Goosehead Insurance, Inc. Announces Third Quarter 2019 Results
- Revenues Grew 32% Over Prior-Year Period to
- Total Written Premiums Placed Increased 44% Over Prior-Year Period -
- Net Income Grew 231% Over Prior-Year Period to
- Adjusted EBITDA Rose 37% Over Prior-Year Period to
- Total Franchises Grew 49% Over Prior-Year Period -
Third Quarter 2019 Highlights
- Revenue grew organically 32% from the prior-year period to
$21.2 million . - Total written premiums placed increased organically 44% from the prior-year period to
$202.1 million , two-thirds of which occurred in the Franchise Channel. - Policies in force grew 45% to 448,000 as of
September 30, 2019 , compared to 310,000 as ofSeptember 30, 2018 . - Net income attributable to
Goosehead Insurance, Inc. of$1.0 million . - Adjusted EBITDA* rose 37% from the prior-year period to
$4.6 million . - Corporate sales headcount of 232 was up 33% year-over-year.
- Total franchises increased 49% compared to the prior-year period to 828; total operating franchises grew 38% compared to the prior-year period to 583.
- EPS of
$0.07 per basic share and$0.06 per diluted share, Adjusted EPS* of$0.08 per share.
* Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EPS are non-GAAP measures. Reconciliation of net income to Adjusted EBITDA 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.
“Our dynamic momentum from the first half of 2019 continued into the third quarter, as we generated another quarter of strong results, positioning us very well for sustained and significant revenue growth and margin expansion over the long term,” stated
“Our ongoing investments are aimed at maximizing client retention, and we are proud to have kept our retention rate steady at 88% and our Net Promoter Score at 90,” continued Mr. Jones. “Maximizing renewals is the longest economic lever in our business and we will continue to invest in our technology and talent to ensure our ability to execute at the highest levels. Our growth strategy remains very much intact and we are delivering on what we promised in terms of our growth and profitability, leaving us well positioned to create significant long-term value for our shareholders.”
Third Quarter 2019 Results
For the third quarter of 2019, revenues were
Total operating expenses for the third quarter of 2019 were
Net income for the third quarter of 2019 was
Total Adjusted EBITDA rose 37% from the prior-year period to
Franchise Channel
Revenues generated through the Franchise Channel in the third quarter of 2019 were
The Company grew total franchises, which includes operating franchises and those franchises in implementation, 49% to 828 as of
Adjusted EBITDA for the Franchise Channel in the third quarter of 2019 increased 56% to
Corporate Channel
Revenues generated through the Corporate Channel in the third quarter of 2019 were
Adjusted EBITDA for the Corporate Channel segment in the third quarter of 2019 was
Adjusted EBITDA Margin for the Corporate Channel for the third quarter of 2019 was 20%, compared to 21% in the prior-year period.
