Goosehead Insurance, Inc.

Good day, everyone, and welcome to Goosehead Insurance fourth quarter 2025 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 participate, you will need to press star 11 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 11 again. Please note this conference is being recorded. Now it's my pleasure to turn the call over to the Vice President of Capital Markets, Dan Farrell. 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 discussions 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 Goosehead. 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, amortization, 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 reconciliation 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 An archived version will be available shortly after the call ends on the investor relations portion of the company's website at goosehead.com.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, and good afternoon, everyone. Thank you for joining our fourth quarter and full year 2025 earnings call. Before I get into the numbers, I want to take a step back and frame where we are, not just this quarter, but as a business, since Goosehead is a company that rewards long-term thinking. Personalized insurance distribution is not a get-rich-quick business. As our founder, Mark Jones, has said, it's a get-rich-over-time-and-stay-rich business, and the work we do compounds when it's done correctly. For the full year 2025, we grew total revenue 16%, adjusted EBITDA 14%, and delivered an adjusted EBITDA margin of 31%. These results didn't come from one-off wins. They came from disciplined execution of our strategy and structural improvements across the organization. Several of our most important KPIs simultaneously moved up and to the right. For example, client retention continued to improve. We moved from 84% in the second quarter to 85% in the third quarter, and we exited the year with continued upward momentum. As we've said before, retention is the flywheel in this business. When retention improves, everything else gets easier. Growth becomes more efficient, margins expand, and client lifetime value increases. We also saw accelerating growth in policies and force, ending the year up 14%, increasing from 13% in the third quarter. At the same time, we have seen strong productivity across all three distribution networks, corporate, franchise, and enterprise sales. Now let's talk about the insurance market itself. Our industry operates in well-documented cycles, moving between hard markets driven by elevated loss ratios, capital constraints, and tightening underwriting, and soft markets where loss ratios normalize, capital returns, and carriers compete for growth. We're currently coming out of a sustained hard market where we saw carriers raising rates, tightening underwriting guidelines, and reducing capacity, actions that were difficult in the short term but necessary to restore profitability. Today, pricing has largely caught up with loss ratios. Underwriting profitability has been restored, and carriers are once again in a position where they want to grow. This is the environment where Goosehead performs best. A healthier product market means more choice for our agents, better outcomes for clients, lighter service loads, more stable underwriting, and carrier partners that want to grow alongside us. The added variable of AI impacting the personal line space is beginning to take hold as well. When implemented strategically in the right portion of the value chain, AI has the ability to improve outcomes for all parties. For us in the distribution portion of the value chain, maximizing efficiency with our existing clients and matching carrier risk appetite with client demand represents the largest value creation application. However, there are significant opportunity costs associated with chasing the wrong implementation of AI. Ultimately, the tool set will be broadly available, but the secret is the data behind the tool. Because we have built such a diversified book of business across 50 states and with hundreds of carriers, we have access to proprietary data that we believe is highly differentiated. Tools in the market today act as quasi-lead aggregator technology, providing generic information about insurance broadly in your area. From what we have seen, these tools have no choice model transacting ability, and in some instances point users to contact their local Goosehead agent. Mark Jones, Jr. will go into more detail about our specific plans for implementing AI in our business, or being incredibly thoughtful about investing only where it drives real value. While we're encouraged by the product market and the technology advancements, I'm extremely proud of what this organization accomplished over the last three years without those tailwinds. Across our franchise network, we made deliberate decisions to prioritize quality over quantity. This has resulted in meaningful productivity gains, stronger economics for franchise owners, and healthier system overall. Gross payments per franchise are up 29% year over year. This meaningful increase in cash flow enables our owners to reinvest in people and ultimately grow more rapidly. We expanded total producer count while reducing the number of operating agencies, exactly what we would expect to see in a system getting stronger. Producers per franchise increased from 1.9 at the start of the year to 2.1 by year end, which is one of the longest and most powerful levers in our model. This momentum was further evidenced by an increase in book