GSHD - NASDAQ

Good day, and thank you for standing by. Welcome to the Goosehead Insurance Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question-and-answer session. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. I would now like to hand the conference over to your speaker today, Maddie Middleton, Senior Director of Investor Relations.

Thank you, and good afternoon. Before we begin our formal remarks, I need to remind everyone that part of our discussion today may include forward-looking statements, which are based on expectations, estimates, and projections of management as of today. Forward-looking statements and our discussions are subject to various assumptions, risks, and uncertainties that are difficult to predict and which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed on them. We refer all of you to our recent SEC filings for a more detailed discussion of risks and uncertainties that could impact future operating results and financial condition of Goosehead. We disclaim any intention or obligation to update or revise any forward-looking statements, except to the extent required by applicable law.

I would also like to point out that during this call, we will discuss certain financial measures that are not prepared in accordance with GAAP. Management uses these non-GAAP financial measures when planning, monitoring, and evaluating our performance. We consider these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons period to period by including potential differences caused by variations in capital structure, tax position, depreciation, amortization, and certain other items that we believe are not representative of our core business. For more information regarding the use of non-GAAP financial measures, including reconciliations of these measures to the most recent comparable GAAP financial measures, we refer you to today's earnings release.

In addition, this call is being webcast, and an archive version will be made available shortly after the call ends on the investor relations portion of the company's website at goosehead.com. Now, I'd like to turn the call over to our CEO, Mark Miller.

Thanks, Maddie, and good afternoon, everyone. Thank you for joining us today for our Q1 2026 earnings call. I'd like to begin by welcoming John Martin as our new Chief Financial Officer, succeeding Mark Jones, Jr., who has been promoted to President and COO. John brings a strong combination of financial expertise, operational discipline, and a background rooted in technology and e-commerce, which aligns well with our focus on execution and our high-performance culture. The team is excited to welcome John, and I know he looks forward to engaging with our investors and analysts in the quarters ahead. We are equally thrilled to see Mark expand his leadership responsibilities. John will report to Mark, and I will work closely with both of them, continuing my role as CEO.

These leadership announcements are evidence of our commitment to a comprehensive succession plan and our focus on ensuring Goosehead has the right leaders for today and well into the future. Let me start by reinforcing something we've said consistently. Goosehead is a compounding business designed to drive long-term growth in policies in force, revenue, earnings, and ultimately, cash flow. We achieve that by operating a highly scalable distribution platform supported by world-class service. For the Q1, we delivered strong and consistent financial results, with revenue growing 23% to $93 million, core revenue growing 15% to $79 million, and delivering adjusted EBITDA of $24.4 million. Last quarter, we spent a significant amount of time discussing the investments we're making in our digital agent platform and AI initiatives.

We have been very intentional in prioritizing long-term value creation while managing to strong and sustainable margins in order to maximize shareholder returns. Today, I want to focus on the strong start to the year and how the investments we have been making are beginning to translate into tangible business results. Goosehead has always been a technology-forward distribution platform, but over the past several years, technology has become even more deeply embedded in every part of how we operate. What's in front of us today is what I believe is the single largest opportunity our business and the broader personal lines industry has ever seen. In nearly every industry, customers have the ability to choose how they want to interact and transact. That has not existed in the independent personal lines insurance space until now. Choice has always been part of Goosehead's DNA.

Historically, that choice has been centered around access to a broad set of carrier partners. We've proven that we are a market leader in providing clients coast to coast with access to over 200 underwriting partners. Today, we're expanding that definition of choice. We're now giving clients a choice in how they prefer to actually transact. For the first time in the United States, clients can shop, quote, and bind insurance through a true choice model, whether that is fully digital, partially digital, or entirely human-driven. During our last earnings call, we announced we went live with this capability with multiple auto carriers in Texas, including partners like Progressive, Liberty Mutual, Mercury, and Root. Today, we're excited to announce that clients can now digitally bind multiple homeowners products in Texas with carriers such as SageSure and Mercury.

This is an important milestone in building a large-scale digital marketplace, which is now that much more achievable because of the real demand that now exists with our carrier partners. Carriers want this capability, and they want it specifically with Goosehead because of the trusted relationships we've built over decades, our access to large amounts of integrated data that drive better underwriting outcomes, and our differentiated go-to-market strategy executed through highly curated client acquisition channels. At the same time, the broader insurance shopping experience, particularly online, remains fragmented and often broken. You may see advertising across social media for AI insurance agencies that claim they can bind and service autonomously, or headlines that declare instant best rates. Those false claims end up generating terrible experiences for the end user.

