GSHD - Earnings call transcript Q1 2020 | 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 2020 Earnings Call. [Operator Instructions]. After the presentation, there will be an opportunity to ask questions. Instructions]. [Operator

turn go to ahead. now Capital Farrell, call Please Markets. the will Dan over VP, I

Dan Farrell

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

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

any except detailed forward-looking filings or and future any applicable law. We you of extent to a our intentions obligations and financial the revise uncertainties results operating to the or statements, Insurance. of the refer disclaim SEC Goosehead required for recent more We that could all the update discussion risks with to impact by of condition

position, prepared representative our financial financial We to evaluating metrics planning, for with tax potential Management performance. by core out are in consider and this are not excluding certain that we other measures call, to accordance during we our period these caused period would performance to GAAP. useful from of capital by operating amortization not discuss I structures, financial items management that non-GAAP depreciation, monitoring like and believe variations non-GAAP measures to differences be will comparisons that certain measures facilitate uses these investors when and point also business. in

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

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

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

Mark Jones

Dan, in unique Mike and to and for call. on Thanks, I'll it our Operating the to and an even then we're to results I'll taken quarter currently hand over Officer, welcome overview to COVID-XX Colby, in have growth we trends and response performance you environment. earnings the strategy, current metrics macro XXXX our our of resilience first observing. of some Chief our quarter provide the actions update

will Mark into CFO, detail go first Colby, and Our on greater our outlook. then quarter results

with context. little Let start me a

have followed that great adopt, We uncertainty. economic of times and companies turbulence especially in a strategy battle-tested

agency Our referral prosper. Goosehead been and a reliable arsenal of and on partner. technology to and tools partners teams played continue relentlessly stable focused have been demonstrate to grow that full externally and and our offense our is to using We've have and clients

we that of have any nor laid neither also support any government furloughed we report proud are sought employees. have or We to kind pay, off reduced

consistent one, examples marketing response referral don't. while our deployment We review of of full taken we clients. COVID-XX others to with Two, partners. wallet and it's to achieve Mike of systemwide detail. few in up, focus even more if share show best our include: virtually, will have But practices actions a

many of sit new while with so partners existing the game add ones, share As a result, we competitors out. our gained and

mortgage from benefited strengthened activity. refinance have We

to buyers. powerful proposition value is equally refi clients to Our as it is

lead unaffected source a Three, we by client shocks. market are enhancing that our gaining is referrals, approaches to

are we as challenge. come We already this through that moat our coronavirus strengthened competitive be formidable only will confident

and respectively. Adjusted for XX%, $X.X QX represented down strong in of the was year-over-year first with ASC expenses some and we we quarter core million, accelerated a as XX% public that growth XXXX year very platform XXXX company built, start in quarter revenue the continue to premium have under delivering of EBITDA expenses. the from QX, along The powerful XXX to growth into seasonal one-time slightly some validate

to fully our quality metrics. to all entire at that working all of of resourcefulness maintaining a our the is the had extraordinary team finish we human This yet the while Despite remotely, transitioning and have capital example exists levels of strong service quarter another Company.

strong We continue over year-over-year April XX%. preliminary growth in to at growth with very premium drive estimated

very and attractive demand is our industry stable. Underlying in

you If you our lines from something, to insurance, or personal drive have buy us somewhere live either or competitor.

remained XX% retention client constant Our QX. at in

about business to revenue renewal As annual two-thirds business to tied rest new XX% business of is the a aggregation. reminder, Roughly our Historically, is recurring is similar of annuity is and business. new growth market, housing distribution referrals. have technology remainder while and the and well-tested built client to a times and good bad. proprietary in the in in drive We've unique model heavily invested is

know we XXXX we guidance are today, our reiterating premium prior and revenue for what on growth. Based

under expect our does Let can we over-deliver. unchanged to guidance, of be. play at let give numbers best do annual If actual you we point. will in that this change, expectations we future you the represents estimates promise it what but Company me remain games so that our our with estimates remind know, guidance. When the our not not We we

This and partners that is existing be experience economy, confident these ability our through that we unprecedented ones continue well Historically, the will marketing are to is perform continue referral to our in human to their times. we've demand. While technology quickly enabled people pivot highly a efforts. to of will demonstrated challenging softening COVID-XX when recognize event to our allows add laser-focused proprietary an capital we and by productive broader that extraordinary impact negatively our we

new can coaching then across to to which of practices, virtual out develop functions rolled Franchise we'll our Channel. program, Company Our and expand look continue this the and we highlighted through pilot into XXXX an success the be as quarter, technology refine initial sales to Channel and beyond. sales the Corporate to best test initiative Last processes and incubator and

While them the whole. channels as one Franchise Corporate on we separate paper, integrated and manage are

