• Goosehead Insurance, Inc. Announces Third Quarter 2022 Results

    ソース: Nasdaq GlobeNewswire / 26 10 2022 16:01:15   America/New_York

    – Total and Core Revenue Each Increased 38% and 39% over the Prior Year, Respectively 
     Total Written Premium Increased 42% to $616 million 
     Net Income of $3.0 million, decreased $2.3 million from a Year Ago 
     Adjusted EBITDA of $11.0 million was up 67% over the Prior-Year Period –
     Adjusted EBITDA Margin Increased over 320 Basis Points to 19% in the Third Quarter –
     Operating Franchises Increased 23% and Corporate Agent headcount decreased 18%

    WESTLAKE, Texas, Oct. 26, 2022 (GLOBE NEWSWIRE) -- Goosehead Insurance, Inc. (“Goosehead” or the “Company”) (NASDAQ: GSHD), a rapidly growing independent personal lines insurance agency, today announced results for the third quarter ended September 30, 2022.

    Third Quarter 2022 Highlights

    • Total Revenues grew organically 38% over the prior-year period to $57.7 million in the third quarter of 2022
    • Third quarter Core Revenues* of $51.9 million increased 39% over the prior-year period
    • Third quarter net income of $3.0 million decreased 43%, EPS of $0.09 per share decreased 55% and adjusted EPS* of $0.24 per share declined 8%, over the prior-year period
    • Adjusted EBITDA* grew 67% over the prior-year period to $11.0 million
    • Adjusted EBITDA Margin* increased 3 points over the prior-year period to 19%.  
    • Total written premiums placed for the third quarter increased 42% over the prior-year period to $616 million
    • Policies in force grew 31% from the prior-year period to approximately 1,238,000
    • Corporate sales headcount of 411 was down 18% year-over-year
    • Total franchises increased 17% compared to the prior-year period to 2,287; operating franchises grew 23% compared to the prior-year period to 1,403

    *Core Revenue, Adjusted EPS, Adjusted EBITDA, and Adjusted EBITDA Margin are non-GAAP measures. Reconciliations of Core Revenue to total revenues, Adjusted EBITDA to net income and Adjusted EPS to basic earnings per share, the most directly comparable financial measures presented in accordance with GAAP, are set forth in the reconciliation table accompanying this release.

    “We delivered excellent growth in revenue and earnings for the third quarter, further validating the strength and consistency of our platform in an increasingly challenging macro-economic environment,” stated Mark E. Jones, Chairman and CEO. “In the third quarter premiums grew 42% with some increasing benefit from auto and home rates that could continue through this year and into 2023 given industry loss trends. Total revenues increased 38%, core revenues grew 39% and Adjusted EBITDA increased 67% with EBITDA margin up over 320 basis points. We are already beginning to see the emerging benefits from optimizing our resources to emphasize growth of our Franchise distribution and drive improvement in productivity of Corporate distribution. Franchise launches were up 57% in the quarter while the quality of our Franchises and pipeline continues to improve. We are ramping up our efforts to help an increasing number of franchises scale operations through producer additions and we are creating more opportunity for our highest quality corporate agents to become franchisees. We expect these efforts to result in continued strong growth of our approximately 2,500 total sales agents across both Corporate and Franchise distribution as we continue our march towards industry leadership in US Personal Lines.”

    Third Quarter 2022 Results
    For the third quarter of 2022, revenues were $57.7 million, an increase of 38% compared to the corresponding period in 2021. Core Revenues, a non-GAAP measure which excludes contingent commissions, initial franchise fees, interest income, and other income, were $51.9 million, a 39% increase from $37.2 million in the prior-year period. Core Revenues are the most reliable revenue stream for the Company, consisting of New Business Commissions, Agency Fees, New Business Royalty Fees, Renewal Commissions, and Renewal Royalty Fees. Core Revenue growth was driven by growth in operating franchises, rising premium rates, and strong client retention of 88%. The Company grew total written premiums, which we consider to be the leading indicator of future revenue growth, by 42% in the third quarter.

