Goosehead Insurance, Inc. (GSHD) reported third quarter 2022 results, with adjusted Earnings Per Share (EPS) of $0.24. Total revenue rose to $57.7 million, which is up 38% compared to 3Q21. This compares to consensus analyst estimates of $0.19 in adjusted EPS and $54.6 million in revenue. Here are five things you should know about this earnings report:
- GSHD’s core revenue in 3Q22 increased 39% year-over-year (YoY) to $51.9 million. Total written premiums, the leading indicator of future core and ancillary revenue growth, increased 42% YoY in 3Q22 to $616 million. This growth was driven by the strong performance of the company’s renewal book from high retention levels and increasing P&C pricing. As part of the total written premiums, franchise premiums increased by 46% to $464 million while corporate premiums increased 30% to $151 million.
- The company continues to invest and build its quote-to-issue capability to protect its competitive position. GSHD sees its October 2022 hire of Justin Ricketts as EVP of Technology and Partnerships as part of this strategy. Mark E. Jones, Co-Founder, Chairman & CEO of GSHD said on the earnings call, “Justin has an internal team of more than 40 people whose mission it is to extend our technology lead and deepen and widen our competitive moat.”
- While the slowing U.S. housing market is a headwind for GSHD, only about 20% of its revenue is exposed to the housing market from transactions tied to home closings. The other 80% comes from referrals and the renewal business. In terms of the 20% of revenue tied to housing, GSHD currently accounts for about 3% of real estate closings per year, in the country. The company believes it has a large opportunity to gain market share and is not dependent on overall housing market transaction growth.
- The company believes it can grow core business premiums at 30-35% and drive EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) margin into the mid-to-high-20s over the next several years. In terms of full year 2022 guidance, GSHD reiterated that its total revenue would be between $194-$205 million, representing organic growth of 28-35%. The company expects this to be driven by high levels of core revenue growth, but partly offset by weaker than historical average contingent commissions from profitability challenges at carriers.
- GSHD continues to focus on the growth of its franchise channel. During the third quarter, GSHD launched 144 franchises, up 57% YoY, a new company record. Signings remained strong and the pipeline “is substantial.” GSHD President, COO & Director Mark K. Miller noted that: “The quality of our signed pipeline continues to improve, and we’re seeing faster launch rates. This is a direct result of changes we implemented in our recruiting and onboarding processes and the adjustments to the compensation model of our recruiting team.”
To learn more, visit Goosehead 3Q22 Earnings Release
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