Goosehead Insurance, Inc. Announces Fourth Quarter and Full Year 2018 Results
- Fourth Quarter 2018 Revenues Grew 32% Over Prior-Year Period to
- Full Year 2018 Revenue Growth of 41% to
- Total Written Premiums Increased 50% Over Prior-Year Period -
- Total Operating Franchises Grew 57% Over Prior-Year Period -
Fourth Quarter 2018 Highlights
- Revenue, all organic, grew 32% from the prior-year period to
- Net income attributable to
Goosehead Insurance, Inc.of $90,000, or $0.01per share.
- Adjusted EPS* of
- Adjusted EBITDA* rose 1% from the prior-year period to
- Total written premiums placed increased 50% from the prior-year period to
- Policies in force grew 47% to 334,000 at year end 2018, compared to 228,000 at year end 2017, and increased 8% from 310,000 as of September 30, 2018.
- Corporate sales headcount of 167 was up 50% year-over-year.
- Total operating franchises increased 57% compared to the prior-year end to 457.
*Adjusted EPS, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures. Reconciliation of Adjusted EBITDA to net income and basic earnings per share to Adjusted EPS, the most directly comparable financial measures presented in accordance with GAAP are set forth in the reconciliation table accompanying this release.
“2018 was another banner year for Goosehead,” stated
“Client retention is the longest lever to our long-term economics, and we maintained our 88% retention rate during the quarter, aided by our world-class service delivery which registered an increase in our Net Promoter Score to 89 for 2018,” continued Mr. Jones. “We continue to be well-positioned, enhanced by the Franchise channel that produces mechanical revenue growth of approximately 120% of new business as it converts to renewal. While we were impacted by headwinds in the housing market in the second half of 2018, thanks to our proprietary technology, our sales team was able to activate a large number of new referral partner relationships and recover full productivity lead volume by the end of the year.”
“Looking ahead to the balance of 2019 and beyond, we intend to grow Goosehead rapidly and responsibly by continuing to invest in both our Corporate and Franchise channels, and in relevant technology that we believe will keep us at the forefront of the industry as we strive to add value for our shareholders,” concluded Mr. Jones.
Fourth Quarter 2018 Results
For the fourth quarter of 2018, revenues were
Total written premium placed in the fourth quarter of 2018 grew 50% to
Net income for the fourth quarter of 2018 was
Total Adjusted EBITDA rose 1% from the prior year period to
Revenues generated through the Corporate Channel in the fourth quarter of 2018 were
The Company had total corporate sales agent headcount of 167 at
Adjusted EBITDA for the Corporate Channel segment in the fourth quarter of 2018 was
Adjusted EBITDA margin for the Corporate Channel for the fourth quarter of 2018 was 18%, compared to 23% in the prior-year period, primarily due to the Company’s continued investment in growth by significantly increasing corporate sales agent headcount, which resulted in higher employee compensation and benefits. The additional investment was offset by the growth in new business and renewal revenues.
Revenues generated through the Franchise Channel in the fourth quarter of 2018 were
Adjusted EBITDA for the Franchise Channel in the fourth quarter of 2018 rose 64% to
Full Year 2018 Results
For the full year ended
Net loss for the full year ended
Total Adjusted EBITDA rose 38% for the full year ended
Liquidity and Capital Resources
Goosehead also announced today that
In an effort to provide additional transparency into the Company’s operations, the Company is initiating a full-year 2019 outlook with respect to written premiums and revenue:
- Total written premiums placed for 2019 are expected to be between
$700 million and $725 million, representing organic growth of 38% on the low end of the range to 42% on the high end of the range.
- Total revenues for 2019 are expected to be between
$80 million and $85 million, representing organic growth of 33% on the low end of the range to 41% on the high end of the range.
The revenue outlook provided above assumes revenue is recognized under the accounting guidance provided by ASC 605. When the Company begins to report revenue under ASC 606 (ASU 2014-09) on the 2019 Annual Report on Form 10-K, it plans to provide a reconciliation to the current method of revenue recognition.
Conference Call Information
Goosehead will host a conference call and webcast today at
The dial-in number for the conference call is (844) 898-2795 (toll-free) or (210) 874-7848 (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.
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 80 insurance companies that underwrite personal lines and small commercial lines risks, and its operations include a network of seven corporate sales offices and over 620 operating and contracted franchise locations. For more information, please visit www.gooseheadinsurance.com.
