Goosehead Insurance, Inc. (GSHD) is a rapidly growing independent personal lines insurance agency that is revolutionizing the way individuals and businesses approach their insurance needs. With a relentless focus on innovation, superior customer service, and a differentiated business model, Goosehead has carved out a unique position in the highly competitive insurance industry.

Business Overview and History

Goosehead was founded in 2003 by Mark E. Jones and Robyn Jones with the vision of providing clients with superior insurance coverage at the best available price and in a timely manner. Mark E. Jones, who previously served as a Senior Partner and Director at Bain & Company and as the Global Head of Recruiting, brought his extensive business experience to the company. In 2011, Goosehead launched its franchise model, which allowed for rapid expansion of its national footprint. This innovative approach enabled the company to leverage its proprietary technology, training, and back-office support to empower independent agents in building their own insurance businesses.

By 2012, Goosehead had established franchise locations across the country, setting the stage for its impressive growth trajectory. The company reached a significant milestone in 2018 when it completed its initial public offering, becoming a publicly traded company on the NASDAQ. This move allowed Goosehead to further invest in its growth initiatives, including expanding its corporate-owned offices and enhancing its technology capabilities.

Throughout its history, Goosehead has successfully navigated various challenges faced by the insurance industry, such as periods of intense price competition, shifting client preferences, and natural disasters that impacted certain geographic regions. The company has demonstrated remarkable resilience by maintaining a diversified carrier portfolio, providing superior client service, and continuously investing in technology to drive operational efficiencies.

As of the end of 2024, Goosehead's impressive growth is evident in its extensive network of 1,100 operating franchise locations across 44 states, covering over 98% of the U.S. population. The company's corporate-owned sales force had grown to 417 agents, complemented by an enterprise sales team focused on digital and partnership channels. This dual-pronged approach has allowed Goosehead to capitalize on the strengths of both corporate and franchise sales, driving impressive growth and profitability.

Financial Performance and Ratios

Goosehead's financial performance has been nothing short of remarkable. In 2024, the company reported total revenues of $314.5 million, representing a 20% year-over-year increase. This strong top-line growth was driven by a 17% increase in core revenues, which include commissions, agency fees, and royalty fees. The company's Total Written Premium increased by 29% to $3.8 billion in 2024.

The company's profitability has also been impressive, with 2024 net income reaching $49.1 million, up from $23.7 million in 2023. Goosehead's adjusted EBITDA, a key metric for the company, grew by 43% in 2024 to $99.9 million, with a record adjusted EBITDA margin of 32%.

Goosehead's balance sheet remains healthy, with a current ratio of 2.34 and a debt-to-equity ratio of 1.56 as of December 31, 2024. The company's operating cash flow and free cash flow also demonstrated strong growth, increasing by 41% to $71.54 million and 53% to $59.36 million respectively in 2024.

In the most recent quarter (Q4 2024), Goosehead reported revenue of $93.92 million, up 49% year-over-year. This increase was primarily driven by a 19% increase in core revenue, which includes higher renewal commissions, renewal royalty fees, and contingent commissions. Net income for the quarter reached $14.86 million.

Key Financial Ratios

• Gross Profit Margin: 45.0% (2024)
• Net Profit Margin: 15.6% (2024)
• Return on Equity: 59.7% (2024)
• Debt-to-Equity Ratio: 1.56 (2024)
• Current Ratio: 2.34 (2024)
• Quick Ratio: 2.34 (2024)

Operational Highlights and Growth Drivers

Goosehead's success can be attributed to several key factors, including its innovative technology platform, exceptional customer service, and strategic focus on expanding its franchise network.

Technology Innovation: Goosehead has invested heavily in developing its proprietary technology, including the Goosehead Digital Agent, a platform that allows clients to shop and compare insurance rates from a variety of carriers. This technology, combined with the company's data-driven approach, has enabled Goosehead to provide a superior customer experience and drive operational efficiencies.

