GSHD - Earnings call transcript Q2 2019 | Goosehead Insurance, Inc

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Operator

Greetings, and welcome to the Goosehead Insurance Second Quarter 2019 Earnings Conference Call.

As a reminder, all participants are in listen-only mode and the conference is being recorded. [Operator Instructions]

I'd now like to turn the conference over to your host, Garrett Edson. Thank you.

begin. may You

Garrett Edson

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

to remarks, formal of today. our and begin need may to forward-looking part differ we Before managements various are The forward-looking actual estimates subject discussion in that predict everyone I the our risks, include materially our of remind statements projections which difficult of to expectations, today assumptions, discussion forward-looking results expressed based could statements, the from which on cause in and or implied other those to uncertainties are and statements. factors are that

uncertainties These be and that statements financial you recent of are intentions the required extent not Insurance. future could operating law. condition any SEC any update results or reliance except We filings and disclaim all or to detailed the of with upon for to the to We impact Goosehead placed should of our obligations discussion revise the performance and statements, refer risks forward-looking by applicable undue therefore more them. a guarantees of future not

and being website portion call Company's the this addition, of version Relations webcast ends www.gooseheadinsurance.com. is archive Investor call available at will the In after an be on shortly the

Jones. CEO, the turn now Please With call like to that, go ahead. to Mark over I'd

Mark Jones

earnings to welcome our Thanks, call. Garrett. quarter second XXXX And

organic as over growth on and Mike levels I our our of the call President latest done continues and I'll innovation enhancements the rapid Operating our of how to high overview then year-to-date, support an will our update will on to we've technology who you provide as calls, our sustained, strategy. Chief long-term Officer, discuss Colby, and quarter and hand ongoing previous well profitability. As

Mark our second quarter follow Colby provide Our more will and CFO, then and results. year-to-date details about

demonstrate accelerate. XX% $XXX difference the our our to compared between to premium revenue quarter, effectiveness the to growth We continuing of execution Franchise continue During premium $XX.X to XXXX. contributor heavily growth to and delivered the far million with growth was the capabilities we more million, the and and largest of mix quarter growth revenue of Channel. second second strategy the XX% business to of by being weighted written to new The of

of a grows in share XX%, XX%. renewal reminder, first our revenues the is to Franchise As share our of earned term while revenues Channel

With converts XX% revenue have of the we renewal growth, Franchise future as contributing earnings to quarter, premiums and for revenue that spring-loaded new business year. next Channel this

another strong to in XXX, XXX. count will to quarter our technology invest initiatives team We with our quarter. unit and XX% progress second terrific franchise franchise heavily in our XX% had talent discuss sales operating of technology our grew minute. also Total enhancements with a the as to XXXX continue results. from franchises grew And Mike key

franchises prior We Channel, One, nationally unit things. we bearing our where four improve; are growth combination in very encouraged productivity, of is up two, to our higher productive recruiting seeing in to programs we are Texas continue by quality agency in the productivity support three, compared training four, ability investments and of are and fruit; development the enhances new the time; become are the training a agents Franchise pre-launch in which and is quickly. over to year, post-launch

to from XX% Corporate sales XXX. grew XXXX headcount

and in best Corporate in Franchise what absence element channel our is are and Channel processes This where out our and then do our Channel our our refined, rolled a our accomplish of the sales not franchises As nationwide. could the technology, We are advantage. our crucial a we Channel. of reminder, is competitive to tested practices Corporate

For million Score technology generated profits XX the Net more our XX%, our and EBITDA business offset to prior client investments renewal year our in and in we XX% increased and rate second XXX,XXX, as from than grew by to year-to-date. talent. adjusted force of $X.X industry-leading quarter, Policies the maintained of world-class XX% retention Promoter

Premium we and half the in onboarding half has the we excellent across feel been growth are in new on all of look back XXXX, like to first of top significant we've the talent As XXXX we firing company. strides line and made cylinders.