    Total operating expenses, excluding equity-based compensation, depreciation and amortization, for the third quarter of 2022 were $46.7 million, up 33% from $35.1 million in the prior-year period. The increase from the prior period was due to larger employee compensation and benefits expenses related to investments in franchise recruiters, service agents, and information systems. Equity-based compensation increased to $5.4 million for the period, compared to $1.9 million a year ago. The change in this non-cash item relates to the Black-Scholes valuation of newly issued options, which takes into account stock price on the grant date and historical volatility, among other inputs. Bad debt expense of $2.3 million increased from $0.7 million a year ago due to increased terminations of signed franchises that have yet to launch. General and Administrative expenses are also higher versus a year ago due to increased real estate costs related to 2021 office openings, software expenses, and increased travel, meals, and entertainment costs.

    Net income in the third quarter of 2022 was $3.0 million, with the decrease due to higher non-cash stock compensation expense and lower income tax benefit. Net income attributable to Goosehead Insurance, Inc. for the third quarter of 2022 was $2.0 million, or $0.09 per basic and diluted share. Adjusted EPS for the third quarter of 2022, which excludes equity-based compensation, was $0.24 per share. Total Adjusted EBITDA was $11.0 million for the third quarter of 2022 compared to $6.6 million in the prior-year period. Adjusted EBITDA Margin of 19% was up 3 points in the quarter.

    Liquidity and Capital Resources
    As of September 30, 2022, the Company had cash and cash equivalents of $46.1 million. We had an unused line of credit of $24.8 million as of September 30, 2022. Total outstanding term note payable balance was $95.6 million as of September 30, 2022.

    2022 Outlook
    The Company’s outlook for full year 2022 is as follows:

    • Total written premiums placed for 2022 are expected to be between $2.176 billion and $2.215 billion, representing organic growth of 40% on the low end of the range to 42% on the high end of the range.
    • Total revenues for 2022 are expected to be between $194 million and $205 million, representing organic growth of 28% on the low end of the range to 35% on the high end of the range, driven by high levels of Core Revenue growth partly offset by lower than historical average contingent commissions of $7-10 million for the full year 2022 as our carriers continue to struggle with their underwriting profitability.
    • After a year of historical investments in people, technology, and real estate, Adjusted EBITDA Margin is expected to expand for the full year 2022.

    Conference Call Information
    Goosehead will host a conference call and webcast today at 4:30 PM ET to discuss these results.

    The dial-in number for the conference call is (855) 327-6837 (toll-free) or (631) 891-4304 (international). Please dial the number 10 minutes prior to the scheduled start time.

    In addition, a live webcast of the conference call will also be available on Goosehead’s investor relations website at http://ir.gooseheadinsurance.com.

    A webcast replay of the call will be available at http://ir.gooseheadinsurance.com for one year following the call.

    About Goosehead
    Goosehead (NASDAQ: GSHD) is a rapidly growing and innovative independent personal lines insurance agency that distributes its products and services throughout the United States.   Goosehead was founded on the premise that the consumer should be at the center of our universe and that everything we do should be directed at providing extraordinary value by offering broad product choice and a world-class service experience. Goosehead represents over 150 insurance companies that underwrite personal lines and small commercial lines risks, and its operations include a network of 12 corporate sales offices and 2,287 operating and contracted franchise locations. For more information, please visit gooseheadinsurance.com.

    Forward-Looking Statements
    This press release may contain various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which represent Goosehead’s expectations or beliefs concerning future events. Forward-looking statements are statements other than historical facts and may include statements that address future operating, financial or business performance or Goosehead’s strategies or expectations. In some cases, you can identify these statements by forward-looking words such as “may”, “might”, “will”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “projects”, “potential”, “outlook” or “continue”, or the negative of these terms or other comparable terminology. Forward-looking statements are based on management’s current expectations and beliefs and involve significant risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by these statements.

    Factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include, but are not limited to, conditions impacting insurance carriers or other parties with which Goosehead does business, the economic effects of the COVID-19 pandemic, the loss of one or more key executives or an inability to attract and retain qualified personnel and the failure to attract and retain highly qualified franchisees. These risks and uncertainties also include, but are not limited to, those described under the captions “1A. Risk Factors” in Goosehead’s Annual Report on Form 10-K for the year ended December 31, 2021 and in Goosehead’s other filings with the SEC, which are available free of charge on the Securities Exchange Commission's website at: www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. All forward-looking statements and all subsequent written and oral forward-looking statements attributable to Goosehead or to persons acting on behalf of Goosehead are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made, and Goosehead does not undertake any obligation to update them in light of new information, future developments or otherwise, except as may be required under applicable law.

    Contacts
    Investor Contact:
    Dan Farrell
    Goosehead Insurance - VP Capital Markets
    Phone: (214) 838-5290
    Email: dan.farrell@goosehead.com;   IR@goosehead.com;

    PR Contact:
    Mission North for Goosehead Insurance
    Email: goosehead@missionnorth.com; PR@goosehead.com


    Goosehead Insurance, Inc.
    Condensed Consolidated Statements of Operations
    (Unaudited)
    (In thousands, except per share amounts)

      Three Months Ended
    September 30,
     Nine Months Ended
    September 30,
       2022   2021   2022   2021 
    Revenues:        
    Commissions and agency fees $27,402  $22,420  $73,676  $61,007 
    Franchise revenues  29,922   18,960   77,299   49,234 
    Interest income  363   301   1,012   841 
    Total revenues  57,687   41,681   151,987   111,082 
    Operating Expenses:        
    Employee compensation and benefits  36,328   26,078   99,471   69,862 
    General and administrative expenses  13,456   10,141   39,358   29,549 
    Bad debts  2,306   732   4,762   1,825 
    Depreciation and amortization  1,809   1,188   5,043   3,320 
    Total operating expenses  53,899   38,139   148,634   104,556 
    Income from operations  3,788   3,542   3,353   6,526 
    Other Income (Expense):        
    Other income     7      146 
    Interest expense  (1,414)  (756)  (3,411)  (1,903)
    Income (loss) before taxes  2,374   2,793   (58)  4,769 
    Tax expense (benefit)  (666)  (2,575)  (104)  (2,646)
    Net income  3,040   5,368   46   7,415 
    Less: net income attributable to non-controlling interests  1,061   1,332   (18)  2,288 
    Net income attributable to Goosehead Insurance, Inc. $1,979  $4,036  $64  $5,127 
    Earnings per share:        
    Basic $0.09  $0.21  $  $0.27 
    Diluted $0.09  $0.19  $  $0.25 
    Weighted average shares of Class A common stock outstanding        
    Basic  20,892   19,559   20,531   18,903 
    Diluted  21,569   21,206   21,430   20,570 
                     

    Goosehead Insurance, Inc.
    Condensed Consolidated Statements of Operations
    (Unaudited)
    (In thousands, except per share amounts)

