GSHD - Earnings call transcript Q1 2019 | Goosehead Insurance, Inc

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Goosehead Insurance First Quarter 2019 Earnings Call.

As a reminder, all participants are in listen-only mode and the conference is being recorded. [Operator Instructions]. to President, conference ICR. like Edson, to now Vice Senior would turn over the Garrett I Please ahead. go

Garrett Edson

on Thank also you, Officer was announcement, and and everyone your call Colby, hosts should good this and released Mark afternoon. be With Jones, President ir.gooseheadinsurance.com. which our to Officer. and and prior us Colby, Chairman have Chief website to Chief By Operating access at which Executive Chief of found Financial Michael Mark Goosehead; may Officer; today now are earnings our

and which we statements our are therefore, for everyone be of undue future We recent reliance to those performance more to filings forward-looking SEC discussion are a statements as in management and, which with estimates our discussion include refer our cause discussion Before could detailed expressed not are begin need expectations, formal upon them. the placed to of of the should not the These statements, that of today subject differ future factors operating uncertainties all or you required by Goosehead applicable of and that remarks, impact or except predict the difficult extent and or remind today. other materially statements, to and could risks We revise financial to law. forward-looking condition are update uncertainties of statements. I the projections disclaim our to results the based results Insurance. obligations intentions any any forward-looking guarantees risks, actual The to on part forward-looking various of and in from implied that assumptions, may

to ends the the shortly Mark an at Jones. go now archived With company's after that, to call Investor webcast Relations Please this addition, the will version and over of the In be turn is website like I'd CEO www.gooseheadinsurance.com. ahead. portion being available on call call

Mark Jones

Earnings Quarter to and Call. First XXXX Garrett, Thanks, welcome our

President why and our and Financial well facilitate our high growth quarter provide Colby, on will As you they ongoing an provide competitive Officer, profitability. our proven technology organic to levels then hand overview we've outlook. believe and the our discuss our advantage calls, will previous on I'll our as support of long-term the who Mark over unique Chief more done as strategy. Colby, Operating sustained of our then rapid follow first Chief call investments I will update and results and about Officer, detail quarter and and further Mike we

anniversary like quarter, growth just of ability organic share Before we I would our a listing model over business as disruptive some I a company. public voiced the have celebrated kind these sustain to the seen, review of of highlights first to this industry profitable that has skepticism highly not the produces our thoughts our given few levels results. differentiated and at Because

to been a this always and works. of owners have ago have the proposition IPO so continued we aligned team stock. we highly has be There that the past platform do that over our just Goosehead have is quarter just done a years. doubt We the can that, no in year demonstrate as participated Those we XX investment and winning continue Goosehead shareholders on we public are have largest remained our their the triple. seen Betting for as nearly shareholders to ourselves management with

Now another turn of let's the to quarter. successful results

people. technology investment our the growth growth we us to margins of prior organic responsible saw in in our rapid to The banner thanks accelerated on years many with and to dollars clearly XXXX intact. that continue our of of and record quarter first adjusted EBITDA quarter, build generated revenue the On and XXXX the model our success consistent top and

over to invest the be growth long business while shareholder Our value and profitability even and we to has to durable produce to sustained highly term. model continue proven create scalable and heavily

Score in of For adjusted quarter, growth our by and represents XX% and more maintained the million, year-over-year once policies forth. higher organic both large as year. by which contingent and XX% the technology in quarter our both we $X.X than other of XX, represents Amazon Apple, received. million is Nordstrom, growth and strong Franchise rate in the revenue also EBITDA company driven offset respectively. of aware, It again margin industry-leading prior XX%, Disney, grew Promoter as increased for talent. our This business grew which commissions our increases renewal adjusted written first channels our commissions client $XX.X Total to to We well Ritz-Carlton, XX%, and and EBITDA and world-class and revenue from and than are investments Net contingent so as premiums any Corporate new including high force business retention renewal in and of

our Our benefited represent the helping to commissions. business quality carrier to contingencies. would on role I based receive profitability from strong growth the important highlight results bonuses we this plays strong of we add contingent quarter earn partners. These our control the in department annual like us of many and

our policy issued analysts work compliance. quality to us thereby be to commissions with the the enables impacts we in review profitability for business improves of placement partners. accuracy is important the carrier professional every before Their write contingent enhanced appetite profitability us. in enhancing of precise accuracy, to of each carrier and XX positively it with That available underwriting check risk Our matching turn and underwriting the

of investment are, results testament to in a the part, quality. our QX value in Our

further grow we summer strongest positioned ramped first in that On remain corporate quarter, the number hiring side, onboarding agent corporate seasonally new months. the net the XX well talent and in up to agents

in pace we into In pipeline continues team our franchise net source the leads quarter, excellent the well franchises that from growth added as sales to the help future. new operating our to maintain XX in addition, channel dedicated of

all and We for together our employees long-term Annual franchise operating top I've onboarding of across toward held event investing growth expanding meeting from us Team talent is people our over path States. As key owners. the Meeting our sales drivers time. setting and our United in and the Goosehead are brings consistently This noted, margins an success, on continued that recently team

