TWFG, Inc.

Good morning. My name is Deedee and I will be your conference operator today. At this time, I would like to welcome everyone to the TWFG fourth 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, please press star 11 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 on the Investors 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, and good morning, everyone. I appreciate you taking time to join us today to discuss TWFG's fourth quarter and full year 2024 results. Joining me on the call is Janice Wingy, our Chief Financial Officer. After my remarks, Janice will review our financial results in detail, and then we'll open up the call for your questions. I want to start by thanking our employees, agents, clients, and business partners for their ongoing support. TWG continues to establish itself as one of the fastest-growing independent insurance distribution platforms, with industry-leading organic growth and margin expansions. Our model provides agents with cutting-edge tools, technology, and operational support, ensuring they succeed in an evolving insurance landscape. Before we dive into our 2024 results, I want to briefly acknowledge the January 2025 wildfires that caused significant devastation in parts of Los Angeles. These events are a stark reminder of evolving catastrophic risk and its impact on reinsurance pricing. While TWG does not bear direct balance sheet exposure, we are closely monitoring reinsurance market trends and carrier responses. We remain confident in our ability to adapt to changing conditions, ensuring our agents have access to stable and competitive capacity in key markets. Before diving into our fourth quarter results, I want to highlight TWFG's strong performance in 2024. Total revenue for the year grew by 18.4%, to $203.8 million, with organic revenue growth of 14.5%, reflecting both sustained momentum in new business production and strategic expansion efforts. Adjusted EBITDA increased 44.7% to $45.3 million, demonstrating the scalability of our platform and operational efficiencies. 2024 was a transformational year for TWFG. We successfully completed our IPO in July, raising $192.9 million in net proceeds. This capital provides us with significant flexibility to accelerate growth through acquisitions, expanding geographically, and investing in technology to enhance agent productivity and client experiences. We have been focused on growing our national footprint, and in 2024, TWG expanded into 15 new states and added 144 new retail locations. bringing our total to 520 retail locations across 34 states. In addition, our MGA now supports agents across 42 states at year end. Total written premium for 2024 reached $1.5 billion, an 18.3% increase year over year, reinforcing our ability to drive growth in both our retail and wholesale channels. As we continue to enhance agent productivity through technology and strategic acquisition, We remain confident in our ability to sustain high levels of organic growth. It is important to note that locations take time to mature and contribute meaningfully to revenue and profitability. Historically, it takes two to three years for new agencies to reach profitability and longer to realize their full growth potential. We remain committed to supporting our new locations to ensure long-term success. Our M&A strategy continues to be a core part of our growth plan. As we evaluate M&A opportunities, our focus remains on acquiring high quality agencies that align with our culture and strategic vision. While acquisitions will be a key driver of long-term growth, we are maintaining financial discipline, prioritizing organic expansion, technology investments, and balance sheet flexibility. We remain committed to keeping leverage within a prudent range, ensuring financial strength as we scale. Technology is at the core of TWG's differentiated approach. Our constant investment in technology combined with our agency-in-a-box model equip agents with enhanced client engagement tools and management tools. From a market perspective, we are seeing stabilization in carrier appetites and improvement in loss ratios, which have opened up new opportunities for growth. Carriers are once again accepting new business in areas where capacity had been previously constrained. While this presents an opportunity for growth, we remain mindful of the importance of diversification and maintaining flexibility in our strategy. As Janice will discuss, TWFG delivered a strong financial result for the fourth quarter, highlighted by 30.8% total revenue growth compared to the prior period, 20.5% organic revenue growth driven by increased new business production and higher premium rates, and an adjusted EBITDA margin of 26.8%, reflecting margin expansion from the economies of scale and our efficient operating model. Our Q4 margin outperformance was primarily due to higher contingent commission income and a timing-related delay in certain public company expenses. We expect a normalized adjusted EBITDA margin in 2025, reflecting our long-term operating efficiency targets. We continue to focus on scaling our platform while optimizing cost structures to drive sustainable margin expansion over time. Looking ahead, our priorities remain clear. We will continue integrating recent and future acquisitions and supporting the growth of our new locations. We will focus on expanding geographically while enhancing our technology and agent support systems. We will be disciplined in capital allocation as we pursue both organic and acquisition-driven growth. These efforts position TWFG for continued success in 2025 and beyond. Now I'll turn it over to Janice to provide more detail in our financial performance.

