Goosehead Insurance, Inc.

Good day and thank you for standing by. Welcome to the Goosehead Insurance second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll 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 would now like to turn the conference over to your speaker for today, Maddie Middleton, Senior Director of Investor Relations. 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, and 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 you all to our recent SEC filings for a more detailed discussion of risks and uncertainties that could impact future operating results and financial condition of GACAD. 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 in 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 and an archived version will be made available shortly after the call ends on the investor relations portion of the company's website, IQSA.com. Now, I'd like to turn the call over to our CEO, Mark Miller.

Thanks, Maddie, and good afternoon, everyone. Thank you for joining us today for our second quarter 2026 earnings call. Before I walk through the quarter, I want to start with a little perspective. Four years ago, when I joined the management team, we were navigating a business that had significant untapped potential, but also had some real challenges. Since that time, we have fundamentally transformed this organization. We restructured our corporate and franchise agent forces, raising the bar on quality and productivity across both networks. We grew our corporate footprint to more than a dozen offices across the country. We launched and expanded ASP, our internal staffing support program for our franchise owners. We launched our enterprise, sales, and partnership businesses from scratch, and they are now unlocking access to millions of new potential clients. We built a world-class technology team that delivered the United States' first true end-to-end choice shopping platform for personal lines insurance. We increased total written premiums from approximately $2 billion in 2022 to well over $4 billion today. We right-sized our cost structure while preserving our capacity to grow. We grew adjusted EBITDA from under $40 million in 2022 to over $130 million in our last four quarters and expanded our margin meaningfully through the hardest product market in 50 years. We did all this while returning significant capital to our shareholders and maintaining a conservative balance sheet. The business we have today is stronger, more diversified and more capable. With the company and the industry in such a strong position, I'd like to share something personal. After a 40-year professional career, I've decided that the time is right for me to retire. At the end of this year, I will hand over the CEO position to Mark Jones Jr. and remain a member of the board of directors and help in any way I can. My decision was made easier knowing we have an exceptional leader in Mark Jones Jr. He has been a member of the management team for nearly 10 years and closely tied to the business since its founding. He knows this business like no one else. He has the trust of our agents, our carriers, and our shareholders, and he has the hunger The skill set and the vision to take Goosehead to heights that will continue to set the standard for what excellence looks like in our industry. I'm very confident in him and in this team. I love this company and I believe deeply in what we're building and I'll remain fully engaged and focused on execution through the end of the year. I'll do everything in my power to set this organization up for its next chapter. Now let me turn to our current operational performance. We delivered strong second quarter results that reflect continued execution against our strategic plan and broad-based momentum across the business. Total rent and premiums grew 14%, accelerating off the first quarter to $1.36 billion. Policies in force grew 15% year-over-year, and client retention, our most impactful driver of top and bottom line performance, improved to 86%. representing its highest level since the hard market began. We're encouraged by this continued sequential improvement in client retention rate and see no structural limitation to meeting or exceeding our prior high of 89% in the future. Total revenues grew 21% to 113 million with core revenues up 10% to 95 million over the prior year period. As a reminder, in the second quarter of 2025, We recovered $4 million of previously unpaid renewal commissions and royalty fees. When adjusting for that year-over-year variance, core revenues grew 16% and total revenues grew 26% in the second quarter. Adjusted EBITDA was $38 million, representing a 34% margin for the quarter. We've spent a considerable amount of time recently discussing our technology enhancements and new developments related to our digital agent 2.0. the country's first choice shopping platform. We remain as enthusiastic as ever around the progress we're making and the significant future opportunity ahead of us. But I want to focus the discussion today on the strategy, consistency, and compounding nature of our core business. The largest portion of our business, our franchise network, is now healthier than ever. Our franchise strategy remains focused on placing the right agency owners in the right geographies and arming them with the support they need to maximize their productivity and profitability. A core pillar of that strategy is generating franchises with more producers. Our agency staffing program, which we stood up in 2023, has done exactly that. Since that program's inception, we have helped our agency owners place hundreds of producers into their operations, and now that strategy is bearing real fruit. Franchise producers are at the highest level in history, and nearly 2,200 with an average of 2.4 producers per franchise, which is resulting in our franchises generating more income per location than ever. The average payment that we send to a franchise on a monthly basis has increased more than 35% year-over-year and is now over $28,000. This powerful and durable income stream allows them to reinvest back into their businesses to further reinforce the growth flywheel. At the beginning of the year, we discussed the expanding footprint of our corporate offices. These new locations were selected strategically to align with attractive product markets, high rates of home ownership, and strong recruiting pipelines from local universities. Our five recent office launches across the country are scaling rapidly, averaging nearly 20 agents each and delivering strong new business production. Over the quarter, several of these new offices were among the top overall offices in our corporate network. These offices allow us to tap into previously underserved markets, build a more diversified client base, and most importantly, they will produce the next generation of future franchise owners. We will continue to drive outsized market share gains with this powerful capacity that is both unique to Goosehead and extremely difficult to replicate. Our enterprise sales business continues to grow at a rapid pace, and our pipeline of new potential partners to fuel continued growth is expanding. As we implement our embedded insurance offering with our current and future partners, this third leg of our distribution stool will continue to grow at an accelerated pace. The backdrop for all of our agents across the sales network is now a dramatically improved product environment, which is resulting in improving bind and package rates. As we highlighted over the past several quarters, everything in our business operates more efficiently in a stable product environment. This is where we thrive. We've navigated a historically hard market over the last several years, and we're now poised to take advantage of a much healthier, personalized product market. Client retention continues to improve, the burden on our service function continues to abate, and we remain aligned with our carrier partners in our mutual pursuit of profitable growth. We have built a firm foundation for the next phase of growth, and I'm incredibly proud of the work we have done. When Mark Jones asked me to take this position four years ago, I knew it was a special opportunity. I'd been with Goosehead on its board for four years, and I had been a client for 15 before that. I knew the business, I knew the culture, and most importantly, I knew Mark's vision. What I didn't fully appreciate until I was inside was just how truly extraordinary The people at every level are in the organization. The agents who wake up every day and go find new referral partners, the franchise owners who are building businesses which are generating life-changing income, the service team members who help our clients navigate some of the most stressful moments in their lives, the technology team who built something that the industry said could not be built, and the rest of our teammates who strive for excellence every day. I'm grateful to all of them. and I'm proud of what we have accomplished together. We came through a once in a generation hard market stronger than we entered. We built new capabilities that will define the next decade of this business. We consistently expanded our market share and more than tripled adjusted EBITDA. We returned hundreds of millions of dollars to shareholders and we did it without compromising who we are, a company that puts the client at the center of its universe. The company is in an exceptional position today, and it gives me great confidence that now is the right time for the transition. Our leadership team is deep and experienced, and Mark Jones, Jr. is one of the best operators I've encountered in my career. I plan to spend the rest of the year making sure that every initiative is properly sourced and set up for success, and then I will hand the baton with tremendous pride, full confidence, and continued support wherever needed for my position on the board. Thank you to this team. Thank you to our agents and franchise partners. Thank you to our carrier partners. And thank you to our shareholders for the trust you have placed in us. It has been the biggest privilege of my professional career. With that, let me turn the call over to our President and COO, Mark Jones, Jr.