worths. on continue significantly to to our and grow our further profitability rapidly long-term and also continues the that all own position and business like I these our to you. remind ourselves done side, and the We of expand company. and technology of committed market fully time. the company share, the investors our holdings majority management XX% to the innovate to of also aligned We net success fully over each this would of with to has be remain responsibly We approximately overwhelming of individual represent

said management quick then buck to devoid ship. and before, is our a jump I've team make As out of mercenaries

our leadership We reaching invested have to lifetime. to long for during worked company potential, together to to my what in intend is time fully continue industry it a today full this build very and be

of and and goals our accelerate continued in we're the for Franchise our each growth about grow confident improvement Our more productivity achieving the to year. We continues Channel. day premium more seeing

family thank like Goosehead we business to day who every would the as I build worked story American of tirelessly this great member every success together.

to grateful advantage for competitive powerful I'm most our are opportunity the leader. people service their Our and

some over our of update the you progress to to now call recent Mike of the initiatives. technology on I'll turn

Michael Colby

hello and everyone. to Mark, Thanks,

online under progress was the development. interface initiatives, prior to an on client a to our announced clients, of ongoing manage engage robust accounts online. technology we've innovation needs that brief our our omni-channel we've strategy their today along capacity quarter. am And current announce Consistent insurance excited their path, discussed strong us We directly And call updates our making and with client-facing I initiatives self-service and over engaging continue with to first update an build to set We to second in clients out on completed provide portal. a previously. the in on we excited we're portal version our to our that technology intuitive our for

Our sign first version upload new have communication portal account, will on focused way supporting and an intuitive to create is a documents. documents client of the process their and client clients preferences, their manage where a onboarding simple

progress of service request. our time monitor real service able their all Additionally, place, they'll engage their in via be of one open policies multiple agents’ functionality, to and the carriers view insurance across chat

a of we is mobile in the develop our Android portal operating and and currently coming expect rolled to this rolled out are subset and the optimized have This iOS working this We've new a mobile app to to clients out weeks. on to clients systems. all

client work a excited is on the new occurs issuance available and and improved processes. meaningfully it's valuable of within strong expect indeed client adoption version these that we first policy our to clients to focused make processes, this experience. and We're While noting tool onboarding worth majority new service the our

made to carrier self deeper we'll be service system we to we've complete partners, blocks in clients database integrations early engage to robust to to with a and that portal. are the these be building issue integrations carrier our Investments used able eventually system along for us in more provide directly tool capabilities online. As invest provide within to-date, experience will investments our the with providing online quote continue in a

to providing partners, for referral agents further differentiating of services We the and a proposition agent also to industry and Goosehead complete choice vision engage ways establish in referral experienced value number is This be homebuyer. us believe insurance in online, their serve progress and the U.S. toward home our the resource direct to to the model today. helping unseen client one a our the in facing in partners as new allowing exciting the portal process can our clients to provider closing the of consumers

Second, client centers. our intelligence application improving first retention on launching our focused artificial we've strides significant in made service in

Salesforce new analytic also user predictive significant that we've model be capabilities. is AI interface change backbone the within AI management was our organization with Over of the compatible the and of the work, entire migrated We've application. year, requiring first feat, small will to the training half that no built development a efforts. This this

insight Now, the be component developing our a during we service time in the actions on This out weeks. retaining rolled best scheduled are probability maximize to to client agents is within next interaction real the the that user to that with us. will of client coming provide interface live

retention on we last As call, the economic is the managing mentioned client lever. longest

However, applying and it there use quality including this for new value-added many our sales recruiting, in processes. cases are control technology,

solution, voice we our the of capabilities to its continues system more AI in compound. will the learn as tool this predictive integrated data accumulate and power As and

comparative generated. two these solution in initiatives new integrated In over rating our to taking XX% line, revenue available our addition rollout we across the adjacent is states, of goal states continue comparative our Currently, major rating the are mainly that markets. where to in solution states larger new to business has

to unyielding and their in you more the entire excellence We look comments support calls. on with I'd to family Mark's defend advantage. commitment Goosehead our of future echo like and to change initiatives, for forward thank order willingness technology consistent manage and through their to new competitive these grow their enthusiastic to providing updates

some provide on call I'll turn second color that, quarter. Mark to our Colby over with And the to

