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Goosehead Insurance, Inc. (GSHD)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was a strong finish: revenue rose 49% year-over-year to $93.9M, Adjusted EBITDA jumped 164% to $37.4M, and net income margin expanded to 25% as contingent commissions materially exceeded expectations, driving a record 40% Adjusted EBITDA margin .
  • Core Revenue grew 19% to $68.0M, Policies in Force increased 13% YoY to ~1.674M, and written premium rose 28% to $965.6M, reflecting healthier franchise productivity and stabilizing retention (client retention 84%) .
  • 2025 outlook guides written premiums to $4.65–$4.88B (+22% to +28%) and total revenues to $350–$385M (+11% to +22%), assuming slowing pricing tailwinds and conservative retention; management expects core margins to expand even as contingents normalize .
  • Capital actions: closed a new $300M Term Loan B (SOFR +3.50%) and $75M revolver, and paid a one-time special cash dividend of $5.91 per share on Jan 31, 2025—potentially a near-term stock catalyst given shareholder returns and balance sheet flexibility .
  • Wall Street (S&P Global) consensus estimates were unavailable during retrieval; we therefore cannot quantify beats/misses versus consensus for Q4 2024 and FY 2024. Values retrieved from S&P Global were unavailable at time of request.

What Went Well and What Went Wrong

What Went Well

  • Record profitability: Adjusted EBITDA surged to $37.4M with a 40% margin, driven by strong contingents and disciplined costs; CEO emphasized “Rule of 50” (20% revenue growth + 32% EBITDA margin) achieved in 2024 and goal of “Rule of 60” ahead .
  • Franchise health/productivity: Franchise producers up 7% YoY; productivity up 49% in 2024; policies in force accelerated from +11% in Q2 to +13% in Q4; management: “Our producer base is healthier than ever” .
  • Technology momentum and AI: Expanding Quote‑to‑Issue, Aviator platform, and launching a client mobile app; using AI for communications, code testing, service call summarization, and building policy recommendation engines—“AI will impact virtually every aspect of how we sell and service” .

What Went Wrong

  • Market constraints: Homeowners capacity remained tight in Q4 (varies by state), E&S mix persists with lower commission rates; admitted market healing expected but timing uncertain .
  • Retention flat below historical peak: Client retention stable at 84% in Q4, below long-term target (~89%); corporate retention pressured by Texas exposure; improvement depends on pricing abatement and product recovery .
  • Cost recovery revenue decline: Initial franchise fees and interest income fell to $1.5M in Q4 (−44% YoY) as franchise turnover declined (reducing accelerated revenue recognition); management guides conservatively for 2025 .

Financial Results

Headline Financials vs prior quarters

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$78.1 $78.0 $93.9
Basic EPS ($USD)$0.25 $0.31 $0.60
Adjusted EPS ($USD)$0.43 $0.50 $0.79
Net Income Margin %14% 16% 25%
Adjusted EBITDA ($USD Millions)$24.7 $26.1 $37.4
Adjusted EBITDA Margin %32% 34% 40%

Notes:

  • Management highlighted contingents as a key swing factor for Q4 profitability, with a “true‑up” driving outsized contribution; contingent commissions in Q4 were $24.0M vs $3.0M a year ago .
  • Cash and cash equivalents disclosure: narrative says $58.0M as of 12/31/24, while balance sheet lists $54.3M; restricted cash is $3.7M, which together approximates $58M (disclosure nuance) .

Revenue breakdown

Metric ($USD Millions)Q2 2024Q3 2024Q4 2024
Core Revenue$73.407 $73.516 $67.974
Cost Recovery Revenue$1.875 $1.644 $1.539
Ancillary Revenue (incl. Contingents)$2.807 $2.875 $24.409
Total Revenue$78.088 $78.035 $93.922

KPIs

KPIQ2 2024Q3 2024Q4 2024
Policies in Force1,588,000 1,636,000 1,674,000
Client Retention84% 84% 84%
Premium Retention99% 99% 98%
QTD Written Premium ($USD ‘000s)$998,874 $1,028,736 $965,596
Total Franchise Producers1,995 2,093 2,092
Corporate sales agents <1yr157 277 253
Corporate sales agents >1yr156 181 164
QTD Franchise Productivity >1yr ($)$30,433 $29,950 $29,089

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Written PremiumsFY 2024$3.62–$3.82B (Q2 reiteration) Raised to $3.70–$3.82B (Q3) Raised low end
Total RevenuesFY 2024$290–$310M (Q2 reiteration) Raised to $295–$310M (Q3) Raised low end
Total Written PremiumsFY 2025N/A$4.65–$4.88B (+22% to +28%) New
Total RevenuesFY 2025N/A$350–$385M (+11% to +22%) New
Special Cash DividendJan 31, 2025N/A$5.91 per share (total $146M) Announced
Term Loan BJan 2025Legacy facilityNew $300M TLB (SOFR+3.50%), $75M revolver Refinanced