As happens many opportunity is provided of members to time, employees, point better. me their long team has the how every Goosehead owners some with proud that am the very lives our that a made of them keep has I to fundamentally with and have was share and recent changed goal franchise can transforming the a our we that for struck some us additions, by lives. for our I impact to year,

highly doing business employees, ecosystem for member every suppliers. deeply time our And partners, franchisees, to referral our - over shareholder We sustained partners us management create are we of carrier that. the clear our committed fact value just to that to about is be to need and team accretive

we As are we to balance our the the confident in to ability of profitability. and look sustain growth year strong

are early have year guidance and not it our and in maintaining that for the still is guidance premiums written revisited year, we Given full revenue.

However, some we update the of to I'll initiatives. of thereafter will updates as now progress further technology at on evaluate Colby our Mike quarter turn provide conclusion second appropriate. to outlook the the and of the recent you this and call over

Michael Colby

Thanks, Mark, everyone. hello and to

provide we've some exciting roadmap Today also we major quarter initiatives the discussed the initiatives make an I'll we've technology During significant out new underway. update technology continued discuss the laid previous on on to previously, on progress first calls. and

X And our platform regions. is the in calls, implementation sales our key quarter states additional now implemented on of Mid-Atlantic on our we're integration by and of Missouri, comparative Salesforce our we the new application covering of noted generated. where in Colorado we the - rating our we states our and As Indiana, this Ohio, nationwide Northeast end is initiative, X business into plans XXXX. have the - and a steady successfully mostly Washington April over implemented prior revenue and in first launched into operations to making XX% In technology states, progress

We and rating at excited vehicle property, we've to the data of Closely our efforts the national rollout to were experienced integration original faster application our allow integrated optimize vehicle national driver made the be release April have Meeting version. announce the worked to Annual related to application, the than our quotes to in our driver Xx and data in addition for that comparative is and improvements with integration. insurance application generated rating of providers. In comparative

Its several quote for insurance as address, our clients. name, agents enhancements home proposition the such agents and to differentiated our in of and minutes. driving points, matter in acquisition home with our data technology that platform birth value both a auto highly create date accurate like clients of these, our Now, process, productivity can focused only on generate for and onboarding an and a client

SMS LiveChat, that and the remainder capabilities of such us in with advancements allow focused bringing our to our exciting features as new operation we're the the further into second our speech solution and voice RingCentral enhance centers quarter on further offices, franchise service Over analytics experience. will client text

while our artificial is of real many with issues address to our we first business. to to first intelligence actionable scheduled lever renewing believe improving business, identify in that levels entire be them across of likelihood This and focused with our will Additionally, increase allowing to insight, we're application, service client our provide service retention the in time, agents, will them centers. launch on this our the assist single client with driving use us. to for of AI retention cases And our the performance economic longest higher clients

exciting ability This technology interface be provide insurance online. by our capacity end launch engage portal is will clients. clients the towards needs manage directly for to to a quote-to-buying This plan ultimately experience quarter. a complete and to an to in their our we our their client-facing the Lastly, in online existing second us first step self-service a accounts ongoing first of

we direct new our before, technology to we've comfortable entire and we're from created our Goosehead. We're which never without ways advantage outperform team, buy-in our intensely is the developing focused of on at the competition. noted strategic a As couldn't settling culture enthusiastic result forward-thinking accomplish

progress innovate some With on to the our provide on that, quarter. our I'll technology to you forward over in invest to to an continue platform ourselves Colby first long to turn positioning organization, and And on updating as calls. color the Mark future big look we our over term. win call We

Mark Colby

Thanks, Mike, good call. to and afternoon on the everyone

new in For and period. revenues channels corporate and improvement contingent compared to was by from of we growth a our XXXX in in produced the increased This franchise quarter first the and commissions. XX% business $XX.X renewal to $XX.X prior-year increase strong both driven million

of force, policies As quarter, the a the written contingent is which the XX% million. year the a reminder, we X receive At growth premiums commission $XXX.X the XX% end of for ago. from proxy had of good each over XXX,XXX business, to year. of grew in most a first Total in year-over-year payments quarter our during increase we quarter our

million, renewal $X.X while generate Total to EBITDA in increased XX% adjusted positioning continue in XX% year-over-year grew technology, growth, EBITDA year margin franchise well year-over-year revenue employee in accelerated benefits number additional and EBITDA franchises consistent partially public by was We material hiring adjusted success. to costs. prior received, driven rapid adjusted increased agents, growth by long-term the higher investments for commissions contingent offset period. related EBITDA channels margin and operating of margin to compensation compared company of Adjusted well and to XX% both and was as us as sales