Mark Colby

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

renewal strong the XX% these written Not and due compared prior driven This potential to For levels embedded by Channels, million the of we growth grew Franchise business. second both Franchise revenue our growth in improvement and in is $XX.X Corporate business quarter to yet in being million future premium new new year to in revenue significant period. $XX.X from of Channel. high reflected numbers XXXX, the was organically

written future growth, grew during quarter, to Franchise crucial we from million. XX% to premiums, XX% premiums increased revenue convert our written and renewal $XXX a is implying royalties XX%. indicator significant Channel as revenue premiums growth the increased future to total of Total the XX%, premium leading business year-over-year new which

the As total largest growth. written Mark revenue growth driver mentioned, premium the this of between was and delta

of quarter, the one the we a policies At XX% over increase from force, had XXX,XXX in ago. end year

long-term to We continue us success. well consistent year-over-year positioning for generate rapid growth,

compared higher margin XX% year driven the in adjusted channels, revenue XX% was to period. $X.X adjusted in margin to prior while million, growth EBITDA was XX% renewal Total year-over-year EBITDA both Adjusted by hiring corporate and investing agents investments material EBITDA sales additional was company compensation franchise public additional and costs. technology employee agents, benefits related in and in to margin impacted by of producing the

in continue of P&L. the remain of agent to to our and technology our these of talent growth. run cost support And franchise focused through investing We most the in high immediately on levels investments

winning are these confident expansion we margin profitable sustained will help reliably remain as to long-term fuel more we convert the premiums. in However, investments business new renewal growth revenue premiums

the primarily increase by the second new Corporate and corporate of grew to of sustained quarter our XX% segment a $XX.X million. revenues This due due in retention. was headcount high business XXXX, to revenue, increase XX% In revenue over period year prior renewable a agent to XX% in rise in clients a levels driven growth

Promoter from XX a key our our team Score, the of of Net metric at exceptional the retention year driver ago. service which up Our key stands is and XX,

our XX, June year graduates recruiting recent corporate XXXX, months. agents, one during up XXX of by XX% seasonally the we driven hiring ago, As sales of from had college strongest

years. manage high the production three our sustainable levels These agents’ into margin new of focusing higher ramping in renewal resulting of production long-term consistently, a convert over up noted revenue, on on profitability. we ultimately basis, levels increasing time, two we've typically As to business

Channel's our they they overstated. most on do technology, new only are develop expansion recent our be ability best help and and our franchises to existing to Franchise recruiting our rapid cannot national to Additionally, efforts contributions our in Not Corporate developments. crucial Channel's practices train

agents. prior million. renewal offset the adjusted investments growth than company's year consistent the was prior revenues, XX% growth $X.X EBITDA corporate was in of continued XX% growth more Adjusted year Adjusted Channel grew EBITDA margin in the primarily The which in EBITDA period. in over sales with the to Corporate the to period due

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

renewal, embedded proud our and growth current enthusiasm in revenue as share our business are We growth of to in Channel, future new premium business lies of very but revenue Franchise new XX% revenue the long-term XX% XX%. the to our business share the from grows in of our converts

XXX year operating from As XX, XXXX, of franchises, had prior total franchises, and XX%. June up we up XXX XX% the

refinement the seeing franchise been processes, production. levels in our continue training higher we have As invest of we to recruiting, and of onboarding significantly

rapid to remains advance are robust this we to and recruiting franchise team continuing pipeline channel's franchise grow our Our growth.