      Three months ended
    September 30,
     Nine Months Ended
    September 30,
      2022  2021  2022  2021 
    Revenues:        
    Core Revenue:        
    Renewal Commissions(1) 16,485  10,969  41,233  29,036 
    Renewal Royalty Fees(2) 21,574  13,206  54,446  33,622 
    New Business Commissions(1) 6,215  6,013  18,312  16,573 
    New Business Royalty Fees(2) 4,866  4,003  13,979  10,840 
    Agency Fees(1) 2,740  3,050  8,491  8,579 
    Total Core Revenue 51,880  37,241  136,461  98,650 
    Cost Recovery Revenue:        
    Initial Franchise Fees(2) 3,056  1,680  7,943  4,570 
    Interest Income 363  301  1,012  841 
    Total Cost Recovery Revenue 3,419  1,981  8,955  5,411 
    Ancillary Revenue:        
    Contingent Commissions(1) 1,962  2,388  5,640  6,819 
    Other Franchise Revenues(2) 426  71  931  202 
    Total Ancillary Revenue 2,388  2,459  6,571  7,021 
    Total Revenues 57,687  41,681  151,987  111,082 
    Operating Expenses:        
    Employee compensation and benefits, excluding equity-based compensatoin 30,933  24,227  83,115  64,218 
    General and administrative expenses 13,456  10,141  39,358  29,549 
    Bad debts 2,306  732  4,762  1,825 
    Total 46,695  35,100  127,235  95,592 
    Adjusted EBITDA 10,992  6,581  24,752  15,490 
    Adjusted EBITDA Margin 19% 16% 16% 14%
             
    Interest expense (1,414) (756) (3,411) (1,903)
    Depreciation and amortization (1,809) (1,188) (5,043) (3,320)
    Tax (expense) benefit 666  2,575  104  2,646 
    Equity-based compensation (5,395) (1,851) (16,356) (5,644)
    Other Income   7    146 
    Net Income 3,040  5,368  46  7,415 

    (1) Renewal Commissions, New Business Commissions, Agency Fees, and Contingent Commissions are included in "Commissions and agency fees" as shown on the Condensed Consolidated statements of operations within Goosehead’s Form 10-Q for the three and nine months ended September 30, 2022 and 2021.
    (2) Renewal Royalty Fees, New Business Royalty Fees, Initial Franchise Fees, and Other Franchise Revenues are included in "Franchise revenues" as shown on the Condensed Consolidated statements of operations within Goosehead’s Form 10-Q for the three and nine months ended September 30, 2022 and 2021.


    Goosehead Insurance, Inc.
    Condensed Consolidated Balance Sheets
    (Unaudited) 
    (In thousands, except per share amounts)

      September 30, December 31,
       2022   2021 
    Assets    
    Current Assets:    
    Cash and cash equivalents $46,107  $28,526 
    Restricted cash  2,263   1,953 
    Commissions and agency fees receivable, net  11,271   12,056 
    Receivable from franchisees, net  2,929   2,986 
    Prepaid expenses  5,573   4,785 
    Total current assets  68,143   50,306 
    Receivable from franchisees, net of current portion  28,126   29,180 
    Property and equipment, net of accumulated depreciation  35,219   24,933 
    Right-of-use asset  42,528   32,656 
    Intangible assets, net of accumulated amortization  4,334   2,798 
    Deferred income taxes, net  140,244   125,676 
    Other assets  5,394   4,742 
    Total assets $323,988  $270,291 
    Liabilities and Stockholders’ Equity    
    Current Liabilities:    
    Accounts payable and accrued expenses $13,500  $12,995 
    Premiums payable  2,263   1,953 
    Lease liability  6,776   4,893 
    Contract liabilities  6,224   6,054 
    Note payable  6,250   4,375 
    Total current liabilities  35,013   30,270 
    Lease liability, net of current portion  64,181   47,335 
    Note payable, net of current portion  113,530   118,361 
    Contract liabilities, net of current portion  44,535   42,554 
    Liabilities under tax receivable agreement  112,394   100,959 
    Total liabilities  369,653   339,479 
    Class A common stock, $0.01 par value per share - 300,000 shares authorized, 21,202 shares issued and outstanding as of September 30, 2022, 20,198 shares issued and outstanding as of December 31, 2021  210   200 
    Class B common stock, $0.01 par value per share - 50,000 shares authorized, 16,201 issued and outstanding as of September 30, 2022, 16,909 shares issued and outstanding as of December 31, 2021  163   170 
    Additional paid in capital  67,238   46,281 
    Accumulated deficit  (61,282)  (60,671)
    Total stockholders' equity (deficit)   6,329   (14,020)
    Non-controlling interests  (51,994)  (55,168)
    Total equity  (45,665)  (69,188)
    Total liabilities and equity $323,988  $270,291 
             


