• Total Written Premiums: $1 billion, a 28% increase over the prior year period.
• Franchise Premium Growth: 33% to $825 million.
• Corporate Premium Growth: 12% to $204 million.
• Total Revenues: $78 million, representing 10% growth over the prior year period.
• Core Revenues: $73.5 million, up 16% for the quarter.
• Adjusted EBITDA: $26.1 million, up 17% from $22.4 million a year ago.
• Adjusted EBITDA Margin: Expanded 193 basis points to 34%.
• Operating Cash Flow: Increased to $59 million from $37.4 million, a 58% increase.
• Policies in Force: 1.6 million, an increase of 12% compared to 11% in the previous quarter.
• Client Retention Rate: Stable at 84% from the second quarter to the third quarter.
• Franchise Producers: 2,093, up from 1,995 in the second quarter of 2024.
• Corporate Producers: 458, up 45% from the year-ago level of 316.
• Same Store Sales Growth: 26% over the previous year.
• Average Gross Pay per Franchise: Up 56% in the quarter compared to the prior year.
• Cash and Cash Equivalents: $50.1 million at the end of the third quarter.
• Debt to Trailing Four Quarter EBITDA: 1.2 times.
• Net Debt to Trailing Four Quarter EBITDA: 0.6 times.
• Guidance for Full Year 2024 Total Written Premiums: Expected to be between $3.7 billion and $3.82 billion.
• Guidance for Full Year 2024 Total Revenues: Expected to be between $295 million and $310 million.

• Warning! GuruFocus has detected 6 Warning Sign with GSHD.

Release Date: October 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Goosehead Insurance Inc (NASDAQ:GSHD) achieved record profitability and reached a milestone of $1 billion in premium within a single quarter.
• The company has significantly improved its recruiting process, resulting in the largest and highest quality college recruiting class ever.
• Franchise productivity improved by 52% year over year, driven by increased referral partner activations and refined sales processes.
• Client retention rates have stabilized at 84%, with expectations for improvement as market conditions improve.
• Adjusted EBITDA for the quarter increased by 17% to $26.1 million, with a margin expansion of 193 basis points to 34%.

Negative Points

• The homeowners insurance market remains challenged, with ongoing issues related to product availability and pricing.
• The company faces uncertainty regarding the financial impacts of recent catastrophic hurricanes, which could affect future results.
• Corporate agent growth, while strong, may lead to increased compensation and benefits expenses in the short term.
• There is still volatility in the product availability environment, with carriers coming in and out of markets.
• The company has experienced a decline in cost recovery revenue by 40% due to lower accelerated franchise fee revenue.

Q & A Highlights

Q: Can you elaborate on the market stabilization and product availability, especially in key geographies like Texas and California? A: Mark Miller, President and CEO, explained that the auto product is starting to return, and carriers are changing their home products, which is promising for markets like Texas. Although product availability is thinner, there is optimism that it will improve soon.

Q: Are your products competitive in areas like Texas and California compared to captives? A: Mark Miller noted that while the market is not as competitive as it used to be, captives are starting to raise prices. Goosehead's carriers are stabilizing their prices, maintaining decent lead flow and product availability.

Q: Has client retention hit a bottom at 84%, or could it decline further? A: Mark Jones, CFO, stated that client retention is largely influenced by pricing actions. With less price increase in the book, retention is expected to remain stable and potentially improve through 2025.

Q: How are new referral partner activations and corporate class performing given the challenging home sale volumes? A: Mark Miller emphasized that the primary strategy remains focused on home closing transactions. Despite challenges, the new corporate class is performing well, with early indications showing high quality and productivity.

Q: Did the recent hurricanes impact revenues, and what is the expected impact on the fourth quarter? A: Mark Jones explained that hurricanes typically cause a temporary slowdown in production due to carrier moratoriums. The impact is usually short-term, with production resuming post-event, potentially shifting some business to the next quarter.

Q: Why is there a wide range in revenue guidance despite being late in the year? A: Mark Jones highlighted the volatile environment, with product availability and contingency revenues being significant variables. Franchise performance is strong, impacting premium more than immediate revenue.

Q: What is driving the improvement in the ratio of revenues to premiums in the fourth quarter guidance? A: The improvement is largely due to franchise performance, which accelerates new business production, impacting premium growth more than immediate revenue growth.

Q: How does the new class of corporate recruits impact margins compared to previous classes? A: Mark Jones noted that improved productivity should lead to better margins. The focus is on retaining agents through their first year to realize the full benefits of Goosehead's systems.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.