from fee for margin was franchise our their year was period, Adjusted initial of royalties Adjusted impacted by the XX% higher revenues mostly prior Franchise versus was department, terms. period. EBITDA the Channel offset million, the policies sales by year and and in quarter second XX% in EBITDA $X.X adjusted the the up franchise XX% investment EBITDA in margin while the in recognition to additional related margin renewal prior

second in income in net $XXX,XXX period, IPO per entirely of equity-based our XXXX. the the compensation were in adjusting costs. compensation second of in in XXXX prior cost related the $X.XX XXXX loss was results Net non-cash EPS compared million XXXX these Included year equity million which a in approximately When of $X.X share. quarter for second adjusted $XX.X due quarter expenses, was quarter was to to

months by fees six to by renewal our the driven fees, agency received. and contingent higher revenues million, grew business, increase the of XX% in commissions generated franchise commissions, For $XX.X XXXX, royalty an

grown It and half solid of rock grow remainder million. responsibly positioned prior from of has for and for year half a period. first EBITDA beyond. adjusted our margin the to months rapidly of was written in have premiums first adjusted the million, been prior first XX% to XXXX $XXX the Goosehead, from $XX.X up Total Total we XXXX and XX% for well for while very the six XXXX remain to XX% rose XX%, the of XXXX EBITDA year

points, of XXth, of outstanding. debt March, had million well $XX paying million June $X.X dividend of after the declared and $XX our as As cash equivalents cash million in we as of Because our to EBITDA shrunk interest improvement. growth, debt allowed basis to has point basis to rate a plus which XXX LIBOR strong XX lower X.X, of ratio tranche access us EBITDA a

further early in XXXX. the remainder de-lever to we our evaluate of and during expect We will XXXX, cash position leveraging

year growth remarks, his the Finally, confident $XX as growth day million are premiums written each full of to million year, noted Mark of of on outlook $XXX respect for between the about with million, written XXXX goals and Total representing and and more in our achieving we placed total of for premiums our XX% organic on grow million, representing XXXX XX% $XXX for to revenue. the on to of the the range. end low of XX% on end the revenues XXXX end end range. the the and range Total XX% high $XX range between organic high low the maintaining

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

XXX under XXX. ended understand time, will investors But our for report will a We provide under the Form at ASC ASC XX-K we can on so that XX, December XXXX. the reconciliation year performance

up I Operator? that, the thank Q&A. your With now And for for open call time. you we'll

Operator

you Great. maybe mute session. by you sorry, accident. from Thank time. on Jay, here Our you. question-and-answer One I'm America. be time, may we Please At is be go more mute. conducting first question Jay, this will Jay from a Bank of [Operator Cohen ahead. Instructions] on

in is line here. Your queue

go from to next Christopher KBW. question go Now, ahead. from Campbell we'll Please here

Christopher Campbell

Yes. gentlemen. Hi. Good afternoon,

Mark Jones

Chris. Hi,

Michael Colby

Chris. Hi,

Christopher Campbell

Hi.

guys So about Mark, opening mentioned a quality you the like to of doing agents. I your had trying script are work in think behind get lot scenes, you higher

expect like start to on seen then, you if productivity would like have So impact see the your for I not, you when where up? a to guess -- franchisees? ramp And like tangible that

Michael Colby

Mike. Chris, Hey, this is

levels from seeing certainly higher are higher We quality and of agents. these revenue productivity

the us takes very full optimistic, you in, early fully positive. be if to indications to years two Now, burn new franchisees it remember, these leave three to a but very

but better training. after recruiting supported out initial get our through our it's So training combination better of agents, and them also having they process, prepared of better a

So optimistic we remain very there.

