Sign in

You're signed outSign in or to get full access.

TI

TWFG, Inc. (TWFG)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue increased 30.8% year over year to $51.7M, driven by commission income (+20.7% to $43.7M) and outsized contingent income (+371% to $5.0M); adjusted EBITDA rose 91.7% to $13.8M with margin expanding to 26.8% as contingent commissions and investment income boosted profitability .
  • Diluted EPS was $0.11 and adjusted diluted EPS was $0.19; organic revenue growth was 20.5% on strong new business and rate increases .
  • 2025 guidance: revenues $235–$250M, organic growth 11–16%, adjusted EBITDA margin 19–21%, reflecting normalization of contingent commissions and full-year public company costs; management highlighted potential upside if contingent trends persist and M&A closes earlier/larger than modelled .
  • Stock-relevant catalysts: conservative guidance (contingent commissions modelled at 0.45% of premium vs 0.59% realized in 2024), improving carrier appetites/loss ratios, and a robust M&A pipeline with signed LOIs; risk factors include property market instability in California and tariff-driven auto repair cost pressures .

What Went Well and What Went Wrong

What Went Well

  • “TWFG continues to establish itself as one of the fastest-growing independent insurance distribution platforms, with industry-leading organic growth and margin expansion” .
  • Carrier appetites stabilizing and loss ratios improving, enabling new business growth; Q4 margin outperformance fueled by higher contingent commission income and timing-related delay in certain public-company expenses .
  • Q4 organic revenue growth of 20.5% and adjusted EBITDA margin of 26.8% reflect scale benefits and efficient operating model .

What Went Wrong

  • Elevated public company costs and branch conversions increased salary/benefits and G&A; salaries +97.8% YoY to $7.7M and other admin +69.9% to $5.0M in Q4, with management flagging further normalization and conservatism in 2025 margin guide .
  • Contingent commissions are variable and hard to estimate; management is using 0.45% of premium in 2025 forecast vs 0.59% realized in 2024, implying margin headwind relative to 2024 .
  • Property market instability (California Fair Plan crowding out private capacity) and possible tariff impacts on auto parts could pressure rates and organic growth variability within the 11–16% range .

Financial Results

Core P&L and Margins

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$39.6 $54.6 $51.7
Net Income ($USD Millions)$5.2 $6.9 $8.2
Diluted EPS ($USD)—$0.08 $0.11
Adjusted Diluted EPS ($USD)—$0.15 $0.19
Adjusted EBITDA ($USD Millions)$7.2 $11.7 $13.8
Adjusted EBITDA Margin (%)18.3% 21.5% 26.8%
Net Income Margin (%)13.2% 12.6% 15.8%
Organic Revenue ($USD Millions)$34.8 $47.3 $43.6
Organic Revenue Growth Rate (%)7.8% 7.6% 20.5%
Commission Income ($USD Millions)$36.2 $48.2 $43.7
Contingent Income ($USD Millions)$1.1 $1.4 $5.0
Fee Income ($USD Millions)$2.0 $2.9 $2.8
Cash from Operations ($USD Millions)$6.1 $11.7 $11.6

Results vs Estimates

MetricQ4 2024 ReportedWall Street Consensus (S&P Global)
Revenue ($USD Millions)$51.7 Unavailable (SPGI daily limit exceeded)
Diluted EPS ($USD)$0.11 Unavailable (SPGI daily limit exceeded)

Segment Breakdown (Total Written Premium)

SegmentQ4 2023 ($USD Millions)Q3 2024 ($USD Millions)Q4 2024 ($USD Millions)
Agency-in-a-Box$237.7 $261.6 $246.1
Corporate Branches$18.8 $77.6 $61.6
Total Insurance Services$256.5 $339.2 $307.8
TWFG MGA$45.0 $60.9 $53.6
Total Written Premium$301.4 $400.1 $361.4

KPIs

KPIQ4 2023Q3 2024Q4 2024
Consolidated Retention (%)91% 88% 91%
Personal Lines ($USD Millions, % Mix)$239.1 (79%) $327.2 (82%) $292.8 (81%)
Commercial Lines ($USD Millions, % Mix)$62.3 (21%) $72.9 (18%) $68.6 (19%)
Organic Revenue Growth Rate (%)7.8% 7.6% 20.5%
Cash from Operations ($USD Millions)$6.1 $11.7 $11.6
Adjusted Free Cash Flow ($USD Millions)$6.0 $11.5 $5.7