    Goosehead Insurance, Inc.
    Reconciliation Non-GAAP Measures to GAAP

    This release includes Core Revenue, Cost Recovery Revenue, Ancillary Revenue, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EPS that are not required by, nor presented in accordance with, generally accepted accounting principles in the United States (“GAAP”). The Company refers to these measures as “non-GAAP financial measures.” The Company uses these non-GAAP financial measures when planning, monitoring and evaluating its performance and considers these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures, tax position, depreciation, amortization and certain other items that the Company believes are not representative of its core business. The Company uses Core Revenue, Cost Recovery Revenue, Ancillary Revenue, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EPS for business planning purposes and in measuring its performance relative to that of its competitors.

    These non-GAAP financial measures are defined by the Company as follows:

    • "Core Revenue" is a supplemental measure of our performance and includes Renewal Commissions, Renewal Royalty Fees, New Business Commissions, New Business Royalty Fees, and Agency Fees. We believe that Core Revenue is an appropriate measure of operating performance because it summarizes all of our revenues from sales of individual insurance policies.
    • "Cost Recovery Revenue" is a supplemental measure of our performance and includes Initial Franchise Fees and Interest Income. We believe that Cost Recovery Revenue is an appropriate measure of operating performance because it summarizes revenues that are viewed by management as cost recovery mechanisms.
    • "Ancillary Revenue" is a supplemental measure of our performance and includes Contingent Commissions and Other Income. We believe that Ancillary Revenue is an appropriate measure of operating performance because it summarizes revenues that are ancillary to our core business.
    • "Adjusted EBITDA" is a supplemental measure of the Company's performance. We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of items that do not relate to business performance. Adjusted EBITDA is defined as net income (the most directly comparable GAAP measure) before interest, income taxes, depreciation and amortization, adjusted to exclude equity-based compensation and other non-operating items, including, among other things, certain non-cash charges and certain non-recurring or non-operating gains or losses.
    • "Adjusted EBITDA Margin" is Adjusted EBITDA as defined above, divided by total revenue excluding other non-operating items. Adjusted EBITDA Margin is helpful in measuring profitability of operations on a consolidated level.
    • "Adjusted EPS" is a supplemental measure of our performance, defined as earnings per share (the most directly comparable GAAP measure) before non-recurring or non-operating income and expenses. Adjusted EPS is a useful measure to management because it eliminates the impact of items that do not relate to business performance and helps measure our profitability on a consolidated level.

    While the Company believes that these non-GAAP financial measures are useful in evaluating its business, this information should be considered as supplemental in nature and is not meant as a substitute for revenues, net income, or earnings per share, in each case as recognized in accordance with GAAP. In addition, other companies, including companies in the Company’s industry, may calculate such measures differently, which reduces their usefulness as comparative measures.

    The following tables show a reconciliation from total revenues to Core Revenue, Cost Recovery Revenue, and Ancillary Revenue (non-GAAP basis) for the three and nine months ended September 30, 2022 and 2021 (in thousands):

     Three Months Ended
    September 30,
     Nine Months Ended
    September 30,
      2022  2021  2022  2021
    Total Revenues$57,687 $41,681 $151,987 $111,082
            
    Core Revenue:       
    Renewal Commissions(1)$16,485 $10,969 $41,233 $29,036
    Renewal Royalty Fees(2) 21,574  13,206  54,446  33,622
    New Business Commissions(1) 6,215  6,013  18,312  16,573
    New Business Royalty Fees(2) 4,866  4,003  13,979  10,840
    Agency Fees(1) 2,740  3,050  8,491  8,579
    Total Core Revenue 51,880  37,241  136,461  98,650
    Cost Recovery Revenue:       
    Initial Franchise Fees(2) 3,056  1,680  7,943  4,570
    Interest Income 363  301  1,012  841
    Total Cost Recovery Revenue 3,419  1,981  8,955  5,411
    Ancillary Revenue:       
    Contingent Commissions(1) 1,962  2,388  5,640  6,819
    Other Franchise Revenues(2) 426  71  931  202
    Total Ancillary Revenue 2,388  2,459  6,571  7,021
    Total Revenues$57,687 $41,681 $151,987 $111,082