Our this the within success significant success evident and continued in agent future. in the dependent model Franchise Channel of we is is investment the this large continued continue Franchise Corporate support part The to and integrated in into opportunity further leverage Channel, in in growth productivity the to our Channel. see on the of

is the on converts to premium mix In understand term it Franchise business earned As how a to the important continues of to on more our shift terms. Channel, policy royalties we XX% renewal revenue. first Franchise of and the to Channel, XX%

as So generated premium growth. growth is and larger between share revenue Franchise new relative in the there Channel, of gap growing a will a business be

see Given revenue rate, we approximately XXX% our renewal. as from retention a converts growth client a policy XX% to mechanical new

drives So tomorrow. strong premium leading premium view most strong today, we is growth future important the revenue why growth indicator as That revenue our growth growth. of

XX% both premiums quarter last quarters. Corporate increase XX%, first channels. In of the $XXX acceleration quarter quarter new business the saw agents. million, increased training increased an quarter, year. This the the growing substantial the the a of for Total year-ago of accomplishment given the and responsibilities each premium the in premiums of business Corporate for growth increasing from bears franchise four in Corporate premium growth In with new Franchise XX% of the new XXXX, we prior XX%, in placed business quarter. premiums showing over were was of and Channel increasing mentoring with rates Franchise the

to from Operating time. of the first increased the at increase year-ago period. adding continuing franchise Total XX% in quarter succeed XX% in franchise recruits X,XXX, the to higher-quality were We're of an over quarter the XXX. franchises end

quarter Channel the Corporate agent sales increase ended year-ago an of from Our XXX, the period. first headcount of with XX%

in in business the and remarks. of Colby innovation on technology operating April through detail his offense, and clients environment key current performance and on our investing with maniacal Our on provide focus partners. metrics Mike our and external more remains referral some will activity talent,

thank moment franchisees their of team, a couple take employees management to want efforts, incredible our the I last months. and particularly over for and

could laser-like I excited Our growth hard and long-term focus success more prospects. has about work, our made possible adaptability. through external be not their

a market. team, business industry-leading disruptive motivated to proven and a highly of and model have a gigantic technology share talented continue We to grab

call the turn I'll to that, Mike over With Colby.

Michael Colby

behind Mark, the facing hello and everyone and call. sales technology discussed and to development, Thanks, on key new productivity, the ability agent strategic our experience outperform our cost a on to management. On on and calls, client retention, initiatives driver software application I've prior industry client focused

Beginning a through the allow virtual investments last insight to of at discuss and March COVID-XX the for were of into already the recruiting sales, from corporate employee primarily XX% crisis, offices agents home. April. seamless Today, environment, transition begin mobilely a business our to to made This base, week working to the results I'd asking provide like all we've and response team. density month to the decade over we approximately workforce represented XX, some the by specific of operating employees, reduced corporate equipped who infrastructure our

in-person support team partner field efforts, mortgage efforts technology, operations to activity importantly, marketing this Additionally, referral our and video corporate and largely group conferencing database technology, all marketing indefinitely suspended meetings. in-person to visits, Leveraging allowed continue we for travel, our be uninterrupted. cloud-based

homes. our of environment challenging to program components remained made voice logistical the investments we involve the operational, this workforce our By from Because fully their challenge virtual cloud proper seamlessly the solution transitioned a began to in largely a training with fully initial also home week, be move equipping to productive the albeit hardware platform be March virtually. made of corporate remainder security, work the secure transitioning was early team to our and conducted virtually. and needed of XX, team to and task The investments the that technology and business following the converting a in two-week in in-person more entire of to environment work-from-home was our cyber

business team we've with and this are very completely we been has our performed. pleased five the of call, As for weeks, virtually operating how

our successfully training to off kicked and new April Our team we training XX. curriculum in-person be virtually, agent delivered on converted training successfully

great but that April, and new agent We equipped the were to sell training grew again team, conduct insurance. May. licensing a also ensure bureaus from and respectively. plan to was with This our of on-boarding month franchises training we For worked to carriers estimate that XX%, corporate and team XX% our creatively operating in effort trainees virtually agents

business revenue, production, XXXX, over new Corporate premium growth to real up the both good up time XX%. is consolidated and is not in total and our GAAP Franchise Compared channels, which April is a proxy, but

market demonstrate operating are mortgage share as slightly, to that rapidly adapted levels changed agents our virtual of successfully has mix great true April. lines grab where lead they increased technology While client back-office deploying same cross-selling a service our our the we other increased at these maintain is and that purchase of production consistently decline, retention new of business and to leads experience, in growth April environment been The in referral Client to XX% even stable to our have functions grown of XX. month a and client and NPS able for remained leads. centers

making to to gives we've operational year. In the initiatives strategic we'll their discussed investments, team. growing crisis unprecedented last monumental are remain team calls our on in previous able make that continue for through to our April maintaining expected effort development capacity, through But and strategic the team, for systems the successfully. confidence The navigate is this our that be to a investments to compared continuing the of years XXX% addition appropriate information we us playing in on and infrastructure year. Navigating preparation timelines offense

and I'd to when like follow and do back offices to our their our government welcoming entire safe and team echo ingenuity comments challenge. work, cannot recommendations. hard I in and it's that to to will but look We CDC we operations their Mark's thank team predict resuming be, forward for when this to normal so. adaptability will responding also

to the our provide color performance. to Colby I'll call on over financial turn Mark that, With