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 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 caption “Risk Factors” in Goosehead’s prospectus relating to its Registration Statement on Form S-1 (Registration Number 333-224080) filed with the
Phone: (214) 838-5145
Phone: (469) 480-4630
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
|Three Months Ended December 31||Full Year Ended December 31|
|Commissions and agency fees||$||8,632||$||7,122||$||36,704||$||27,030|
|Employee compensation and benefits (including Class B unit compensation of $0 and $26,134
for the three months and year ended December 31, 2018, respectively, and $895 and $2,231
for the three months and year ended December 31, 2017, respectively)
|General and administrative expenses||3,967||2,610||13,060||8,597|
|Depreciation and amortization||424||259||1,464||876|
|Total operating expenses||13,314||10,017||74,078||35,100|
|Income (loss) from operations||1,403||1,117||(13,930||)||7,611|
|Other Income (Expense):|
|Other income (expense)||—||—||(22||)||3,541|
|Income (loss) before taxes||736||377||(18,218||)||8,678|
|Net income (loss)||605||377||(18,667||)||8,678|
|Less: net income (loss) attributable to non-controlling interests||515||377||(9,764||)||8,678|
|Net income (loss) attributable to Goosehead Insurance, Inc.||$||90||$||—||$||(8,903||)||$||—|
|Earnings per share:|
|Weighted average shares of Class A common stock outstanding|
|Pro forma net income:|
|Pro forma income before taxes attributable to Goosehead Insurance, Inc.||n/a||$||141||n/a||$||3,242|
|Pro forma income tax expense||n/a||(30||)||n/a||(811||)|
|Pro forma net income attributable to Goosehead Insurance, Inc.||n/a||$||111||n/a||$||2,431|
|Pro forma earnings per share:|
|Pro forma weighted average shares of Class A common stock outstanding:|
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
|Cash and cash equivalents||$||18,635||$||4,948|
|Commissions and agency fees receivable, net||2,016||1,268|
|Receivable from franchisees, net||703||564|
|Total current assets||22,839||7,719|
|Receivable from franchisees, net of current portion||2,048||1,361|
|Property and equipment, net of accumulated depreciation||7,575||6,845|
|Intangible assets, net of accumulated amortization||248||216|
|Deferred income taxes, net||1,958||—|
|Liabilities and Stockholders’ Equity|
|Accounts payable and accrued expenses||$||3,978||$||2,759|
|Total current liabilities||7,812||5,767|
|Deferred rent, net of current portion||4,548||3,916|
|Note payable, net of current portion||45,947||48,156|
|Liabilities under tax receivable agreement, net of current portion||1,694||—|
|Commitments and contingencies (see note 9)|
|Class A common stock, $.01 par value per share - 300,000 shares authorized, 13,800
shares issued and outstanding as of December 31, 2018, zero issued and outstanding
as of December 31, 2017
|Class B common stock, $.01 par value per share - 50,000 shares authorized, 22,486
issued and outstanding as of December 31, 2018, zero issued and outstanding as of
December 31, 2017
|Additional paid in capital||88,811||—|
|Total stockholders' equity and members' deficit||82,595||(41,133||)|
|Total liabilities and equity||$||34,798||$||16,706|
Reconciliation of Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EPS to Net Income
This release includes Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EPS that are not required by, or presented in accordance with, generally accepted accounting principles in
These non-GAAP financial measures are defined by the Company as follows:
- "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 to assume a single class of stock (Class A) and assuming no non-controlling interest. Adjusted EPS is a useful measure to management because it eliminates the impact of items that do not relate to business performance and helps compare companies that may not have a dual-share class structure.
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.
|Three months ended
|Full year ended
|Net income (loss)||$||605||$||377||$||(18,667||)||$||8,678|
|Depreciation and amortization||424||259||1,464||876|
|Other (income) expense (including state franchise tax)||135||—||157||(3,541||)|
|Adjusted EBITDA Margin(1)||16||%||20||%||25||%||25||%|
(1) Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by Total Revenue (
The following tables show a reconciliation from basic earnings per share to Adjusted EPS (non-GAAP basis) for the three months and full year ended
|Three months ended December 31, 2018:|
|Earnings per share - basic (GAAP)||$||0.01|
|Add: equity-based compensation(1)||0.01|
|Less: Estimated taxes assuming Class B shares were fully converted to Class A(2)||(0.01||)|
|Adjusted EPS (non-GAAP)||$||0.01|
(1) Calculated as equity-based compensation divided by the weighted average of Class A and Class B shares outstanding during the period [
(2) Calculated as net income attributable to non-controlling interests, excluding taxes directly attributable to non-controlling interest, times the effective tax rate of controlling interests, divided by the weighted average Class B shares for the period [(
|Year Ended December 31, 2018:|
|Earnings (loss) per share - basic (GAAP)||$||(0.66||)|
|Add: income prior to the Reorganization Transactions(1)||0.12|
|Less: estimated controlling interest taxes on income prior to Reorganization Transactions(2)||(0.03||)|
|Add: origination fees from previous debt immediately recognized upon refinance(3)||0.02|
|Add: equity-based compensation(4)||0.75|
|Less: Estimated taxes assuming Class B shares were fully converted to Class A(5)||(0.01||)|
|Adjusted EPS (non-GAAP)||$||0.20|
(1) Calculated as the income prior to the Reorganization Transactions divided by the sum of Class A and Class B shares at the time of IPO [
(2) Calculated as the income prior to the Reorganization Transactions, times the controlling interest percentage at the time of IPO, times the assumed effective tax rate of 25%, divided by the count of Class A shares at the time of the IPO [
(3) Calculated as the origination fees of previous debt immediately recognized upon refinance divided by sum of Class A and Class B shares at the time of the refinance [
(4) Calculated as equity-based compensation divided by the weighted average of Class A and Class B shares outstanding during the period [
(5) Calculated as net loss attributable to non-controlling interests, excluding taxes directly attributable to non-controlling interest, times the effective tax rate of controlling interests, divided by the weighted average Class B shares for the period [(
Key Performance Indicators
|Corporate sales agents < 1 year tenured||90||102||58|
|Corporate sales agents > 1 year tenured||77||72||53|
|Operating franchises < 1 year tenured (TX)||36||36||57|
|Operating franchises > 1 year tenured (TX)||166||165||130|
|Operating franchises < 1 year tenured (Non-TX)||168||157||74|
|Operating franchises > 1 year tenured (Non-TX)||87||66||31|
|Policies in Force (in thousands)||334||310||228|
|QTD Written Premium (in thousands)||$||135,119||$||140,296||$||90,286|
|Net Promoter Score ("NPS")||89||88||86|
Source: Goosehead Insurance, Inc.