GSHD - Earnings call transcript Q3 2019 | Goosehead Insurance, Inc

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Operator

Greetings and welcome to the Goosehead Insurance Third Quarter 2019 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to introduce your host Mr. Garrett Edson, Senior Vice President of ICR. Thank you, sir.

begin. may You

Garrett Edson

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

I based difficult need actual today. our projections upon remarks remind be expectations could we everyone in include Subject performance of those of formal are Before to and as The statements. materially the begin from guarantees and undue part uncertainties to discussion predict, Article in results not forward-looking or differ to statements that reliance our and of cause placed estimates statements implied in management These of future them. therefore statements expressed forward-looking factors which on various may to forward-looking today not assumptions, which are the other are that should risks,

point out measures in and uses that this management the by measures planning, and financial all accordance GAAP statements, would that during future required like applicable We our of you risks that our extent with non impact forward-looking or or findings performance. financial gap to SEC, could to disclaim more condition obligations we and of I refer intentions detailed these with except goose prepared of operating any any evaluating the certain recent results for the monitoring discussion will law. update revise We the to uncertainties call, not are insurance. financial to when discuss also

caused other that to these non-GAAP business. differences are comparisons operating we and by certain not performance representative depreciation structures facilitate period investors for core be consider and of items excluding to metrics variations potential tax financial position by in amortization our period from We management capital useful to measures believe

measures For including financial more information today's financial to measures these measures non-GAAP most earnings GAAP you release. of the reconciliations refer to we regarding our use of comparable

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

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

Mark Jones

Thanks call. Garrett quarter earnings and to our welcome XXXX third

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

year-to-date third and CFO Our about and provide results. then will Colby Mark our more quarter detail follow

bellwether most Let premium strength by me important the focusing start our growth strategy: the of in assessing growth. on core organic

and XX% third million. quarter we quarter million of revenue grew respectively. by premium XXXX million to Year-to-date $XXX growth the $XX.X year $XXX Revenue we premiums over XX% During million. XX% to prior organic grew to from the $XX.X delivered and XX% and QX

and quarter third term was Franchise growth are revenue for of royalties of X/X the During a where the Channel our realized our in of our XX% policy on premium first renewals. XX%

and realize this client the mechanical the XX% ability rate retention renewal. growth policies loading We spring revenue in us causes our confidence term growth recent of gap in in it in While a a which creates maintained our of new quarter top bottom and earnings future the most growth toward first high between growth Franchise future. this of degree premium Channel to gives revenue a converts as weighting business of the to line business new and

this in extremely Investments in perform to we've technology. success have in we've achieved Channel. is due and this to made talent channel over in been our our continues Channel Franchise Channel years last to our our the The the Franchise growth several year Corporate Overall investments primarily well. also accelerated critical

drives mentors corporate make capital; goal that us tests serve and as team Goosehead increasingly achieving of believe position of leadership. intellectual and for and the best performance franchise We insurmountable of and the industry for ideas to development those wish our our these trainers barriers coaches our to well envy new industry. technologies; standards investments set our Our partners; create practices who us challenge and

of quantity to franchise while XX% operating headquarters. count unit quality owners grown XXX new aided our work Both by QX to business to at end generated attending decision quarter by to the the training grow of modules franchisees institute At agency our the on-site corporate new and XXX. XXXX grew continues franchises additional had prior XX% being from our to

Goosehead. and In support are in and to coaching enhancements addition recruiting training in accelerating major productivity technology onboarding contributions making new franchisees' a difference

the sales continue to the Channel franchisees that of by robust Channel. continue successful of coaching supported phase. pilot Corporate headcount some in most talented of resources initiatives of XXXX our Franchise I'd leverage the our to Earlier in we this we another Corporate pipeline from as agents. recruitment a in channel. implementation year that to XX% XXX like We growth introduced is to one retain corporate recent drive have our just to also accelerated franchises of to grew year a to our sales highlight

partner a and with of corporate them a franchise As take best sales management and agents relationship development optimization on the will process agent management. provide program coaching group on lead time detailed practices part referral of closing