Nine Months 2019 Results
For the nine months ended
Net income for the nine months ended
Total Adjusted EBITDA rose 51% for the nine months ended
Liquidity and Capital Resources
As of
2019 Outlook
The Company is raising its full year 2019 outlook with respect to total written premiums and maintaining its outlook for revenue:
- The Company expects total written premiums placed for 2019 between
$715 million and $730 million , representing organic growth of 40% on the low end of the range to 43% on the high end of the range. The previous range was between$700 million and $725 million of total written premiums placed. - The Company expects total revenues for 2019 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) in its 2019 Annual Report on Form 10-K for the year ended
Conference Call Information
Goosehead will host a conference call and webcast today at
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 80 insurance companies that underwrite personal lines and small commercial lines risks, and its operations include a network of seven corporate sales offices and 828 operating and contracted franchise locations. For more information, please visit www.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 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 “1A. Risk Factors” in Goosehead’s Annual Report on Form 10-K for the year ended
Contacts
Investor Contact:
ICR
Phone: (214) 838-5145
E-mail: IR@goosehead.com
Media Contact:
Phone: (469) 480-4630
E-mail: PR@goosehead.com
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues: | ||||||||||||||||
Commissions and agency fees | $ | 11,739 | $ | 9,760 | $ | 38,672 | $ | 28,072 | ||||||||
Franchise revenues | 9,261 | 6,180 | 24,564 | 17,060 | ||||||||||||
Interest income | 169 | 114 | 452 | 299 | ||||||||||||
Total revenues | 21,169 | 16,054 | 63,688 | 45,431 | ||||||||||||
Operating Expenses: | ||||||||||||||||
Employee compensation and benefits (including Class B unit compensation of $0 for the three and nine months ended September 30, 2019, and $0 and $26,134 for the three and nine months ended September 30, 2018) | 11,412 | 8,956 | 30,981 | 49,646 | ||||||||||||
General and administrative expenses | 5,169 | 3,694 | 13,800 | 9,093 | ||||||||||||
Bad debts | 399 | 399 | 1,282 | 984 | ||||||||||||
Depreciation and amortization | 516 | 352 | 1,391 | 1,039 | ||||||||||||
Total operating expenses | 17,496 | 13,401 | 47,454 | 60,762 | ||||||||||||
Income (loss) from operations | 3,673 | 2,653 | 16,234 | (15,331 | ) | |||||||||||
Other Income (Expense): | ||||||||||||||||
Other income (expense) | — | (22 | ) | — | (22 | ) | ||||||||||
Interest expense | (609 | ) | (1,631 | ) | (1,861 | ) | (3,598 | ) | ||||||||
Income (loss) before taxes | 3,064 | 1,000 | 14,373 | (18,951 | ) | |||||||||||
Tax expense | 301 | 164 | 1,475 | 318 | ||||||||||||
Net income (loss) | 2,763 | 836 | 12,898 | (19,269 | ) | |||||||||||
Less: net income (loss) attributable to non-controlling interests | 1,765 | 595 | 8,525 | (10,278 | ) | |||||||||||
Net income (loss) attributable to Goosehead Insurance Inc. | $ | 998 | $ | 241 | $ | 4,373 | $ | (8,991 | ) | |||||||
Earnings (loss) per share: | ||||||||||||||||
Basic | $ | 0.07 | $ | 0.02 | $ | 0.30 | $ | (0.66 | ) | |||||||
Diluted | $ | 0.06 | $ | 0.02 | $ | 0.27 | $ | (0.66 | ) | |||||||
Weighted average shares of Class A common stock outstanding | ||||||||||||||||
Basic | 15,140 | 13,533 | 14,746 | 13,533 | ||||||||||||
Diluted | 16,451 | 14,614 | 15,936 | 13,533 | ||||||||||||
Dividends declared per share | $ | — | $ | — | $ | 0.41 | $ | — | ||||||||
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except per share amounts)
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 10,820 | $ | 18,635 | ||||
Restricted cash | 728 | 376 | ||||||
Commissions and agency fees receivable, net | 2,181 | 2,016 | ||||||
Receivable from franchisees, net | 1,474 | 703 | ||||||
Prepaid expenses | 1,829 | 1,109 | ||||||
Other Assets | 69 | — | ||||||
Total current assets | 17,101 | 22,839 | ||||||
Receivable from franchisees, net of current portion | 2,607 | 2,048 | ||||||
