Today's Viewpoint: A MarshBerry Publication

GOOSEHEAD ANNOUNCES 1Q2022 EARNINGS

Goosehead Insurance Agency, LLC (GSHD) reported 1Q2022 results with adjusted Earnings Per Share (EPS) of $0.04. Consolidated revenue rose to $41.3 million which is up 32% compared to the 1Q21. This compares to consensus analyst estimates of $0.02 in adjusted EPS and $41.7 million revenue.

Below are notable takeaways from the quarter:

  • GSHD’s total revenue in 1Q22 grew organically at 32% year over year to $41.3 million. In 4Q21, the company reported 16% organic growth.
  • GSHD reported core revenue (New Business Commissions, Agency Fees, New Business Royalty Fees, Renewal Commissions, and Renewal Royalty Fees) growth of 37% year- over-year to $36.5 million in 1Q22.
  • The company’s 1Q22 total written premiums, the leading indicator of future core and ancillary revenue growth, increased 41% to $451 million. As part of the total written premiums, franchise premium increased 48% to $341 million while corporate premium increased 24% to $110 million.
  • Total written premium growth was driven by new corporate and franchise agent growth, franchise new business generation, and increased retention. GSHD’s book is also seeing more diversification, with Texas comprising 51% of total written premium, below the 57% in the same period a year ago.
  • In the first quarter, total franchises increased 41% to a total of 2,298, and operating franchises increased 28% to a total of 1,268. GSHD has been driving faster launches by addressing “the elongation in the launch process through increased engagement with signed but not yet launched agencies.”
  • CEO Mark Jones noted that leadership is focused on its three core growth drivers: onboarding of high-quality agents, franchisees ramping up production, and client retention. He said on the earnings call: “Our renewal book continues to perform exceptionally well with client retention of 89%, up from 88% a year ago and helping us deliver very strong overall premium and revenue growth.”
  • During 1Q22, the company enhanced its consumer-facing quoting platform to allow a complete online checkout experience for its first carrier partner. Consumers can now access the choice model with the convenience of an all-digital experience, and go through the whole process to buy home, auto and umbrella insurance online.
  • The company is gaining traction with its cross-selling and referrals, seeing sequential monthly acceleration in 2022. GSHD sees itself gaining market share­ by leveraging technology. It currently has about a 3% market share of mortgage transactions and under 0.5% of U.S. premium. During the first quarter, GSHD activated 45% more new referral partner relationships compared to the same period last year.
  • The company reiterated its stance on investing for growth to drive long-term margin expansion. GSHD’s 1Q22 EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) margin was 3% versus 7% a year ago; excluding contingent commissions, the company’s margins expanded one point. General & Administrative (G&A) expenses increased by 46% year-over-year to $13.5 million, driven by higher travel & entertainment, marketing expenses around digital agent initiatives, and growing real estate footprint. The annual Ascend Conference, which was not held last year, contributed $2 million of expenses. Ex-Ascend, G&A would have increased 24%.
  • In terms of guidance, the company sees total revenue for 2022 of $197 million – $212 million, indicating organic growth of 30% – 40%, boosted by “high core revenue growth and historically average contingent commissions.” GSHD also sees “significant EBITDA growth and EBITDA margin expansion for the full year 2022.”

In sum, GSHD’s leaders were optimistic about the company’s growth prospects and outlook, noting the improvements in both franchise and corporate productivity. While GSHD was generally positive around its outlook, it noted that the macro environment continues to be challenging for new business generation.

Subscribe to MarshBerry’s Today’s ViewPoint blog for the latest news and updates and follow us on social media.

Investment banking services offered through MarshBerry Capital, LLC, Member FINRA Member SIPC and an affiliate of Marsh, Berry & Company, LLC. 28601 Chagrin Boulevard, Suite 400, Woodmere, Ohio 44122 (440.354.3230)

This earnings summary has been prepared by Marsh, Berry & Co., LLC. and is not intended to provide investment recommendations on any company. It is not a research report, as such term is defined by applicable laws and regulations, and it does not contain sufficient information upon which to make an investment decision. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities, financial instruments or to participate in any particular trading strategy. These materials are based solely on information contained in publicly available documents and Marsh, Berry & Co., LLC has not independently attempted to investigate or to verify such information.

MarshBerry continues to be the #1 sell side advisor in the industry (as ranked by S&P Global). If you're considering selling your firm, we are the best choice to help you through the complicated process. If you don't hire MarshBerry, hire a reputable advisor that can help you navigate one of the most important business decisions you will ever make. You will be much better off having an advisor in your corner that knows the industry than trying to do this on your own.