks they will take. At the same time, home closings fell to a 30-year low in 2024, but our agents doubled down on their marketing activity, and our current lead flow is close to historically high levels. However, our bind rate on those leads is still below our historical averages. Our bind rate is directly related to product availability and price stability, and we expect meaningful improvement in both over the next six to 24 months, given our strong carrier relationships, diversified geographic footprint, and improving carrier economics. I get very excited about the business when I think about what it looks like when product fully recovers. Until that day arrives, we're building a business hardened for exponential growth. Let me give you a few examples of what we have changed and why these changes have positioned us to accelerate into the recovery and move toward the rule of 60 company that we strive to be. First, on the franchise side of the business, We have narrowed our aperture on who we want to own franchises, and we've tightened our focus on selected geographies. Historically, we have indexed toward ex-captive agents located in a handful of states. This strategy is shifting quickly. We are still looking for the best of the best ex-captive agents, but we're aggressively targeting business professionals with capital that want to build multi-agent, multi-location businesses. These professionals recognize the power of a recurring revenue model with low capital intensity and high retention rates. The future growth of the franchise network is also tightly integrated with a strategic geographic dispersion plan. We have rebuilt the strength of our franchise development team, and they're scouring the country to find the best owners in every town and city in America. One powerful component of our new franchise strategy is helping goosehead corporate agents move into franchise ownership. Many of our most successful, newer vintage franchises are ex-corporate agents. As we continue to focus on quality of new franchises versus quantity, we have discovered that our Corporate Agent to Franchise Owner program is one of the best ways to ensure quality, quantity, and geographic dispersion. The opening of the new office in Tempe, Arizona is a major step forward on this strategic initiative. We seated the office with experienced corporate agents from several other offices, which has resulted in this office being 20% more productive than the next best corporate office. As a reminder, our corporate team remains 2.8 times more productive than industry best practice. This shows the power of our corporate team when located in a geography with a robust product offering. Going forward, this office will be staffed with recruits from local universities. These new corporate agents will then be on what is effectively a paid apprentice program, where they learn to sell insurance, and more importantly, manage people and build a business. Many will return home to open franchises in California, Washington, Oregon, Nevada, and Utah. Based on the early success of this office, we expect to strategically place additional smaller footprint corporate offices across the US over the next several years. We're using this new office as a blueprint for how we recruit and develop the highest quality franchise owners in the future. We expect that up to 10% of our corporate agents annually will ultimately launch high velocity agencies across the country. These owners tend to be growth oriented and in some cases up to 10 times more productive than our traditional franchise owners. Let me give you one recent example. Grant Sheets, who was previously a successful sales manager in our Houston corporate office, launched an agency in June of last year. He very quickly scaled his agency and made his first hire last July. Grant's agency currently has five agents with two more in training and plans to continue to scale up to 12 agents by year end. On the production front, Grant and his team have made Gruset history by becoming the fastest agency to ever cross $100,000 in new business revenue production in a single month. We're extremely proud of Grant, and we expect to see more exciting growth from him and his peer group of ex-corporate agents turned franchise owners over the next several years. To support this franchise growth strategy, we have built a world-class recruiting machine that can attract high caliber college graduates to our corporate offices. As of today, we have over 90% of our corporate sales openings already filled for 2025. And our corporate agents from last year's class are retaining well and moving up the tenure curve. In addition, our growth strategy includes our enterprise business, where large and medium sized companies with an existing base of clients want to embed an insurance offering into their model. These companies need what Goosehead has to offer, a client-first choice model with superior technology and exceptional service. The relative strength of our carrier portfolio and national geographic footprint provide powerful strategic advantages relative to any other insurance agency and make Goosehead the logical choice for many companies looking to participate in the personalized ecosystem and add value to their clients. Over the past six months, we have implemented new technologies that allow our systems to ingest lead flow from multiple partners and route it to the best available agent to meet the client's unique needs, speeding up the time to action and increasing close rates. Over time, we believe that enterprise sales and partnership business will turn our core business from hand-to-hand combat to a hyperscale platform using generative AI to remove many of our traditional bottlenecks. Leveraging the high-quality client base of mortgage servicers allows us to reach a population that is both highly attractive to our carrier partners and has a high close rate. We believe the direction we are headed with tangible AI achievements will deliver extraordinarily profitable growth, even remarkable relative to what we have delivered over the last 22 years. We have made outsized investments in technology over the last several years compared to our competitors, And we're adding new types of talent to our team to accelerate the transformation in all aspects of our business. One great example of this is the addition of Bill Wade to our board of directors. Bill has a proven track record with over 25 years at Bain and Company, driving transformation with technology innovation. He's exactly the type of thought leader we need to win the AI race in the insurance industry. In the quarter, we continue to make progress on our technological advantage. by rolling out our Goosehead mobile app. To ensure a smooth rollout, we are introducing the app in stages through an invite-only process. Currently, the app displays and explains coverage information, allows for live chats with our service team, and will soon display renewal information and the option to explore other quotes with your agent. We expect to continue to launch technological advancements that improve our client experience and strengthen our service team. The insurance landscape is evolving and the demands on our client service team are higher than ever. We're committed to delivering outrageously good client experience and plan to point outsized resources to ensure the client remains at the center of our universe. As we look ahead, we remain laser focused on the path to becoming the largest distributor of personalized insurance in the country. We know this journey will not be easy and we don't expect it to be, but we're confident we have the people, the platform, and the plan to get there. We build a resilient foundation and we're investing ahead of the curve so that when the market returns, we're not just participating in the recovery, we're leading it. I want to thank our agents, franchise owners, carrier partners, and employees across the country who continue to drive our mission forward. We're just getting started and the best chapters of our story are still to come. Thank you for your continued support and we look forward to sharing more progress with you in the quarters ahead. Now I'll hand the call over to our CFO, Mark Jones, Jr.