Property and equipment, net of accumulated depreciation | 9,610 | 7,575 | ||||||
Intangible assets, net of accumulated amortization | 442 | 248 | ||||||
Deferred income taxes, net | 14,503 | 1,958 | ||||||
Other assets | 158 | 130 | ||||||
Total assets | $ | 44,421 | $ | 34,798 | ||||
Liabilities and Members’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 4,355 | $ | 3,978 | ||||
Premiums payable | 728 | 376 | ||||||
Unearned revenue | 330 | 530 | ||||||
Deferred rent | 632 | 428 | ||||||
Note payable | 3,500 | 2,500 | ||||||
Total current liabilities | 9,545 | 7,812 | ||||||
Deferred rent, net of current portion | 6,712 | 4,548 | ||||||
Note payable, net of current portion | 43,355 | 45,947 | ||||||
Liabilities under tax receivable agreement, net of current portion | 12,659 | 1,694 | ||||||
Total liabilities | 72,271 | 60,001 | ||||||
Commitments and contingencies (see note 7) | ||||||||
Class A common stock, $0.01 par value per share - 300,000 shares authorized, 15,173 shares issued and outstanding as of September 30, 2019, 13,800 shares issued and outstanding as of December 31, 2018 | 152 | 138 | ||||||
Class B common stock, $0.01 par value per share - 50,000 shares authorized, 21,115 issued and outstanding as of September 30, 2019, 22,486 shares issued and outstanding as of December 31, 2018 | 210 | 224 | ||||||
Additional paid in capital | 13,792 | 11,899 | ||||||
Accumulated deficit | (22,350 | ) | (20,761 | ) | ||||
Total stockholders' equity | (8,196 | ) | (8,500 | ) | ||||
Non-controlling interests | (19,654 | ) | (16,703 | ) | ||||
Total equity | (27,850 | ) | (25,203 | ) | ||||
Total liabilities and stockholders' equity | $ | 44,421 | $ | 34,798 | ||||
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 EPS is a useful measure to management because it eliminates the impact of items that do not relate to business performance.
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 net income to Adjusted EBITDA and Adjusted EBITDA Margin for the three and nine months ended
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net income (loss) | $ | 2,763 | $ | 836 | $ | 12,898 | $ | (19,269 | ) | |||||||
Interest expense | 609 | 1,631 | 1,861 | 3,598 | ||||||||||||
Depreciation and amortization | 516 | 352 | 1,391 | 1,039 | ||||||||||||
Tax expense | 301 | 164 | 1,475 | 318 | ||||||||||||
Equity-based compensation | 396 | 345 | 1,131 | 26,738 | ||||||||||||
Other (income) expense | — | 22 | — | 22 | ||||||||||||
Adjusted EBITDA | $ | 4,585 | $ | 3,350 | $ | 18,756 | $ | 12,446 | ||||||||
Adjusted EBITDA Margin(1) | 22 | % | 21 | % | 29 | % | 27 | % |
(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 and nine months ended
Three Months Ended September 30, 2019: | ||||
Earnings per share - basic (GAAP) | $ | 0.07 | ||
Add: equity-based compensation(1) | 0.01 | |||
Adjusted EPS (non-GAAP) | $ | 0.08 |
(1) Calculated as equity-based compensation divided by sum of Class A and Class B shares [
Nine Months Ended September 30, 2019: | ||||
Earnings per share - basic (GAAP) | $ | 0.30 | ||
Add: equity-based compensation(1) | 0.03 | |||
Adjusted EPS (non-GAAP) | $ | 0.33 |
(1) Calculated as equity-based compensation divided by sum of Class A and Class B shares [
Key Performance Indicators
September 30, | December 31, | September 30, | |||||||
2019 | 2018 | 2018 | |||||||
Corporate sales agents < 1 year tenured | 122 | 90 | 102 | ||||||
Corporate sales agents > 1 year tenured | 110 | 77 | 72 | ||||||
Operating franchises < 1 year tenured (TX) | 20 | 36 | 36 | ||||||
Operating franchises > 1 year tenured (TX) | 177 | 166 | 165 | ||||||
Operating franchises < 1 year tenured (Non-TX) | 209 | 168 | 157 | ||||||
Operating franchises > 1 year tenured (Non-TX) | 177 | 87 | 66 | ||||||
Policies in Force | 448,000 | 334,000 | 310,000 | ||||||
Client Retention | 88 | % | 88 | % | 88 | % | |||
Premium Retention | 92 | % | 94 | % | 94 | % | |||
QTD Written Premium Placed (in thousands) | $ | 202,082 | $ | 135,119 | $ | 140,296 | |||
Net Promoter Score ("NPS") | 90 | 89 | 88 |
Source: Goosehead Insurance, Inc.