our program in investors We a of is in asked period increased that by production three potential industry-leading is creates channels The time. in business in pilot their completion of short competitive the fully Franchise franchisees more difficult has our an is exceptionally Corporate results to both do Channel the this without incredible We manner for achieve not after our the it. answer competitors months participating support This I'm across integrated replicate. could advantage XX%. both. channel average have which manage a Channel frequently program to distribution priority. tremendous we and than traction developed by our

to saw addition and earnings growth top quarter a accompanied year-to-date achieving expansion. In we by a strong growth during the margin also great line

a During XXXX. and technology again client maintained than the talent. period more the to the retention $X.X prior year of million rate of EBITDA XX% compared margin XX. our XX% XXXX adjusted industry-leading increased adjusted we prior EBITDA to $XX.X Year-to-date grew while adjusted XX%. in XXXXXX year Promoter and quarter third XX% renewal XX% investments increase in our EBITDA of world-class our once to QX Net grew in from by Policies XXXX to XX% force in expanded from and XX% million business to Profits offset generated over expanded and margin EBITDA Score to adjusted

service client Our With maximize retention and our ongoing the of Colby able driver quarters for team's guidance we're commitment Mark year tightening a with X in profitability. in is to details premiums. will full excellence our books a minute. long-term now key of to ensure that which helps we're you growth XXXX share

to the and significantly we what strongly remain finish to well to rapidly expand over We business and continue we the and at grow share do XXXX out out market while that responsibly our start term. our set profitability achieving ensuring expect positioned to longer

strong a very In summary, quarter. had we

team to continues simple strategy, and execute clear a our with business have effectively. We very a

create on human defensible to time the in but laser-focused you we others competitive that our wish we've criticality technology have keeping of pedal leave our result so in highly the the of that our getting is every of leadership advantage on started. We privileged without over team day. our industry. the and what said just distance who extraordinary and have mode All I'm to peer commitment as us. built ourselves industry to place between with recognize feel maximum the all proud and of and are capital We to keeping investors trust the The we is metal it accomplished for a on may competitive field being prize challenge

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

Michael Colby

and Mark everyone. Thank to you hello

integrations Over center portal intelligence already capabilities of cybersecurity the build development we've of service on deployment and that investments of platform solution XXXX areas and of voice application our course our to considerable client-facing cloud-based data enhancements significant our us sustain allow advantage. into artificial focus migration in technology and a source competitive made including a to

I'll all our you with the of of developments map. Today new areas these provide an status exciting investment update road technology of within and

XX% out where XX of rating go data in been over to for covering production agents the integrations. our now project separate states auto longer to Our deeper last-mile what manage to process lines home integrated the we within new runway attention of turning sales our call our system and issuance business. entire eliminating business rolled a We're technology integration from source to can the comparative process. platform need proprietary integrations to carrier carrier quote This and additional has requiring complete a has

well to via However direct consumer portal choice on customer online this are and the our to first model ultimately way bringing we which accomplishing our

update later. an provide on I'll

lines present flood quoting with outside increase will extremely under the first insurance soon us flood comparative the homeowners' insurance and on rater our auto carriers are obtain data and retention. capability with workflow. focused likelihood zone we're Additionally to quotes starting during along give to flood and anchor just of bringing agents client bindable our flood valuable other insurance to to of more integrations additional integrations the to an business business line with ancillary of of Direct the homeowners source primary way determinations account efficiently

capabilities information database us view information include mortgages transaction. quarter new we've the the buy-side Over the for title company enhanced both the of third the realtor activity sell-side and of XXX-degree the a our of course giving mortgage purchase and home to

our voice this go-to-market execute have U.S. platform on states this strategy of have how to feed all solution and hit activity data overstated. up available. becomes data RingCentral of The XX% some rate XXX% home ability in environment. power XX% force in we're into lender working we our our sales solution increasing on to migration our the amplifies We cannot on the the integration data we be data the this to and more of purchases and mortgage the realtor of new it as completed While currently

new allow omnichannel and experience customer our more features and Now our is service including centers to features like advanced analytics broader text chat the voice us monitor the of completely. that focus into more implementation

also to to the deliver expect service our allow tools to these only time. We to continue center for clients not over us but in realize benefits scale best-in-class service