Mark Colby

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

been first our ASC under A recognized a discussed quarter provided first accounting as For schedule ASC as results if against will for accounting comparability be quarter to XXX earnings XXXX purposes, supplemental release. of ASC XXXX in on my has comments the XXXX our XXX reconciliation XXX.

The strong XX% growth, important of premium revenue of $XXX million. leading premiums, increase the million Channel. to faster-growing future shift For of and time and This growth in to convert for continued one, This renewals. new agent business channel XX% our and written as our premium an implies segment XXXX, to included business ancillary fees being embedded rates, quarter after of the to the royalty the revenue year renewal XX% first to growth significant core from is indicator new business increased generation continued toward driven retention $XXX premiums future productivity increasing Franchise XX% which ongoing Franchise to premiums by million. $XX in mix our growth high XX% growth total at Corporate franchise

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

and year-over-year and policies success. positions rapid both us for well Our consistent premiums growth in long-term

for Revenues revenue were grew X% XXXX the recognition If million. million which to period. the QX skewed by the $XX.X XXX, each was million compared $XX.X ASC under prior-year $XX.X reported quarter to revenue period, used different in in is

reported under revenues More ASC XXX. importantly, core increased million, $XX.X to XX% if

a reported under operating royalty levels prior by from end from XXX, year a in plus had with quarter, quarter, continued strong productivity, sustained first and an Channel retention. from XXX ago. up increase the X,XXX year franchises, fees XX% in At increase combined driven of new we results our the XX% business year operating of generated up of and growth ago if In with higher core the first franchises, from total the XX% million renewal of ASC an high revenues $X.X franchises, the Franchise

We channel. this strategy build on within national of continued to expansion our

total franchises ago. to a compared our Non-Texas year represent franchises, XX% operating now of XX%

our continuing pipeline stands very Franchise Our currently and remains team, to XX. we which strong are grow at recruiting

the the the of increase was first and ASC growth. an increase from Corporate year Channel to continue reported of team under by an driven quarter. at end revenues high in of $XX.X the planned will quarter from our of the year-ago retention. in XX% this continued drive the period, XXX, year-ago quarter, We XXX, increase were first in If growth XX% core agents million invest of sales an levels Corporate throughout headcount the to

are a sales recruiting of the our historically because for reminder, college months As largest our Corporate Corporate Channel, for the summer onboarding.

the We of our via invest evidenced in virtual coach agents, in continue by Corporate to as agents investment Channel Franchise our success sales increased our program.

former during quarter. Additionally, support roles we agents of full-time group into the moved a franchise corporate

on XXXX $X.X the accounting again well higher and EBITDA the skewed quarter. compared with recognition period, million to different EBITDA million Adjusted for under quarter XXX, each adjusted was $X.X year-ago by If in in million ASC calendar primarily people was versus reported expenses revenue contingent commissions to company and and lower certain in due earned the decline based one-time of accounting operating as timing XXXX, public year as investments technology, expenses. $X.X

and that quarter one-time included the expenses the of of incurred previously $XXX,XXX Specifically, over quarter of expenses were accounting XXXX. $XXX,XXX in over second

under our now As of a each quarter lowest first XXX, expect we ASC will be earnings the seasonally reminder, quarter year.

operating quarterly long and should While not margin do the our natural over leverage continue see business business to manage has a we term, short-term the gradual on improvement basis.

overall advantage over We term. profits maximize to manage trade We emerging business margin future to near-term take pressures to will gladly off growth. invest for the opportunities long of the

of term to of maintain In notes XX, expects to on $XX balance The facility $XX million, line sheet. of which cash in committed of $XX.X and adding XXXX, note and million term outstanding in of the term note, our over XXXX, the refinanced to credit Company an to funded structure, $XX.X million and of balance unused revolving to X, fully million, the draw and on Company million $XX equivalents payable remaining facility the an As $XX credit order Company June million ready agreement. payable cash be note and is down March million had cash revolving credit its $XX.X efficient million balance $XX its XXXX, sheet. March capital payable new

to to relates of to balance returning our shareholders cash As unchanged. sheet execute our it excess growth planning, remains needed strategy not our