As investments the through most making we're P&L. of talent a technology the current in and reminder, cost run

primarily driven year a to XX% XX% these policies which increase expansion. rise sales quarter in sustained over year. our channel, down of was of a growth headcount improved of Breaking productivity to XXXX, in growth number prior year over from Corporate margin agent business long-term in by and the However, provide the revenues revenue, first for fuel X the increase due over results XX% and renewal This the should opportunities in ago investments $XX new renewal grew our million. the corporate term a by segment as service and period grew and time, revenue XX% past

also contingent a significantly profitable for commissions of our total increasingly due and tripling higher recorded We carriers. business written producing premiums to

high retention. to team, Our and year Net from XX Promoter Score, increased level ago continued responsible of X for service largely the our was key XX of which metric is the

a As during ago we year of from sales XX% headcount the XX, we XXXX, X agents, up March XXX of had our recruiting quarter. corporate reenergized as efforts

basis. long-term on-campus As we've largest reminder, Corporate historically sales annual as of the because we our noted for manage months business a our are onboarding. and consistently, the on an recruiting, summer But

Adjusted growth EBITDA their our over their converts higher-margin Corporate to growth in received, than and EBITDA year was up ramp primarily time, the in which Channel prior the production in continued new production seasoned margin become headcount. into agent to XX% investment due adjusted company's and versus $X.X as revenues, commissions year As revenue. XX% the period period. as and renewal in million. in corporate The the over contingent margin XXX% ultimately growth Adjusted profitability renewal offset prior sales more the EBITDA agents in grew was well

Channel generated operating the million versus greater first XX% fee royalty franchises prior new revenues in period, on driven Our quarter, Franchise higher year larger the a and generated from commissions business, $XX.X received. improvement of royalty of fees business contingent number renewal the by increased a from

XXXX, up XX% XXX March ago. of X operating, As XX, we had franchises year from

period. by margin invest and investments the we've As we've department. driven from policies higher we initial our productivity. long-term remains franchise lengthened teams partially was to to additional year ensure has franchise franchise noted franchise contingent commissions practice adjusted received, to company robust additional terms and compensation launching the and XXXX in will EBITDA continue higher pipeline we revenues and in the share. stronger very instituted previously, adjusting our fee in $XXX,XXX Channel net quarter significantly to renewal margin related by sales million, results a in $X.X continuing of to from the in their franchise in up requirements costs. increase in of prior offset term. was signing period XX% to pay That in quarter which compared of equity-based recognition Net XXXX prior due for of adjusted income first delayed our the long income The sales and best well first were the quarter year are said, quarter first Franchise When the over million XX% the per the while margin for for growth, period, first adjusted rapid was the those EPS approximately $X.X was year to period. EBITDA was in channel's results expenses the $X.XX the from prior versus $X.X Included the our million royalties XX% off EBITDA Adjusted believe and

cash of special $XX paid per we the or outstanding. X well As as March share, of cash of as to debt of business as million, holders XX and on close of April million, of $XX.X $XX million equivalents we March dividend record of On $X.XX a cash XX.

- million, XXXX and million, the the $XXX XX% on in on the growth noted XX% end. million high outlook full written total for total XX% end organic his our the between are low between total premiums we $XXX growth XXXX $XX Finally, from of maintaining the as XX% revenues Mark range high low of end; remarks, written of our to the XXXX respect with for our to representing year of of million premium and end range organic of $XX on and and revenue representing

before, noted on guidance accounting. XXXX As our based revenue ASC is XXX

full time time. we your of have year XX-K ASC under December report at on for thank a reconciliation for the can will a ended the under Form With that, we that you XXXX, We XX, I but XXX year XXX. would so performed how provide will understand investors ASC

now for call Operator? the open up We Q&A. will

Operator

Instructions]. [Operator

question comes with Christopher first from KBW. Our Campbell

Christopher Campbell

the quarter. of quarter? I the few questions, a mostly Mark I ago. said in that. were contingents Xx the on contingents like they How around a and what something were Congrats this just his contingents year things being about script much revenues guess think

Mark Colby

about That's right.

prior the this combined in year for million $X.X quarter were to million So they compared $X.X quarter.