We intelligence and within agent Salesforce data on retention first organization application the client This service display rolled in the to retention. increase within the our required user migrate service us and artificial focused develop interface of center. suggest entire have client retention actions to out will workflow compatible successfully to retention the next-best drivers likelihood that build model to realtime the system the the a

to into analytic focus feature Our for call provided be capabilities of model voice data remainder new by relevant client and before. the XXXX the as data predictive the of such the enhance the by points during XXXX mentioned interaction including sentiment will

continues of As more data the we in analytics. predictive accumulate model to precision level learn the increasing the

where additional also attention this to cases which many drive apply we can to turn technology our for use results. We there business are

As developed our version of focused call last our mentioned portal on client onboarding of first new on the clients. the we've

an experience clients sign From day clients they easily out set onboarded supporting X where we can policy new documents. client provide robust applications client using upload intuitive portal. to are our all portal our in our and and Now their

allow XXXX that unavailable these now choice able through until major the to of to These together enhancements quote the provide the multiple this are meaningful important user now over experience. portal. we've individual on we of our in online completed as the tools as year to as been capabilities have to the that and major in efficiency that compete model. will But well releases system the technology integrations and us improvements back-end projects issue And with eventually system carriers cutting-edge as to initiatives us self-servicing allow broaden focusing policies being new portal with

development far of mentioning enhancements internal in our that increased XX% XXXX. we've And many team this by worth it's agent from also so accomplish To feedback. originated the

and aggressively attracting win big providing best to and compete brightest business. time continued I technology all experience possible continuous future efforts a by enthusiastically ability improvement in of development to The focus people over and updating culture on look gear our and our driver best space and Our forward you into high our the progress rapid our highly engaged innovation. to of remain customer commitment of in keep the supportive is the on the big on calls. talent excellence and

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

Mark Colby

afternoon call. good on everyone and to the Mike Thanks

compared quarter period. to third of million $XX.X grew to XX% revenue organically For year million $XX.X XXXX in we prior the the

driven in premiums revenue As million. business. the an and noted important leading was prior and improvement indicator to new XX% is in from Franchise growth future strong quarters Channels by during the both Total Corporate quarter renewal our year-over-year written of increased growth $XXX our which

once Our premiums premiums new year ago. one revenue over XXXXXX after end XX% business implying XX% in and on policies again Franchise to of written increase growth the At force to we grew renewal a Channel embedded as basis. quarter renewal XX% total premium royalties one from we increase had our the from future convert an XX% ongoing year significant

$X.X long-term adjusted revenue by to million success. We both in continue generate grew renewal margin consistent year-over-year growth channels. to driven for year-over-year us higher well XX% EBITDA Total rapid positioning

from likewise higher additional and technology. EBITDA renewal sales franchise more the Channel prior in employee year margin ongoing as compensation to agents sales expanded investments Adjusted in in margin related revenue to the period of agents corporate than XX% investing and particularly the in hiring benefits Franchise XX% offset

costs invest significantly the in and agent investments immediately technology the of and our to support of these to continue through run as a growth. franchise talent levels high of And most We P&L. our reminder

premiums long-term the are our growth to We to profitable agents' as investments corporate investing winning help also business we in confident premiums. new convert expansion of high our revenue reliably We productivity Franchise further to sustained expand these within support continued will more levels remain Channel. and renewal fuel margin role

franchise high direct a ongoing our in we've is This share and ability for from very investments converts growth innovation revenues XX%. result renewal over past well made fee the business agents quarter our a prior and of new royalty fees XX% of generated the in fees royalty a increase higher initial the new $X.X Channel improvement XX% our driven period franchise by generated believe driven versus of Franchise million this Our of the We our recruitment new of and prospects to to business in third from business grows operating outstanding Franchise year an as renewal the share year sustainable the onboarded. from Channel growth margin technological in larger years. greater talent higher number on business few our bodes franchises franchises by consistent long-term generate support revenues of and revenue to

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

We recent our are franchise improved in significantly higher investments in to support see of processes continuing franchises. to launching of thanks targeted production terms months and levels onboarding