Thank you, Gordy, and good morning, everyone. We will start with the top line written premium, which increased by $60 million, or 20%, over the prior year period to $361.4 million. Within our primary offerings, insurance services grew 51.3 million or 20%, and the MGA grew 8.6 million or 19.2% over the prior year period. This growth was driven by a combination of new business acceleration and normalized retention levels. During the fourth quarter of 2024, we saw a healthy uptick in written premium new business growth of 45% or 27 million over the prior year period. as well as renewal business growth of 14% or $33 million over the prior year period within both of our product offerings. We have also maintained steady retention levels of 91% quarter over quarter. Drivers of the growth was primarily due to higher premium rates, written premiums from our 2023 acquisitions rolling into the current year, and new business growth as carriers opened up for new business in regions where they had previously restricted growth. Going to revenues, our total revenues increased $12.2 million or 30.8% over the prior year period to $51.7 million. The increase of 30.8% was mainly due to commission income representing 18.9% of the total growth, contingent income representing 10% of the growth, and fee income representing 1.9% of the remaining total growth. Commission income increased $7.5 million or 20.7% over the prior year period to $43.7 million. Driven by higher premium rates, accelerating new business activity, solid economic growth in our core states, and the rollout of our 2023 book of business acquisitions into the current period. The insurance services offering increased 19% over the prior year period and represented 16.1% of the total increase. The MGA offerings saw growth of 29.5% over the prior year period and represented 4.6% of the total growth. Contingent income increased 3.9 million or 371% over the prior year period to 5 million, benefiting from loss ratio improvements late in the year and continued growth in total written premiums. Fee income was up 0.8 million or 39.8% to 2.8 million, primarily due to higher policy counts and increased new business through our marketing activities, with $4.6 million coming from the TWICO program and our MGA offering. Organic revenues increased $8.8 million, reaching $43.6 million for an organic growth rate of 20.5%, driven by rate increases and strong new business growth. Turning to expenses, there are some key considerations here due to the acquisition of nine of our independent branches. These branches were previously part of our agency in a box model that has now been converted into corporate branches, which shifted costs from commission expense to salary and benefits. Commission expense increased 2.9 million or 11.2% over the prior year period to 28.9 million. The increase represents, one, a 5.1 million increase related to the growth of business, offset by a 2.2 million decrease related to the branch conversions of which 2.1 million shifted to salary and benefits. Total salary and employee benefits increased by 3.8 million or 97.8% over the prior year period to 7.7 million. This was driven by a 2.1 million increase from the branch conversion shift from commission expense, a 0.5 million increase related to the 2023 corporate store asset acquisitions, and a $1.2 million increase from the RSUs issued in conjunction with the IPO. Other administrative expenses increased $2 million or 69.9% over the prior year period to $5 million. This increase is mainly due to public company costs, including professional fees and consulting services, representing $1.2 million or 40% of the total increase and the remaining increase of 0.9 million or 29.9% was driven by the continued growth of our business and branch conversions. Amortization and depreciation increased 1.5 million or 101% to 3.1 million, driven by amortization of intangibles from branch conversions and the 2023 corporate store asset acquisition. Net income for the quarter was 8.2 million, a 2.9 million or 56.3% increase over the prior year period. On an adjusted basis, net income increased 3.8 million or 57.2% over the prior year period to 10.5 million, including an increase in income of 2.9 million, increase in stock-based compensation of 1.2 million, increase in amortization expense related to acquisitions and branch conversions of 2.9 million, offset by a $3.1 million increase in tax expense on an adjusted net income. EBITDA and adjusted EBITDA were strong at $10.2 million and $13.8 million, respectively, representing growth of 91.7% for adjusted EBITDA. Adjusted EBITDA margin was 26.8% compared to 18.3% in the prior year period. This expansion was driven by overall growth, but also benefited from outsized contingent commission and investment income, somewhat offset by the ongoing ramp-up of public company costs, which we expect to normalize over the next few quarters. With that, I will turn it back to Gordy.