Christopher Campbell

got Okay, it.

you seeing like you the out agents are positive? the like so productivity did seeing higher And Are more maybe in cohort? newer XXXX you a like of year first than

Michael Colby

focused organization. certainly on it's we've incremental We've is capabilities we're Well, training that I franchising. as onboarding nothing an since on seeing been And to recruiting continued consistent and mean a started end. I mean, capabilities, progress been improving improvement. our us this improving our new

Christopher Campbell

has insurance? interest leads you that And thinking like like bit with to -- rates a seeing the business little your I'm like further lower year-to-date. a impact like the like on then And about like people down like in are homeowners great. pickup significantly is decrease? rates Okay, refinancing having What decline homeowners LIBOR come expecting rate for with Fed just

Michael Colby

Without market which have market, and highest Texas, lead I lot Is out But very market, housing speaking agents largest adoption. very a do we our housing to from broader I our we technology has could of healthy user that where tell to strong the in you certainly can are seeing the in share, -- level flow. highest generating with the are levels housing the market, we're a be. it market tailwinds, is think rolling high

it's in -- what the we mean our kind of in where we're time. of of I worth any So feeling register, impact outside and regardless look market of at Texas, here Texas of extended the low over relatively least market, share if pointing even out you housing macro period certainly any those at that type cycles, don't not of volatility

Christopher Campbell

just surveys in the for a to seen somebody Thanks auto color. it. in and like Thinking we've like huge switching market, got -- like what things like And of that, kind about the auto. like rate. the drop BLS is Okay, then that just

come that's and that heard like is is that. mean shopping of So shopping behavior rates less I we've bag that online driving mixed what like down, then have driven things more kind is a because but

in behavior for just a trying in auto idea you leads? of an get to are I'm shopping So pickup like seeing,

Michael Colby

independent take mix maybe, decide our client relationship the that's client the our changes, rate seeing relationship And stays we consistent consistent -- of as beauty For And with with or as being of us, why retention. broker an levels to client stays mix that carrier reduce it us. carriers an the the is Chris, rate, production, in you're Goosehead. of but independent those

Mark Jones

And Yes. I'll Chris. add,

you our those might feel the than cross-selling of impacts home agency. normal back we If leading to strategy little go-to-market and the auto, with think less a your

Christopher Campbell

it. much a a is of a maybe non-Texas? got few numbers million like breakout can Is And premium $XXX you Texas and questions. how Okay, that give -- just of there of breakout

Michael Colby

of but kind down see say if tomorrow, out We our will don't In over new the of come But that by business Texas break don't at we time. come state, numbers. renewal, and disclose by breakout state. that level, premium in queue, those and and you'll is a of in Corporate, out high about that's XX% kind Franchise breakout you I'll look

Mark Colby

Yes.

Christopher Campbell

Okay, ahead. would And Go like what -- been got it. sorry. have that I'm

Mark Jones

Sorry. agent new of The coming Texas. outside from of our majority overwhelming is growth

Christopher Campbell

got guys been like Okay, what of, into year I'm ago? to that trying would you idea are how get have And a states. other these like quickly diversifying it. an just

Mark Jones

Yes, sure.

a I ago, you if back look So XX% probably year it's think -- XX%.

Christopher Campbell

it. got Okay,

of XX% XX%? and your ago, like it's business have year So now been a would Texas

Mark Jones

Yes.

Christopher Campbell

Okay.

Mark Jones

expanding rapidly we're outside of So Texas.

Christopher Campbell

Okay.

Mark Jones

franchise of of outside XX% at XX%, and Texas, them into If continued XXXX. were our look has launches, you between I think XXXX that certainly trend

Christopher Campbell

one Okay, one. great. then And just last

the outside, things where you think and I improve mentioned think get like that, could had looking to we distribution retention. high on other a improve where inside that business? the business just Are I there to like you would you So think areas more it that the beyond ROE invest guess you investing you're like

Mark Colby

helps something and business. us holds next across that's continuum every of that improvement It's we're Chris. I culturally the across what to entire business, as organization; I on just the highly an true that committed between our us mean and distance are And maximize competitor. aspect innovation. the we focused think