Customers are frequently routed through lead aggregators and data resellers, creating the illusion of choice, but ultimately leading to confusion, lack of transparency, and in many cases, poor coverage decisions. Goosehead's Digital Agent Platform is solving these pain points. We're delivering real choice, not just in product offering, but now in purchasing experience. By implementing this platform with a targeted audience through our partnerships, we remain the trusted advisor our clients and carrier partners rely on. In the area of AI, we are now seeing tangible benefits as we roll out multiple use cases across our service organization. Lilly, our AI-powered virtual phone assistant, is now fully resolving approximately 19% of all inbound calls without requiring transfer to a live agent. This improves speed to resolution for our clients and allows our service teams to focus on more complex and consultive interactions.

In addition, we have deployed tools behind the scenes in areas such as intelligent case routing, which has allowed us to reinvest roughly 40 full-time service team members towards more complex and value-added interactions. These tools are driving real-time efficiency gains while also adding scalability to what has historically been the most complex and labor-intensive part of our business. All this progress is occurring alongside a rapidly improving product market. Our carrier partners are increasingly leaning into growth across both home and auto products nationwide. As pricing stabilizes and product availability expands, we are seeing consistent improvement in many of our key operating metrics. For example, our client retention continues to climb at a steady pace, and we expect to achieve 86% client retention during the year. Bind rates and packet rates are increasing, supporting higher agent productivity.

Given these strong market conditions, we believe the time is right to more aggressively expand our offensive capability with more agents in more geographies. When we spoke to you in February, I commented that we had fundamentally reset the corporate agent footprint. At that time, we had expanded to new geographies like Tempe, Arizona, and Nashville, Tennessee. We're continuing to make excellent progress on this initiative. During the quarter, we opened three additional corporate offices in Seattle, the Washington, D.C. area, and Minneapolis, and we had the fourth opening in April in Indianapolis. As of the end of the Q1, we now have more than half of our corporate agents outside of Texas. These three offices are outperforming our expectations. Even more importantly, these offices serve a strategic purpose that far exceeds the short-term production they generate.

They are quickly diversifying our agent base, making Goosehead an even more attractive partner for our major national carriers. These offices are talent incubators for future franchise ownership. Since the beginning of the year, we have launched 12 new franchises out of our corporate offices, all of which are outperforming the average franchises we have launched from outside of our ecosystem. In just their second month live, these 12 launches contributed new business production that were nearly 2.5x the average franchise. Our existing franchise base also continues to lean into growth, with 133 franchises hiring at least one producer during the quarter, generating nearly 50% increase in gross producer adds year-over-year. As agencies continue to focus on hiring and driving productivity, they're reaching new highs with 208 franchises hitting monthly production records during the quarter.

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for questions. Our first question comes from Andrew Andersen with Jefferies. You may proceed.

Thank you.

Thank you. Our next question comes from Brian Meredith with UBS. You may proceed.

Interesting. What's the call pipeline of potential new carriers on the platform, particularly for the auto insurance side?

Yeah, Brian, this is Mark. We have four auto carriers now already on the platform, which gives us really good coverage. As you know, auto's not specific to region necessarily, like home is as much. We have pretty good coverage and a couple more to be added, TBD, in the next two months.

Great. Thank you.

Thank you. Our next question comes from Tommy McJoynt with KBW. You may proceed.

Thanks.

Thank you. Our next question comes from Charlie Lederer with BMO Capital Markets. You may proceed.

Thank you.

Thank you. Our next question comes from Andrew Kligerman with TD Cowen. You may proceed.

Thank you. Our next question comes from Luc Nelson with Cantor Fitzgerald. You may proceed.

Okay, that makes sense. Just my last question, I've just been looking sequentially at your Net Promoter Score. It's just been declining since, I think, late 2024. Can you just kind of dig into what's going on there and if you have any further details?

Yeah, this is Mark. The other Mark. I think we've said it before, the NPS score is kind of an industry sentiment sort of a score, the way we use it. Steep price increases over the last three years, particularly in our biggest market in Texas, have been pretty steep. NPS is a 12-month rolling average sort of number, and we've talked about we expect it to come down over time. It's behaving kind of like we expected it to be. I think we deliver an outstanding client experience, and it's kind of dislocated from retention rates at this point. Mark just talked about retention rates every month continue to climb up. They're kind of dislocated, and we do client surveys. The client survey scores are extremely strong. We think we're delivering a really good client experience.

Okay, great. Thank you so much.

Thank you. Our next question comes from Maxwell Fritscher with Truist. You may proceed.

Perfect. Thank you very much.

Thank you. Our next question comes from Pablo Singzon with JPMorgan. You may proceed.

Thank you.

Thank you. Our next question comes from Roland Mayer with RBC Capital Markets. You may proceed.

That's perfect. Thank you so much.

Thank you. Our next question comes from Katie Sakys with Autonomous Research. You may proceed.

Great. Thank you.

Thank you. As a reminder, to ask a question, please press star one one on your telephone. One moment for questions. I'm not showing any further questions at this time. I would now like to turn the call back over to Mark Miller for any closing remarks.

Yeah, I just want to thank everybody for joining us today. It's an exciting time to be part of the Goosehead business, and we look forward to talking to everybody again in July for our Q2 call.