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

terms the year XX% policies than up more for year adjusted prior Franchise channel thanks the a is period come for XX% XXXX of renewal was related prior the grew the Corporate to the Channel growth as higher-margin $XX.X margin our their our Adjusted strong Channel million. continues XX% prior EBITDA third to the quarter was from in $X.X to revenues to quarter period million year believe yet It third and while and we was period trajectory. Franchise this XX% quarter best over EBITDA royalties segment In banner its in investments. versus the offsetting our

primarily revenue rise increase due sustained XX% corporate to driven revenue client by new headcount renewal of in and agent a high a to was XX% in levels retention. business growth due increase This a in

a our XX. Net at service which the of retention exceptional key Score team Promoter our of metric driver is and Our key remains

two long-term on sustainable our revenue XXX up during increasing agents' profitability. a seasonally agents convert our of typically solid months. higher-margin given another up recruiting to driven ramping ago levels was As XXXX strategy by one had production as new agent These production levels It XX hires of three we in And resulting from sales XX% year our focus strongest new predictably enviable over recruitment. years. time into renewal year of corporate for September we reminder

rolling expansion. noted best for innovations refine Channel and and the Channel's our with success for our nationally to our our Mark barrier team crucial Franchise competition. corporate our beta a entry test We training our is rapid as sales backbone before doubles and in fortified Franchise out initiatives Additionally his technological Corporate to to provides us our It remarks as potential with Channel. practices

period $X.X quarter XX% the XXXX corporate per $X.X scope third in EBITDA period Adjusted million Adjusted compared compensation year to the agent third headcount which period. versus of the quarter prior $X.X to the primarily prior million EPS responsibilities. equity-based the investments Corporate million due Channel in up growth income out Net year margin the EBITDA was of in in was the year was XXXX $X was share. company's the of in sales backs million from continued adjusted while $X.XX prior in in and their of XX%

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

Total months $XX.X while period to uniquely year the long while from an prior grown year public have positioned $XXX our adjusted grow XXXX. premiums XX% XX% prior adjusted the company the was and of margin nine EBITDA XX% absorbing in for to EBITDA costs nine months year Total entire rapidly XX% million. term. of from for the XXXX responsibly in rose first even the XXXX for to million We written remain over up

$XX.X debt $XX.X outstanding. we and of had equivalents as cash cash September of million XX of million As as well

quarter. prior strong has to growth times adjusted approximately X.X leverage the shrunk in further X.X Because ratio continued our times our of from EBITDA

and leverage further cash expect and XXXX. to evaluate in position early of our delever remainder We during XXXX we'll the

XXXX noted full respect we maintaining with premiums written to Finally and our his outlook raising our are year in remarks total revenue. for Mark our outlook as

Because and organic between increases million previous written of XX% placed. expect million low million premiums the end representing now range written between written $XXX the on total XXXX of total in of the The $XXX premiums end Franchise growth the to of for and we high range on total Channel's $XXX range. of premium $XXX the placed XX% was million

million on the XXXX end representing the XX% to million total organic expect and $XX XX% growth for low revenues on between of of end range of high the We the $XX range.

XXXX success in setting outstanding continued deliver to beyond. continue results us XXXX for up and We in

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

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

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

Operator

[Operator KBW. Our comes Campbell with first question Instructions] from Christopher

Christopher Campbell

I the expecting. we on And little too. in than guess question It bit I lower numbers a kind was there question is of had first the were a just growth. distribution

the operating like it at looked then looking count franchise this was like when it last quarter So quarter that XXX. was I'm Texas declined It it quarter-over-quarter. And looks XXX.

guess how the distribution about within drove that going growth channel? market? we just in should then what think each decline forward home And I So just

Michael Colby

Chris this is Michael.

As very outside it of of diversify relates Texas. our operating state to to effort a production the we've made franchisees Texas the focused

uncorrelated the them is carrier outside agent partners. we're our by key to to provide state. of outside more provide XX% that coming In business with has our because of risk growing that underwriting and a is that of It's fact important can a book we And diversified of over from business to growth do new trying reason of Texas. book for the

in of actually focused efforts proactive we any recruiting state Texas have year. not taking this had place the So

a sufficiently effort getting being that's some said where business. an of state recruiting that carriers planning provide the we're with we're resources more But of strictly book the think toward repurpose I diversified. Now back of our And to Texas. our a is being diversified to book to point

Christopher Campbell

agents? agent Texas Just it. mean big XXX then get? can be count Got I you? is terms the How can I guess how like for And just of like in you big it XXX like

