Key Points
- Revenue grew by 13% year over year to $78.1 million.
- Net income increased to $10.9 million from $7.2 million in the prior-year period.
- Total written premiums placed grew by 30% to nearly $1 billion.
Goosehead Insurance (GSHD -1.80%), an innovative insurance broker, released its second-quarter results on July 24. The mid-cap company reported total revenues of $78.1 million, a 13% year-over-year increase. That result was in line with the company's full-year revenue guidance of $290 million to $310 million. Core revenue stood at $73.4 million, up 20% year over year. Net income rose to $10.9 million from $7.2 million in the prior-year period. EPS improved to $0.25 and adjusted EPS of $0.43 met management's expectations.
| Metric | Q2 2024 Result | Q2 2024 Guidance | Q2 2023 Results | % Change (YoY) |
|---|---|---|---|---|
| Total revenue | $78.1 million | $72.4 million | $69.3 million | 13% |
| Net income | $10.9 million | - | $7.2 million | 51.4% |
| EPS | $0.25 | - | $0.15 | 66.7% |
| Total written premiums | $999 million | - | $767 million | 30.2% |
| Operating expenses | $53.4 million | - | $46.2 million | 15.6% |
| Source: Expectations based on guidance provided in the Q1 earnings report on April 24. |
Business Overview
Goosehead Insurance, founded in 2003, is an insurance brokerage built around a technologically advanced platform and distinctive business model. It operates through a combination of corporate-owned and franchise offices, offering clients personalized insurance services with competitive rates from more than 150 carriers.
Recently, Goosehead has focused on enhancing its technological offerings, such as its Digital Agent platform, which provides rapid and accurate quotes. The company prides itself on delivering superior client experiences and maintaining high agent productivity, separating sales from service for greater efficiency.
Second-Quarter Highlights
Total written premiums increased 30% to $999 million. This kept it on track to hit its full-year guidance range of $3.62 billion to $3.82 billion. Core revenue grew by 20% to $73.4 million. Furthermore, Goosehead maintained a high net promoter score of 91. (The net promoter score is a measure of customer satisfaction based on a single question: How likely would you be to recommend this company, product, or service to a friend? Anything above 70 is viewed as excellent.)
Adjusted EBITDA stood at $24.7 million, up from $23.1 million in the prior-year period. Adjusted operating expenses grew by 15.6% to $53.4 million, influenced by higher investments in employees and technology. And the company repurchased $63 million worth of its shares during the quarter.
Goosehead did face some challenges in Q2. Its client retention rate declined by 1 percentage point from Q1 to 84%. On the earnings call, management attributed that decline to market pressures as some carriers' price hikes led more Goosehead customers to shop around. Additionally, two carriers in financial distress reduced commissions, impacting Goosehead's near-term profitability.
Looking Ahead
Goosehead Insurance has maintained its full-year guidance for total written premiums to land in the $3.62 billion to $3.82 billion range and total revenues to be between $290 million and $310 million. Adjusted EBITDA margins are projected to expand further in 2024. Management's outlook remains optimistic, with a continued focus on leveraging its technological platform and expanding its franchise model.
Investors should closely monitor Goosehead's efforts to improve client retention and manage operating expenses. Additionally, any shifts in commission structures or market dynamics will impact its profitability. However, with strategic investments and a strong foundation, Goosehead appears well-positioned for sustained growth in the coming quarters.