Christopher Campbell

X drove in Got most we I guess other that first timing all guess those? should I in and of of contingents mean of Is it. quarter I not your think just, are kind how quarters? And then the And what that? the about now

Mark Colby

the either of end are the third beginning the that carrier or Historically that's Most fourth And we first been quarter quarter. in table. there's of contingencies quarter. on of received one still in the received our the

Christopher Campbell

Okay. Got it.

kind Now thinking So of . shouldn't . quarter, see . there and Correct? any about contingents. be second margins we should

Mark Colby

Nothing material.

Christopher Campbell

Got it. how Corporate that million, that And then Franchise Channel? then between $X.X the and Okay. out does break

Mark Colby

in up the some be quick. will pull about there But that. detail So more real Q it

and Channel. $X.X the million for Corporate million for Chris. $X.X Franchise Sorry,

Michael Colby

X interesting, worst kind think look quality see increasing the loss and then. we've year able to we've our Chris since when XXXX, record, that you testament - seen navigate commission to through of revenue on XXXX, of that years been it's back been catastrophic is this control over a contingent Mike What's - I is efforts every that that

Christopher Campbell

And sort to where Got of Yes. that before? I pipeline, are mean, it. then the you I mortgage were guess you mean, rectified guys was issue. have I And, you an of that? back kind

Mark Colby

Yes.

XX% you around business share, went the our of where to if at quarter share pretty look the XXXX. our So we in specifically a which first proxy, of from fourth market Texas, is, quarter for market in most good XX% is

So, yes, pivot pay kind has start to to of really and our share started ability grabbing off.

Christopher Campbell

And trends it. like of your Got in California, Florida, states newest kind Illinois? similar seeing are then you

Mark Colby

Yes. Again, share mortgage Chris, outside it's sample seen even register. smaller we've much The a of but doesn't size Texas, success nationally.

Christopher Campbell

All it. franchise then right. I quarter Franchise mentioned look one know just this time. fees what was the Didn't versus drive year? are revenues seeing helped fees. to last that between And one franchise on of initial on I the last guess it just in trends in XQ. that first this year like you Got

Mark Colby

Yes.

So us. sure this purpose. - tactics we've a business remarks in to kind of people full We've they to remarks, with start training. coming that's mentioned ready through in before Mark's onboarding model changed are fully my as and lot to we on seen a delay people of there's in make And the commit

end little of delay this that's of towards into year. so continued last And And kind what we've the year. is seen bit of a

Mark Jones

. . that Chris, the think there, . I important takeaway is the

Christopher Campbell

a better expected are in guys was like, bit seeing, little than probably you you Franchise. know I Now retention your

is is planned? lower the just retention guess behind Franchise had Channel where what you impetus than the I if delaying So

Michael Colby

- it's I we're focused on we're what focused about mean, is agents. successful launches on for our Yes, Chris.

at So with to and there's a into us. exit launching them they're a successfully having lot successful where goes onboarding that from currently

So But to fee if better and We're year. We're you primary that expedite It's career quality think our the from about agent. with focused concern fee. more can strong. franchise look expediting year, that just experience we're agents value our lifetime a pipeline very recruiting launching about of process better them is a franchise revenue. at Again, our agents, the it's recognition that rather not having focused of which our agents of for and lot justifies a create I our on a that every that agent franchise approach us kind successfully more over launch long-term successful value provides initial on every there. those than

Christopher Campbell

one, Channel? makes last sense. in Franchise one I Corporate That are may. then and And trends What you then retention seeing if just the

Michael Colby

trends consistent Very historically. we've with seen what

Operator

Instructions]. [Operator

is Our Bank Merrill Lynch. Jay next of Cohen question from with America

Jay Cohen

Chris asked of a my questions. lot

the Just There's one say fair? In there first question. follow-up in fair contingents that unusual nothing on the of with earnings. grow it to quarter. was the as nothing this in Is we look into contingent kind unusual quarter? other words, XXXX, that your Is should

Mark Colby

to this contingency the one year, we have future. new every but believe there's - will That's say. that that fair into did have We to continue reason

Michael Colby

total value premium our that for carriers. we're written creating the with Proportionate these and growth

with I So agree that.