    (1) Renewal Commissions, New Business Commissions, Agency Fees, and Contingent Commissions are included in "Commissions and agency fees" as shown on the Condensed Consolidated statements of operations.
    (2) Renewal Royalty Fees, New Business Royalty Fees, Initial Franchise Fees, and Other Franchise Revenues are included in "Franchise revenues" as shown on the Condensed Consolidated statements of operations.


    The following tables show a reconciliation from net income to Adjusted EBITDA and Adjusted EBITDA Margin (non-GAAP basis) for the three and nine months ended September 30, 2022 and 2021 (in thousands):

      Three Months Ended
    September 30,
     Nine Months Ended
    September 30,
       2022   2021   2022   2021 
    Net income $3,040  $5,368  $46  $7,415 
    Interest expense  1,414   756   3,411   1,903 
    Depreciation and amortization  1,809   1,188   5,043   3,320 
    Tax expense (benefit)  (666)  (2,575)  (104)  (2,646)
    Equity-based compensation  5,395   1,851   16,356   5,644 
    Other income     (7)     (146)
    Adjusted EBITDA $10,992  $6,581  $24,752  $15,490 
    Adjusted EBITDA Margin(1)  19%  16%  16%  14%

    (1) Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by Total Revenue ($10,992/$57,687), and ($6,581/$41,681) for the three months ended September 30, 2022 and 2021, respectively. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by Total Revenue ($24,752/$151,987), and ($15,490/$111,082) for the nine months ended September 30, 2022 and 2021, respectively.

    The following tables show a reconciliation from basic earnings per share to Adjusted EPS (non-GAAP basis) for the three and nine months ended September 30, 2022 and 2021. Note that totals may not sum due to rounding:

      Three Months Ended
    September 30,
     Nine Months Ended
    September 30,
       2022   2021   2022   2021 
    Earnings per share - basic (GAAP) $0.09  $0.21  $  $0.27 
    Add: equity-based compensation(1)  0.14   0.05   0.44   0.15 
    Adjusted EPS (non-GAAP) $0.24  $0.26  $0.44  $0.42 

    (1) Calculated as equity-based compensation divided by sum of weighted average Class A and Class B shares [$5.4 million/(20.9 million + 16.4 million)] for the three months ended September 30, 2022 and [$1.9 million/ (19.6 million + 17.3 million)] for the three months ended September 30, 2021. Calculated as equity-based compensation divided by sum of weighted average Class A and Class B shares [$16.4 million/(20.5 million + 16.7 million)] for the nine months ended September 30, 2022 and [$5.6 million/ (18.9 million + 17.9 million)] for the nine months ended September 30, 2021.

    Goosehead Insurance, Inc.

    Key Performance Indicators

      September 30, 2022 December 31, 2021 September 30, 2021
    Corporate sales agents < 1 year tenured  241   293   301 
    Corporate sales agents > 1 year tenured  170   213   201 
    Operating franchises < 1 year tenured (TX)  66   57   56 
    Operating franchises > 1 year tenured (TX)  237   214   206 
    Operating franchises < 1 year tenured (Non-TX)  399   333   335 
    Operating franchises > 1 year tenured (Non-TX)  701   594   542 
    Policies in Force  1,238,000   1,011,000   948,000 
    Client Retention  88%  89%  89%
    Premium Retention  98%  93%  92%
    QTD Written Premium (in thousands) $615,575  $407,291  $434,752 
    Net Promoter Score ("NPS")  90   91   92 

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