TWFG, Inc.

good morning my name is josh and i will be your conference operator today at this time i would like to welcome everyone to the tw fg third quarter 2024 conference call all lines have been placed on mute to prevent any background noise after the speaker's remarks there will be a question and answer session if you would like to ask a question during this time simply press star then one one on your telephone keypad if you would like to withdraw your question press star one one again This call is being recorded and will be available for replay on the company's website. Before we begin, let me remind you that today's discussion may contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward-looking statements, please refer to the company's press releases and SEC filings. Also on today's call, our speakers will reference certain non-GAAP financial measures, which we believe will provide useful information for investors. The company has posted reconciliations of the non-GAAP financial measures discussed during this call in the tables accompanying the company's earnings press release located in the investor section of the company's website at www.twfg.com. It is now my pleasure to introduce Mr. Gordy Bunch, founder, chairman, and CEO of TWFG. Sir, the floor is yours.

Thank you, Operator. Good morning, everyone, and thank you for taking time to join us today to discuss our third quarter 2024 results. Joining me on the call is Janice Zwingy, our Chief Financial Officer. After my opening remarks, Janice will review our financial results, and then we will take your questions. I would like to start off every call to take time to thank all of our employees, carriers, agents, clients, and vendors that continue to partner with us to achieve our goals. We have a great team working every day to create one of the fastest-growing independent insurance distribution platforms in the country. This quarter highlighted our team's resiliency, as we started July with Hurricane Beryl rolling over our home office, knocking out power and internet for several days. Our home office team executed our business continuity plan, bringing our temporary location online the day after landfill. Knowing we had a tremendously talented team capable of addressing the challenges from Beryl allowed us to continue launching our IPO roadshow the same day. We completed our IPO in July, raising $192.9 million in net proceeds through the issuance of 12,650,000 shares of Class A common stock at a $17 per share price. Hurricanes Francine, Helene, and Milton further tested our resiliency across Louisiana, North Carolina, and Florida locations. TWFG agencies have been through numerous catastrophic events over our 24 years and have contingency plans in place to address the safety of our agents and staff. TWFG offices can work remotely as needed to continue supporting our clients in their time of need. Our policy is caring is not just a tagline. It comes to life and is most visible during these catastrophic events. I couldn't be prouder of our agents, employees, carriers, and the first responders answering the call to do their duty during our client's greatest time of need. I want to remind everyone that TWFG does not have balance sheet exposure to the ensuing losses our carriers will cover. New business production, timing of commissions, overtime expenses, contingency amounts, and temporary operational disruptions would be TWFG's impacts from hurricanes, floods, and other catastrophic events. Our third quarter recruiting efforts continued to outpace our historical growth trends with our Agency in a Box offering launching 86 new TWFG locations in the quarter. The 86 new agencies opened 13 new states for TWFG branches in Alabama, Connecticut, Idaho, Indiana, Missouri, Nevada, New Mexico, Oregon, South Carolina, South Dakota, Tennessee, Washington, and Wyoming. which we believe will provide future growth for our business. Please note it will take several years for the newly onboarded agencies to contribute to our current period financials. It is too early to tell how these agencies will perform, but it is good to see the growth in new locations and the geographical expansion. As far as the operating environment is concerned, we are beginning to see improvements in carrier appetites for growth as the industry achieves significant improvements in loss ratios. This is expected to lead to higher new business growth and expansion opportunities heading into 2025. TWFG had a strong third quarter highlighted by 14.5% total revenue growth, 7.6% organic revenue growth, 15.3% adjusted net income margin, and a 21.5% adjusted EBITDA margin. At TWFG, we believe we offer a strong value proposition for the tens of thousands of captive agents and independent agents looking for the right partner to help them grow and perpetuate their businesses. Our value proposition, coupled with a conservative balance sheet, flexibility around deal structuring, and our efficient operating model position us well going forward. TWFG continues to build a pipeline of potential acquisitions, and we will have several non-binding letters of intent in the marketplace. I will now ask Janice to review our third quarter results in greater detail.