Michael Colby

less mean Texas It's and agents been our of since operating of inception. So I we're Texas Texas in households. than in concentration X% we've largest

transactions go-to-market we of only our sophisticated executed strategy Texas of in And in else. If in our competitors. you, And less way we've been is than our longer we, were involved new XX% go-to-market anywhere strategy a year-to-date. home more loan than than more, deploying any

incredible So outside an recruiting in in agent our diversified a here the we more growth have we specifically our still book But have state Texas been in efforts our growth with carriers. to for an runway runway for Texas. incredible efforts still. of Texas again accommodate growth have

Christopher Campbell

then just, I'm Go ahead. I sorry. And guess

Mark Jones

one This Mark Chris Jones. can is thing? just I add

the look number are our by and you of that's take any to State state into you at Farm account at in the agents bounded that a which of One Texas market important is of for portion at they have Allstate look match. those the think or I large things you captives if of in good is the the product the or state numbers look

So a they're carriers they're more because platform carrier market between of they have We XX% address the XX% and broad our hand a on of a very with base market. portfolio. somewhere to addressable and and finite have ability the very limited our other single-carrier

the So times we've and growth of X currently X, opportunity even than represent. sort got captives the literally more

Christopher Campbell

you of the has outside what Texas. And it have of agent then outside come mean XX% sounds growth I new just guys from like had Texas of

premiums what of year So versus percent non-Texas a days are I ago? guess these

Mark Colby

But it's yes got, written right. makes Texas. we've our Well QX that about of about were franchises still premium XX% in in of total it's Chris. outside you're of And the Texas XX% launched XX% book. about, up we

Christopher Campbell

a right? Was that was that, I higher thought year ago? that lot was a what And

Mark Colby

to Yes. about was XX% It XX%. Yes.

Christopher Campbell

between they And then levels the how Are I guess do commission vary similar? taxes?

Mark Jones

and for premiums Commission states. are. across auto similar. homeowners levels average are vary They Premium

Christopher Campbell

the have guys you level these commission And days? what's average

Mark Colby

XX% roughly I approximately it's new XX% on business and on So it's think renewal.

Christopher Campbell

like terms then benefit any they're seeing higher pay to mode? carriers some willing of pressure a of the the you are seeing, line carriers a commissions personal for to as Are upward auto and to see in being some auto you of these in switching are mean kind growth you of starting that growth? I get in more And adequate

Mark Jones

that. I and wouldn't adding kind of by We're say talent talent top growing movement rates. growth and that's growth we're not necessarily our of force in on of levels top we see bringing At really of feeling see also kind where we productivity by we're our growth what feeling in focused any type is agent on.

Christopher Campbell

I to then about terms mean of any a but probably like are And know XXXX there guidelines relative like early should terms thinking little in bit XXXX we start guidance in I of premiums revenue growth?

Mark Colby

in XXXX. Yes. the future guidance we about QX to high invest expect We'll growth talk of our to for continue past We're and foreseeable continuing levels into XXXX.

Christopher Campbell

volume Okay. mortgage last lower. Got And rates then you pipeline? seeing That's guys it. just interest you Are seeing, sales the good Are a one mortgage are in like lenders. guys benefit for one. and

Mark Jones

your seeing it. I do little muted You're that this with rates a to last Certainly something been the compared seasonality. have to normal year would has certainly seasonality year. And suspect

Christopher Campbell

make to understand. sure just so I And

would be means this like that year a for... low typically of like right So time

Mark Jones

typically right. housing may be typically, your you're driven I rates. say of market. going by, would driven decline seasonal it's into the Well less potentially for kind the It's But by low season

Mark Colby

than Yes. looking us at quarter-over-quarter. sequentially we year-over-year And reason about talk the always that that's rather

QX. we And compares year to to so year continue as focus that of just kind last and move into last on year-to-date QX

Operator

Instructions] there [Operator and questions. time this are gentlemen no further Ladies at

comments. concluding to So any Mr. the I'd for pass over floor like back additional to Jones

Mark Jones

to you. express quarter. We'd Thank look fourth your strong just for a support appreciation to like and Thank our you. forward

Operator

teleconference. you conclude does disconnect gentlemen, your thank for this may Ladies this and We today's your at lines you time. and participation

Goosehead Insurance (GSHD) 3 Nov 192019 Q3 Earnings call transcript