Mark Jones

Jones. Mark Jay, it's

based calculated, way you One to opposed the written that of premium. premium as the things, on loss ratios earned they're as know, are

and ratios. based we're just run Because loss a that math quality. improves through to And on is opposed standpoint. arithmetic we're earned underwriting placement. high you're a the just the our in our value where as that ratios really statements seeing It premium the on we bit written mode So like the compliance premium. little you overwhelmed that loss is has you're financial are, loss measured investment is risk against precise of ratio when it works from growth realizing in What

Jay Cohen

Got it.

your On a some there compare typical through the your a any issue, percentage there you agent? a say, I'm it's very you mistake goes could quality way with agency? versus that certain point. interesting Is independent could business example, is typical quality quantitatively a wondering measure versus a for of

Michael Colby

Yes.

identifying just the errors the us. Our to provide that able place underwriting It's it's carrier of precision. that wants in carriers that don't process. And make being risk - beyond and the also risk type available to with about

we to it's trends expected want books, from prevent carrier lot a risk that but files underwritten - quickly very a that. loss prevent time that to are there's probably their their it with and our kind us, able So of to being and with we biggest see component they're and not they what a their systematic maybe what their be business. details agency it if even placed that's real may on system and in they the value-added being in their accurately, written. than book quality of doesn't a of our doesn't And risk those higher I'd rate is of that can control, If a kind last seeing of change quickly being that positioned system say understand are make business partners they objectives, on carrier communicate for type react would management losses the able time of

So there's that able a holding the underwriting them. and and with really about they're profitable that to to But to I'd them component of eligibility and for it's type obviously the what quickly be guidelines, business being understanding accuracy seeing react place guidelines. of say

Jay Cohen

you your have I really get contingent more I it than attractive use size because guess could just that, and typical I'll on because terms up of just follow deals mom-and-pop their independent for to couldn't agents able are word that carrier you - capability most to "better," - with Just do a the independent agent? argue the

Michael Colby

And things. absolutely. One a shine. aren't underwriting The that's just really But deliver And opportunity they there. able both to mom-and-pops I of is think the your a to where have mom-and-pops aren't about we two scale be really would It's maximize to growth. from it's material benefit profitability. arrangements. just you those about have I growing. about It's typically type think at where

Jay Cohen

Right. question. Exactly. Last Right.

you've just bad, you good and in reflect surprises, I'm either the you X so as a side, if passed On had could model. on that public or the wondering company just franchise Franchise any year

Mark Jones

is company on look It's public people in price are as business tell impacted involved public I don't people, a on industry the a specific organization I associated everyone else explicitly focus leadership. our full bit the impacted other that been It's company because the little being is we business raising think is But the "Don't you The going I doesn't doing among are. are isn't - us, they're your job." impacted a to with their no our people which franchise to here group. here to think for than at term. - aspirations very the of And we to There's team the focused. reaching to - going no that is there's nature that on a management of focus about has toward business. the very people's running And reiterate potential, hasn't the looking focused that we're we're term. of help share I executing stock us. What's opposed sort to it. for price. public it long of of continue the help. going kind sort mean, at mercenaries company Being long And distraction

Michael Colby

with agree completely. I that

Jay Cohen

[indiscernible] I . . . Maybe

Michael Colby

just our I of positive. kind they that awareness can of of from being level of has And additional that a the say feedback been kind through, company I filings read people transparency, process, having territories. that candidates and kind publicly maybe from And of say would as heightened traded in marketing kind we're of there's a franchise these in anecdotally, sense new would our Jay,

Jay Cohen

mean Yes. I a question. of about probably effect you public company. year. don't known misphrased really the the for we've I I'm a saying just being

You've a been about scrutinized year. by new people for

fact get the So as to or public. bad, public, a good back surprised year, has either Channel? - you over forget What last the Franchise look want not the sense you, I just that in

Mark Jones

We've some surprised in Franchise chock we thing that. think to housing our Channel. go this I explain point. to at heard market" They public newly rookie that back up, we and were to to third in saw "housing No of just quarter transparent that headwinds. company that able I then a was statements there's and And of sort one were of market fourth from as quarter interests has volume that, I don't listened call announced tell recovered to stock. The the up the was I what we all works. facing our people doing housing the me, fully sell-off up and only on CEO, in impacted headwinds. quarter the by noted anything some my be that end When system of yes, the address market we were on trying back third our tried the and that mistake we

lot I so And little think a surprises. a hasn't talk bit public there a of the other to that to investing I learned been little how But bit more. than

Operator

for remarks. I concludes any the the This Mark Jones question-and-answer session. would like turn to conference back to over closing

Mark Jones

on this Difficulty] our And to support. to team's joining call. delivering great a I'll your just you. everyone special. thank reiterate We something for appreciate Thank management us like just [Technical commitment I'd business

Operator

today's concludes call. conference This

day. Thank disconnect participating you and may for pleasant your lines. You a have

Goosehead Insurance (GSHD) 5 May 192019 Q1 Earnings call transcript