Goosehead Insurance, Inc. (GSHD)·Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 delivered solid growth with Total Revenue $90.4M (+16% y/y) and Core Revenue $83.9M (+14% y/y); Adjusted EPS was $0.46 and Adjusted EBITDA $29.7M (33% margin). Total written premium rose 15% to $1.18B; client retention improved to 85% .
• Versus S&P Global consensus, Adjusted EPS was essentially in line ($0.46 vs $0.458), while revenue was a modest miss ($90.4M vs $91.1M). The company reiterated FY25 revenue and premium guidance; contingent commissions could drive Q4 variability*.
• Management highlighted a large embedded franchise partnership with a top-20 mortgage originator/servicer and outlined material investment in a “digital agent” DTC platform ($25–$35M annually in 2026–2027, ~70% capitalized), positioning for accelerated growth through partnerships and technology .
• Capital allocation was active: Goosehead repurchased $58.7M of stock (685K shares at $85.58), citing compelling valuation and confidence in trajectory .
• Product availability appears ~“80% healed,” retention is trending higher, and management sees accelerating core revenue and premium growth into Q4 and 2026, though near-term margin expansion may be tempered by growth and tech investments .

What Went Well and What Went Wrong

What Went Well

• Written premium and revenue growth were robust: +15% written premium ($1.182B) and +16% total revenue ($90.4M) y/y; Adjusted EBITDA grew +14% to $29.7M (33% margin) .
• Strategic partnership wins: “embedded franchise partnership with a top 20 US mortgage lender and servicer,” with partners representing >1M mortgages serviced and 75K annual closings; enterprise sales leads grew >100% y/y .
• Management quote on shareholder value creation and long-term trajectory: “we were pleased with the opportunity to drive shareholder value through $58.7 million of share repurchase… at a valuation level we found very compelling” .

What Went Wrong

• Revenue modestly missed consensus, and Adjusted EPS was flat y/y (down 8% y/y on Adjusted EPS per press release highlight), reflecting expense investments and mix shifts; Adjusted EBITDA margin slipped to 33% (−100 bps y/y) .
• Premium retention fell to 93% (from 98–99% in prior periods), consistent with moderating year-over-year pricing and geographic mix toward lower-premium states, which dampens reported retention metrics .
• Potential legal/regulatory overhang: a law firm announced investigation of a Goosehead data breach affecting personal information, raising reputational and compliance risks .

Financial Results

Quarterly Performance vs Prior Periods and Estimates

*Values retrieved from S&P Global.

Estimate comparison and context:

• Adjusted EPS: actual $0.46 vs $0.458 consensus (11 estimates) — essentially in line*.
• Revenue: actual $90.4M vs $91.1M consensus (5 estimates) — modest miss*.
• Management cited improving product availability, higher retention, and variable contingent commissions as key Q4 swing factors .

Revenue Composition (Core/Cost Recovery/Ancillary) — Q3 vs Prior Year

Premium Composition by Channel

KPIs

Guidance Changes

Management reiterated FY25 ranges in Q3; Q2 lowered premium guidance due to pricing moderation outpacing retention recovery while revenue guidance held, supported by improving average commission rates .

Earnings Call Themes & Trends

Management Commentary

• “We are excited to share we signed an embedded franchise partnership with a top 20 US mortgage lender and servicer… [and] $58.7 million of share repurchase in the quarter” — Mark Miller, President & CEO .
• “In 2025, so far, we have invested $10.9 million into the digital agent platform… During 2026 and 2027… invest between $25 million and $35 million… ~70% capitalized… revenue contributions to begin in the second half of 2026” — Mark Jones Jr., CFO & COO .
• “The product market has improved dramatically… we expect the product market to become a tailwind rather than the headwind it has been for the last three and a half years” — Mark Jones Jr. .
• “Our newest go-to-market team, the enterprise sales team… continues to scale, growing over 100% versus Q3 last year” — Mark Miller .
• “We view the current market dynamics as a great buying opportunity… a lever to further compound EPS growth” — Mark Jones Jr. on buybacks .

Q&A Highlights

• Margin trajectory and investing cycle: Management expects normal operating leverage in core business but flagged $8–$11M of incremental OpEx for digital agent in 2026–2027; near-term margin expansion may be muted to maximize long-term profit dollars .
• Contingent commissions outlook widened to 55–80 bps of written premium based on carrier loss performance and cat frequency; Q4 outcome range remains broad .
• Franchise/corporate productivity: Enterprise margins expected to exceed franchise/corporate over time; corporate new business commissions growth accelerated to ~20–22% y/y; operating franchise count intentionally declining as quality and producers per franchise rise .
• Product market status: ~80% healed; some key markets reopen fully in January; management expects accelerating growth as pricing stabilizes and availability increases .
• Buyback capacity: ~$36M remaining authorization at Q3 end; team may act strategically given valuation .

Estimates Context

• Adjusted EPS: $0.46 vs S&P Global consensus $0.45767 (11 estimates) — essentially in line*.
• Revenue: $90.435M vs S&P Global consensus $91.060M (5 estimates) — modest miss*.
• Implications: With improving retention and higher contingent commissions potential in Q4, consensus may need to consider upside variability, but ongoing tech investments could temper near-term margin expansion .
  *Values retrieved from S&P Global.

Key Takeaways for Investors

• Q3 fundamentals were healthy with double‑digit premium/revenue growth and rising retention; Adjusted EPS in line, revenue modestly below consensus — watch Q4 contingents as a swing factor .
• The embedded mortgage franchise and enterprise channel momentum are tangible catalysts; partnerships provide scaled lead flow and support the digital agent rollout .
• Expect medium‑term investment cycle (digital agent, partnerships) to dampen near‑term margin expansion; management is prioritizing long‑term profit dollars and market share .
• Share repurchases ($58.7M in Q3) underscore confidence; remaining authorization provides optionality for capital deployment .
• Product availability tailwind: management estimates ~80% healing with further improvement into 2026; improved close rates and retention should bolster revenue quality .
• Regulatory/compliance watch: law firm press release alleged data breach investigation — potential reputational overhang; monitor for company disclosures and remediation .
• Guidance steady for FY25 revenue and premiums (premium range lowered in Q2, maintained in Q3); management expects acceleration in core revenue and premium growth in Q4 and 2026 .