Exceptional Customer Service: Goosehead's commitment to delivering exceptional customer service is reflected in its industry-leading Net Promoter Score (NPS) of 89 in 2024, which is more than 4 times the industry average. The company's centralized service centers and highly trained staff have been instrumental in maintaining high client retention rates, which stood at 84% as of the end of 2024.

Franchise Network Expansion: Goosehead's franchise model has been a key driver of its growth, with the number of operating franchises increasing from 1,230 at the end of 2023 to 1,100 at the end of 2024. The company's franchise sales agents have consistently outperformed industry benchmarks, with franchise producers averaging 1.9 agents per franchise in 2024, up from 1.6 in the prior year.

Revenue Streams and Business Model

Goosehead operates in a single reportable segment - insurance distribution. The company's revenue streams include:

Commissions and Agency Fees: Goosehead earns commissions as a percentage of policy premiums placed for its customers. New Business Commissions are earned at the effective date of the policy, while Renewal Commissions are earned upon the effective date of the renewal or replacement policy. The company also charges non-refundable Agency Fees for policy placement.

Contingent Commissions: Goosehead earns Contingent Commission revenue from contracts with insurance carriers based on growth, profitability, or other performance-based metrics. These are recognized over time as the company completes its performance obligations.

Franchise Revenues: This includes Initial Franchise Fees, recognized over the 10-year life of the franchise contract, and ongoing New and Renewal Royalty Fees, recorded as franchises place and make effective policies for insureds.

Geographic Markets and Industry Trends

Goosehead operates primarily in the United States, with a focus on Texas, California, Florida, and Illinois, which make up a significant portion of its business. The company does not have any international operations.

The US personal lines insurance industry has seen steady premium growth, with a 5-year CAGR of 4.5% from 2019 to 2024. The industry has also experienced volatility in underwriting profitability due to factors like natural disasters and inflation.

Liquidity and Financial Position

As of December 31, 2024, Goosehead's financial position remained strong:

• Cash and Cash Equivalents: $54.28 million
• Available Credit Line: $74.80 million under a $75 million revolving credit facility
• Debt-to-Equity Ratio: 1.56
• Current Ratio: 2.34
• Quick Ratio: 2.34

Looking Ahead

As Goosehead continues to execute on its growth strategy, the company is well-positioned to capitalize on several emerging trends and opportunities in the insurance industry.

Improving Industry Landscape: After navigating a challenging market environment in recent years, the personal lines insurance industry is showing signs of stabilization. Carriers are gradually opening up capacity, particularly in the auto insurance segment, which should provide Goosehead with more opportunities to place business and drive revenue growth.

Expansion into New Verticals: Goosehead is actively exploring opportunities to expand its reach beyond the traditional personal lines insurance market, including through partnerships with mortgage servicers and other businesses that can benefit from the company's insurance distribution capabilities.

Technological Advancements: Goosehead remains committed to investing in its technology infrastructure, with plans to further enhance its quote-to-issue platform and leverage artificial intelligence to improve the customer experience and drive agent productivity.

Future Guidance and Outlook

For 2025, Goosehead has provided the following guidance:

• Total revenues are expected to be between $350 million and $385 million, representing organic growth of 11% on the low end and 22% on the high end.
• Premiums for the full year are expected to be between $4.65 billion and $4.88 billion, representing 22% organic growth on the low end and 28% on the high end.
• The premium and revenue forecast assume a gradual decline in pricing tailwinds through the year and conservative client retention levels.
• Continued margin expansion is expected in 2025, as the company plans to grow core revenue faster than the expense base.
• Contingent commissions are expected to be lower in 2025 compared to 2024, at approximately 40 to 65 basis points of total written premium, down from the unusually high 82 basis points in 2024.

Overall, Goosehead's innovative business model, relentless focus on customer service, and strategic investments in technology position the company for continued success in the years ahead. As the company continues to execute on its growth strategy and capitalize on industry tailwinds, Goosehead is well on its way to redefining the insurance landscape and delivering value to its shareholders.