Mark Jones

it's Jones. Chris, Mark

use Company we throughout faster, -- scattered more are teams actually not the get do jobs only things job, to have these experts, solely higher but their better, on productivity, is the it technology we smarter, innovation. lower people focused are do how cost. doing And do the are We whose quality, that how our

experience experience a this is believers curve. strong of little of very of legacy being bit part in Bain aggressively kind the manage curve. an of We to the a So

as day. And so go happening every things we these are constantly

Michael Colby

Chris, evolution. about we just the consistently we talk more to point. we're on talk some you XXXX, the it's XXX we really the technology to Mark's add that that initiatives a of that incremental accumulation out over changes had of drivers doing are technology over those thing know in enhancements And and But We of ways, year. -- big one time every call. rolled about technology the those our in different of lot the biggest over small course of

we're focused it's on. something that So always

Christopher Campbell

Well, color. luck the thanks quarter. the for in of third great. Best Okay,

Mark Jones

Thanks, Chris.

Operator

Jay The from go next question is Cohen from Please here of Bank America. ahead.

Jay Cohen

me you now? Can hear

Mark Jones

hear can you. We Jay. Hi,

Jay Cohen

Sorry.

it mute, I I So thought acronym, an was but it there out. figured button was was a mute. it

Mark Jones

old, you're you're tells that fact The that not getting sure you Jay.

Jay Cohen

so. all certainly Hey, some did out you're like and seem mine, investing were think retention. well. so Chris' I I of worked It anyway, them questions of to listen does to improve

is investments quite higher where is? to retention Can you keep these Your a get or it of much already just kind it high. it designed

Mark Jones

gain retention XX% of point on single margin. a the even really, is valuable really when you're Well, at

are -- will confident we one what and to sure got, of they things. always the we center is do of and they making so want at invest in that continue are. so. we're always a our service That's world to but reaching lot we involves And center, So we are we've more what for do. our best service why And that heavily reasons the the that protect in

on packaging make hen sure to reasons the is is hard have with there in of where henhouse push a them line there our so you clients, fox policy that with that no may and one of agent no business. we the another has another That's --

the peppering on -- helps retention. we with your client focus that And so line of that, agent We so for business. other constantly that is

so can incremental are the good is get we initiatives and any gain worthwhile. It AI is Our retention. helping longest-lever, with

Jay Cohen

franchisees to getting your larger tougher the people is find to expected firm, it'll of That's franchise it. relative but it for improving. and that quality I you tougher over then of be of seems be have to And number guess helpful. right better. suggested a And Got time Is matter a simply recruitment, the would that I the recruiters?

Mark Jones

the it, of so just the Jay. And the large. over we might smaller, time. see part lot that's of That's was population audience target dilution size, But a if

have right close to XX,XXX think leads I our now in we pipeline.

huge And rich environment. target a so it's just

better trained. our franchise saw... people -- sales We can are the we Run better so We -- disclose we have this. cost, had

Jay Cohen

Sure.

Mark Jones

We increased by... headcount

Mark Colby

XX%.

Mark Jones

franchise with signings... and XX% sales increased

Mark Colby

XX%.

Mark Jones

Right, XX%.

Mark Colby

Yes. And year-over-year. that's

Mark Jones

Year-over-year.

So do how we're just -- focused everything this We're we at we're better do. do we getting better. constantly on

Mark Colby

Jay, we that I model see state across entire that country. when of recruiting think in, to as more are success lot working efforts, stories across with have we're a who and helps you your agents success every the the really seen

with helps that. definitely it So

Jay Cohen

Got it. guys. you. answers, Helpful Thank

Mark Jones

Jay. Thanks,

Mark Colby

Jay. Thanks,

Operator

further closing there As for over comments. any like turn to [Operator Jones I'd Instructions] are floor the back to no Mr. questions,

Mark Jones

quarter We to dialing and for Just best would great years future. a more your like to And importantly, the great and appreciate your deliver support. several appreciate third to everyone do call. got thank into into our a our interest you've the commitment

Operator

call. today's concludes This conference

may You this your at lines participating. your disconnect for you again time. Thank

Goosehead Insurance (GSHD) 4 Aug 192019 Q2 Earnings call transcript