Thank you, Gordy, and good morning to everyone on the call. Starting with the top line, written premium increased $46 million, or 13%, over the prior year period to $400.1 million. Under our primary offerings, insurance services grew 40.5 million, or 13.5%, and TWFG MGA grew 5.5 million, or 10%, over the prior year period. The increase in written premium was driven by an acceleration in new business and normalizing retention levels. Carriers have begun to open up for new business across geographies where they had previously restricted growth, and consumers have more choices in the marketplace today compared to prior periods. As a result, we saw a shift in our book with new business premiums increasing 39% or 25 million compared to a decrease of 20.1% or 16.1 million in the same period in the prior year. And premium retention normalizing to 88% for 97% in the third quarter of 24. Total revenue increased 6.9 million or 14.5% over the prior year period to 54.6 million. which was driven by accelerating new business activity, rate increases, healthy economic growth in our core states, higher investment income, and moderating retention levels. Commission income increased $4.2 million or 9.7% over the prior year period to $48.2 million. This increase is due mainly to higher premium rates, new business growth, and continued rollout of our book of business acquisitions in the 2023 and to the current period. Fee income increased $0.8 million or 37.2% over the prior year period to $2.9 million due mainly to an increase in policy fee income driven by higher policy count in our PWFG MGA offering. In addition, branch fee income increased $0.3 million or 42.2% over the prior year period to $1.2 million due to an increased branch fee rate. Other income increased 1.6 million or 270% over the prior year period, due mainly to increased investment income. Organic revenues increased 4.5 million to 47.3 million for an organic growth rate of 7.6%, driven by increases in premium rates and healthy new business growth. Now turning to expenses, I want to make a comment that our expense comparisons to prior year periods for mainly commission expense and salary and employee benefits are skewed given the acquisition of nine of our independent branches in January 2024, which in prior years were operated as agencies in a box and has now been converted to corporate branches. The commission expense associated with branch conversions decreased while salary and benefits increased compared to prior year periods. Commission expense decreased $1.7 million or 5.2% over the prior year period to $30.8 million. This decrease represents, one, a $3.9 million decrease related to the branch conversions, of which $2.4 million shifted to salary and benefits. This was offset by a $2.2 million increase related to growth of the business. Total salary and benefits, expense increased by $4.9 million, or 146% over the prior year period to $8.3 million. This increase is primarily due to one $2.4 million increase related to branch conversions in Q124, where commission expense shifted to salary and benefits. Secondly, a $1 million increase related to 2023 corporate store acquisitions, and thirdly, a million dollar increase from the issuance of RSUs in conjunction with the IPO. Other administrative expenses increased 2 million or 71.2% over the prior year period to 4.8 million due to the continued growth in the business, branch conversions, and the absorption of public company costs. Amortization and depreciation expenses increased 1.9 million or 161% over the prior year period to 3 million due mainly to the amortization of intangibles associated with our branch conversions and the 2023 corporate store asset acquisition. Net income for the quarter decreased 0.7 million or 9.4% over the prior year period to 6.9 million. Adjusted net income for the quarter decreased 0.3 million or 3.9% over the prior year period to 8.3 million. This decrease represents, one, the increase in stock-based comp of 1 million, increase of the amortization to 2.9 million due to the aforementioned acquisitions and branch conversions, and thirdly, offset by an increase in tax expense on adjusted net income of 2.5 million. EBITDA and adjusted EBITDA for the quarter was 10.7 million with 18.5% growth and 11.7 million with 29.7% growth, respectively. Our adjusted EBITDA margin was 21.5% in the third quarter compared to 19% in the prior year period. The margin expansion was driven by branch conversions, corporate locations acquired last year, and economies of scale, offset somewhat by public company costs, which we expect to continue to ramp into our run rate expense base over the next several quarters. With that, I'll turn it back to Gordy.