Earnings Call Themes & Trends

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
AI/Technology initiativesFocus on productivity, margin expansion; no detailed AI commentary in Q2 PR Scaling Quote‑to‑Issue; Phoenix office announced; productivity initiatives Launching mobile app; AI used for e‑mails, code testing, call summarization; policy recommendation engine; deepening QTI pipelines Expanding tech scope; explicit AI roadmap
Product availability (auto/home)Pricing up; headwinds noted, yet strong premium growth Auto capacity improving; home still tight but stabilizing; hurricanes caused short moratoriums Auto price increases slowing; modest decreases in some markets; homeowners tight but carriers opening capacity by state Gradual improvement; state/product dependent
Regional/footprint strategyBroadening corporate footprint; recruitment pipeline Opening Phoenix office; diversify beyond Texas; feeder for franchise expansion Phoenix launch confirms; deploying agents where capacity aligns; CA E&S robust; TX admits returning gradually Diversification continues
Franchise health/productivityFranchise productivity up 54% in Q2; ASP sourcing talent Producers per franchise rose to 1.9; franchise exits down; same-store sales up Franchise productivity +49% full year; producers +7%; first-year franchise productivity +76% FY Sustained strengthening
Contingent commissions$2.2M in Q2; low basis points; cautious outlook Indicated potential upside; dependent on loss ratios; expected crystallization in Q4 Surprise upside: Q4 contingents $24.0M; FY 2024 82 bps of premium; 2025 forecast 40–65 bps conservatively Material positive surprise; normalizing in 2025
Capital and liquidityBuyback executed ($63M since last quarter); conservative leverage Planning new term loan; comfortable with 3–4x leverage and quick deleveraging Closed $300M TLB, $75M revolver; special dividend paid; run-rate interest = SOFR+3.50% Strategic balance sheet actions

Management Commentary

  • “We are continuing our trajectory toward becoming a Rule of 60 company… In 2024, we ended the year as a Rule of 50 company, delivering 20% revenue growth and 32% EBITDA margin” — Mark Miller, CEO .
  • “The improving landscape for underwriting profitability should allow us to further capitalize… producers per franchise was 1.9, up 19% from 1 year ago” — Mark Jones Jr., CFO .
  • “We will be launching the Goosehead mobile app… we believe AI will impact virtually every aspect of how we sell and service personal lines” — Mark Miller, CEO .
  • “Operating cash generation for the year was $71.5M, up 41%, while free cash flow of $59.4M increased 53%” — Mark Jones Jr., CFO .
  • “We currently use AI… to assist auto drafting e‑mails… draft code for testing… summarize conversations… policy recommendation engine” — Mark Miller, CEO .

Q&A Highlights

  • Contingent commissions “true‑up” surprised to the upside; management still views normalized long‑term range at ~80–85 bps of premium but is guiding conservatively for 2025 (40–65 bps) given loss trend uncertainty .
  • Margin outlook: Expect core margin expansion in 2025 even with smaller contingents; tech investments accretive over time; EBITDA margin ex-contingents should expand .
  • Product capacity recovery: Auto improving broadly; homeowners tight but selectively opening; CA operations continuing despite wildfire disruptions; E&S currently critical in CA .
  • Commission rate dynamics: As admitted market heals, carriers are approaching Goosehead to raise commission rates to incentivize growth—supports core revenue per unit .
  • DTC pathway: Auto will likely see direct-to-consumer functionality first; timeline unspecified .
  • Embedded “middle market” franchises: Embedded with a national bank; mortgage servicer pipeline growing to diversify lead flow and reduce housing transaction sensitivity .
  • Capital structure: New TLB at SOFR+3.50%; special dividend funded via GF distribution; leverage strategy “lather, rinse, repeat” with rapid deleveraging through earnings .

Estimates Context

  • S&P Global consensus for Q4 2024 and FY 2024 could not be retrieved at the time of analysis due to SPGI rate limits. As a result, we cannot quantify beat/miss versus Wall Street consensus for revenue, EPS, and EBITDA. Values retrieved from S&P Global were unavailable at time of request.
  • Implication: Given outsized Q4 contingent commissions and record margins, sell‑side models likely need to adjust contingency assumptions downward for 2025 while raising core margin expectations, consistent with management guidance .

Key Takeaways for Investors

  • Q4 print benefited from a significant contingents “true‑up,” producing a record 40% Adjusted EBITDA margin; expect contingents to normalize to 40–65 bps in 2025, tempering total margin while core margin still expands .
  • Franchise productivity and producer density are strong structural positives—producers per franchise at 1.9 and first‑year franchise productivity sharply higher, underpinning core growth into 2025 .
  • Technology and AI initiatives (QTI, mobile app, AI tooling) are accelerating agent productivity and client experience, widening Goosehead’s distribution moat with carriers .
  • Regional mix matters: corporate retention pressured by Texas; diversification (Phoenix office) and CA E&S capability mitigate near-term constraints as admitted markets heal .
  • 2025 guide implies decelerating total growth (vs 2024’s contingents boost) but healthy core expansion; watch client retention trajectory back toward ~89% and admitted mix recovery to lift commission rates .
  • Balance sheet reset and special dividend are shareholder-friendly catalysts; run-rate interest at SOFR+3.50% provides clarity for modeling OI&E .
  • Trading lens: near term narrative hinges on contingents normalization and retention recovery; medium term thesis focuses on scalable producer growth, tech leverage, and embedded franchise pipeline driving durable core revenue growth .