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total RevenuesFY 2025—$235–$250M New range
Organic Revenue GrowthFY 2025—11%–16% New range
Adjusted EBITDA MarginFY 2025—19%–21% New range
M&A Additions (model assumptions)FY 2025—+$3M revenue and +$0.7M EBITDA closed Jan 1; +$20M revenue and +$5M EBITDA with mid-year convention New disclosure
CapExFY 2025—Lower than Q4 office relocation peak; focus on Philippines capacity expansion and automation projects New commentary

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Technology/automationInvesting to enhance agent productivity; signs of improved underwriting appetites Continued pipeline building and scale; public company cost ramp expected Technology core to model; automation initiatives planned in 2025 Up
Carrier appetites/loss ratiosUnderwriting margins improving; appetite increasing Contingents trending toward normalization; market opening for new business Stabilization and improved loss ratios underpin Q4 growth Up
Public company costsInitial disclosure with IPO completion G&A +71% YoY; further increases expected Q4 margin benefited by timing delay; 2025 margins guided lower on full run-rate costs Up (cost)
Contingent commissionsN/ANormalizing from historically low levels Outsized Q4 contingent income; 2025 forecast uses 0.45% vs 0.59% realized in 2024 Up in 2024; Conservative 2025
Property market (California)N/APrograms/wholesale growth amid hard property market CA capacity challenges; potential wrap-around product; need better wildfire models Mixed
Florida Citizens takeoutN/AN/AEvaluating expansion; post-AOB reforms improved stability but legislative risk remains Emerging
Tariffs/macro (auto)N/AN/ATariff-driven parts/materials inflation could influence auto rate path; range drives organic growth variability Watchlist
M&A pipeline/multiplesIPO awareness boosting pipeline Signed LOIs aiming 1/1 close; robust interest Small agencies 9–10x EBITDA, larger 10–12x; micro portfolios at 1.5–3x revenue Active

Management Commentary

  • “Our Q4 margin outperformance was primarily due to higher contingent commission income and a timing-related delay in certain public company expenses” .
  • “For the full year 2025, we expect total revenue to be between $235 million and $250 million... and an adjusted EBITDA margin in the range of 19% to 21%” .
  • “2024 came in at 0.59% of premium as far as the contingent received. And right now, in our forecast, we’re using 0.45%” .
  • “It takes two to three years for new agencies to reach profitability... the 100-plus new branches we launched in 2024 [will] contribute meaningfully to our longer-term organic growth” .
  • “We are seeing stabilization in carrier appetites and improvement in loss ratios... carriers are once again accepting new business” .

Q&A Highlights

  • M&A valuation context: small agencies at 9–10x EBITDA; larger at 10–12x; micro producer portfolios 1.5–3x revenue (~5–9x EBITDA conversion) .
  • Organic growth drivers/risks: auto rates (tariffs on parts/materials), property capacity (California Fair Plan pressure), and reinsurance renewals (moderate expectation) underpin the 11–16% range .
  • Contingent commission mechanics and conservatism: varied calculation across carriers; optional lock-ins in Oct/Nov; 2024 realized 0.59% of premium vs 0.45% forecasted, implying potential upside if trends persist .
  • Geographic opportunities: Florida expansion post-AOB reform (with monitoring of new litigation proposals); California MGA approach contingent on modeling/reinsurance support .
  • CapEx: elevated in Q4 due to HQ relocation; 2025 CapEx focused on Philippines capacity and automation; expected below Q4 peak .

Estimates Context

  • Attempts to retrieve S&P Global consensus for Q4 2024 revenue and EPS, and FY2025 were unsuccessful due to SPGI daily request limit exceeded; therefore, estimate comparisons are not included. Management’s guidance and commentary are used for forward context .

Key Takeaways for Investors

  • Q4 quality of earnings was strong, with outsized contingent commissions and investment income driving a 26.8% adjusted EBITDA margin; without these tailwinds, management guides to 19–21% in 2025 as public-company costs normalize .
  • Guidance appears conservative: contingent commissions modelled at 0.45% of premium vs 0.59% realized in 2024, and M&A contributions assume mid-year convention; both provide potential upside if trends/pipeline materialize faster .
  • Organic growth momentum remains intact (20.5% in Q4), supported by improving carrier appetites and rate dynamics, though auto tariffs and property capacity could widen outcome dispersion within the 11–16% FY2025 range .
  • Structural mix shift: Corporate branch conversions raise salary/G&A but support scalability and margin over time; watch near-term margin normalization as these costs season .
  • Geographic optionality: Florida Citizens takeouts and California capacity solutions via MGA/partners create growth avenues, contingent on regulatory and modeling developments .
  • Balance sheet/liquidity: YE 2024 cash and equivalents of $195.8M and undrawn $50M revolver support M&A and tech investments .
  • New agencies from 2024 recruiting/expansion are unlikely to be material near-term; maturation over 2–3 years should sustain medium-term organic growth .