However, current out decided of until environment, abundance dividend of have further economic special payment the an notice. delay we of given a caution to

to outlook total noted based with today, Finally, what full-year we XXXX respect maintaining and remarks, we his as Mark revenue. in on premiums our know written are

expect to billion, expected XX% $XXX the and are representing growth to placed under XX%. million be We XX%. growth premiums in revenues of XXX be between million, Total continue to of $XXX $XXX organic XX% representing written range million $X.XXX to ASC of total to organic to

well people a effect on margin certain moderating as as to expenses, XXXX. in in will have and Investments one-time technology, continue improvement

even Our business of and positioned growth times uncertainty. remains consistent well sizable during to deliver economic

as We monitor impacts will closely and necessary. on any that will our continue to the an situation COVID update may and provide have business, we

now With listening, we up that and for will the I'd for like lines everyone to Q&A. thank Operator. open

Operator

Thank you.

We Q&A session. [Operator will now Instructions]. begin the

of Please is question KBW. first The Meyer ahead. go Shields from

Meyer Shields

was everyone. a impact agents is need channels in talk good Great. to greater the what dramatically I increases strong. be about you whether evening, and ability incredibly of the both of Thanks, terms This and get in seems selectivity. rising good to could the more bit that hoping little unemployment afternoon, for

Mark Jones

We Corporate are much and times these employer. drawn are the to on strong in particularly stable seeing very strong people side very a interest, where

So, we're interest. seeing definitely more

not our been pick of in able way, compromised cream standards -- fact, are We we're have in crop. any hiring the have our the of to though,

there only positive impact is on side. the So Corporate

On would that? the too think Mike, to you Franchise with side, tell. I soon it's agree

Michael Colby

Yeah. your agree I echo and comments. would

a at market labor Our never compromising labor it's loosens or up, level. standards. always tight market high we're standards are evaluation those whether very held a Whether

Meyer Shields

near-term we've because Is of heard of to Okay. cash any potential a flows? granting more have flexibility Fantastic. to likely on And constraints. question, financial my that second lot insurers policyholders impact

Michael Colby

Yes.

these carriers benefiting both them. way do and that clients agents sell what is that going they're they're to we've the the for So, far a so where heard from in this

us. for So, again been told going be what neutral to it's economically we've that is

Mark Jones

they're help is is to agents. as clients strong to trying as that it equally their commitment Their the to

to be impact should no economics. our there So

Meyer Shields

Thank you Fantastic. so Okay. much.

Mark Jones

Thanks, Meyer.

Operator

from RBC go of next Dwelle [Operator me. question Markets. -- is The pardon Capital question The Mark ahead. Instructions] next Please

Mark Dwelle

Yeah. Good afternoon.

question little substantially have bit detail first of little greater of more I just expense. a to the rate were had increase mean would Can benefits fairly that some I employee bit it a the and what up in expected. The related talk probably there? compensation about and was I than you drivers

Mark Colby

Yes.

For one, we see employees year in. XXXX. so was, some February, of year call, the is the as in of where their thing also employee I other in our year were it's raises related forward annual that QX last most a will just QX And held continued however, hiring to on meeting kick it's and mentioned had of our kind expenses of that to comparison. development in in was those over meeting this $XXX,XXX fast annual in time But,

Mark Dwelle

Are Okay. more but of is sales cost to approach this need customers? in maybe any incremental kind in incurring I you view prospectively, modified less quarter, that incurring of way are -- the prospecting and you you mean just the

Mark Colby

the be with opposite. we'd To the anything, If can't making No. having rather so hands be those get-togethers, host and to We're honest, and shaking those we it's in happy those lunches. out field, introductions. do virtually, hours

those So, if QX. But types other in we're can that help referrals places see in those marketing funds expenses looking in think decreases ways drive ways. other anything, you'll to growth I client into in of reinvest for slight some

Mark Dwelle

people as changes that refinance of or prospect mentioned Okay. seeing transactions. in policy you And able to behavior you, deductibles change a as far just then, any to limits trying navigate by new or changes business had I that current or the the you've what mean, renewals driven have customer environment? in in been have Are you been lot

Mark Jones

different fair refinance insurance new accommodate Mark, sure on, And focused and we're usually way. with seeing covered price. working we're making country, we're also but properly -- across first we that we're foremost, our are seeing business, at is so that I client policy. many that because not seeing mean, agents the a it companies the price, business, competitive we're at the a can right with purchase

So, effort employees. so we for have far, not our savings of coverage any seen reducing type by

would quality In that. control fact, our processes prevent

Mark Dwelle

questions. you. my Thank all are Those Okay.

Operator

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

Mark Jones

would very I joined us everyone today. that of thank the just results. like proud to We're

you shareholders, our you, for do for hard and to very working continue your so. are today. And we'll time thank We

Operator

today’s call. This conference concludes

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

Goosehead Insurance (GSHD) 2 May 202020 Q1 Earnings call transcript