acquisitions within the network, going from 38 in Q3 to 64 in Q4. Typically, the buyer is one of our strongest and fastest growing agencies, so these consolidations make the entire community stronger, more resilient, and positioned for growth. On the corporate side, we did what we said we would do and fundamentally reset the corporate agent footprint. We expanded the new geographies like Tempe, Arizona, and Nashville, Tennessee, and reduce concentration in well-established markets. So far in 2026, we have three new offices fully launched, with a fourth slated in April. A portion of our corporate agents outside of Texas increased from 30% in 2022 to 52% in 2025. Since 2022, the corporate team has produced 61 new franchises through our corporate to franchise ownership path. many of which now sit in the top 5% of new business production across the entire network. Corporate new business growth also re-accelerated in 2025, reaching its fastest pace since 2021. This year, we also gained traction on our newest distribution arm, the Enterprise Sales and Partnership Network. This network is incremental, efficient, and strategically important. It allows us to access portions of the market that traditional agency models simply cannot reach. In 2025, enterprise sales almost doubled new business production, and partners on our platform now address millions of mortgages serviced across the country. At scale, this channel is a growth driver and margin accretive. To summarize, the fundamentals in almost every area of our business remain sound, but we acknowledge the future of insurance distribution may look different over time as technology evolves. That is why we have been investing heavily in our technology roadmap for the past several years. Technology remains one of our deepest competitive advantages, and we have exponentially increased the size of the tech organization in the past three years, adding skill sets not commonly found in our industry. Over the past several years, we've invested in both agent-facing tools and core infrastructure required to support a much larger organization. To that end, Goosehead has now delivered the United States' first end-to-end choice buying experience. Our digital agent 2.0 platform is now live in Texas with multiple auto carriers and multiple home insurance carriers in active implementation. During 2025, we made massive strides in the hardest challenges in digital binding, and we are now set to rapidly expand our product and geographic coverage. These capabilities can only exist with deep relationships and trust with the carriers, complex integration with underwriting back-end systems, and a high-scale service organization that can handle the complexity of hundreds of carriers and multiple product lines. This is not just another lead aggregation tool with an AI wrapper. This is a true frictionless digital distribution platform. We want to give our clients the purchasing option they want, whether it is all digital, partially digital, or completely human. By leveraging our proprietary data, we can deliver that shopping experience in a way that provides carriers with high quality and retentive clients. We've also made significant strides to enhance our client experience with technology innovation. We launched our mobile app, giving clients the ability to manage policies across multiple carriers in one place. Introduce Lilly, our AI-powered virtual phone assistant. Lilly has already handled hundreds of thousands of client interactions streamlining the client experience, and reduce the number of calls requiring agent involvement. As these tools mature, we expect continued improvement in the client experience alongside lower servicing costs. It is an exciting time to be in the property and casualty insurance industry, especially for Goosehead. We have hardened our model, widened our competitive mode, improved productivity and profitability, and laid the foundation for what we believe will become the leading digital insurance distribution platform in the United States. Looking ahead to 2026, our priorities remain clear and unchanged, accelerating growth within existing agencies, placing agencies in the right geographies, expanding our corporate sales organization, scaling enterprise and partnership channels, continuing to invest in technology, particularly strengthening our proprietary AI applications and building a winning culture. What excites me most is that we're entering the next phase with improving market conditions. When the product market is healthy, everything in our system works better. Agents close more business, clients are better served, carriers lean into growth, and retention improves naturally. We finished 2025 in a position of strength. and our focus in 2026 is on continuing to execute against the opportunity in front of us. I've said before that we believe Goosehead has the ability to operate at a Rule of 60 model over time, where the combination of revenue growth and EBITDA margin exceeds 60% on a sustained basis. As our core KPIs continue to improve and newer initiatives like partnerships and Digital Agent 2.0 scale, we see a clear path to progressing toward that objective. I'm proud of the progress we've made this year, and I'm even more confident in the position we've built as we continue to work towards our long-term objective of becoming the largest distributor of personal lines insurance in our founder's lifetime. Thank you to our clients, our teammates, our carriers, and our partners. With that, I'll turn the call over to our CFO and COO, Mark Jones, Jr.