Goosehead Insurance, Inc (GSHD) Bundle
Understanding Goosehead Insurance, Inc (GSHD) Revenue Streams
Understanding Goosehead Insurance’s Revenue Streams
During the three months ended September 30, 2024, revenue increased by 10% to $78.0 million from $71.0 million for the same period in 2023. For the nine months ended September 30, 2024, revenue rose by 11% to $220.6 million, up from $198.3 million in the prior year.
Total Written Premium, a key leading indicator of future revenue, reached $1.03 billion for the three months ended September 30, 2024, compared to $0.80 billion for the same period in 2023, marking a 29% increase to $2.85 billion from $2.21 billion for the nine months ended September 30, 2024.
Revenue Sources Breakdown
The revenue streams can be categorized as follows:
- Core Revenue
- Cost Recovery Revenue
- Ancillary Revenue
Core Revenue Insights
Core Revenue increased by 16% to $73.5 million for the three months ended September 30, 2024, up from $63.1 million in 2023. For the nine months ended September 30, 2024, Core Revenue was $205.8 million, an increase of 17% from $176.1 million in the previous year.
| Revenue Source | Q3 2024 ($ million) | Q3 2023 ($ million) | 9M 2024 ($ million) | 9M 2023 ($ million) |
|---|---|---|---|---|
| Renewal Commissions | 20.2 | 19.0 | 56.8 | 53.4 |
| New Business Commissions | 6.2 | 6.1 | 18.6 | 17.9 |
| Agency Fees | 2.0 | 2.0 | 6.0 | 6.6 |
| Total Core Revenue | 28.5 | 27.2 | 81.4 | 77.9 |
Cost Recovery Revenue
Cost Recovery Revenue decreased by 40% to $1.6 million for the three months ended September 30, 2024, down from $2.8 million in 2023. For the nine months ended September 30, 2024, it declined by 39% to $6.0 million from $9.9 million in the previous year.
Ancillary Revenue Analysis
Ancillary Revenue also saw a decline, falling to $2.9 million for the three months ended September 30, 2024, down from $5.2 million in 2023. For the nine months, it decreased to $8.8 million from $12.2 million.
| Revenue Source | Q3 2024 ($ million) | Q3 2023 ($ million) | 9M 2024 ($ million) | 9M 2023 ($ million) |
|---|---|---|---|---|
| Contingent Commissions | 2.5 | 4.8 | 7.4 | 10.7 |
| Other Franchise Revenues | 0.4 | 0.3 | 1.4 | 1.5 |
| Total Ancillary Revenue | 2.9 | 5.2 | 8.8 | 12.2 |
Year-over-Year Growth Rate
The following table summarizes year-over-year revenue growth rates across different segments:
| Revenue Segment | Q3 2024 Growth (%) | 9M 2024 Growth (%) |
|---|---|---|
| Total Revenue | 10 | 11 |
| Core Revenue | 16 | 17 |
| Cost Recovery Revenue | -40 | -39 |
| Ancillary Revenue | -44 | -28 |
This analysis reflects the company's evolving revenue streams and highlights the significant contributions of Core Revenue while also noting the declines in Cost Recovery and Ancillary Revenue segments.
A Deep Dive into Goosehead Insurance, Inc (GSHD) Profitability
A Deep Dive into Goosehead Insurance, Inc's Profitability
Goosehead Insurance, Inc. has demonstrated a solid performance in its profitability metrics for 2024. The following analysis presents a detailed look at its gross profit, operating profit, and net profit margins, alongside trends and comparisons within the industry.
Gross Profit, Operating Profit, and Net Profit Margins
For the third quarter of 2024, Goosehead reported total revenues of $78.0 million, which marked a 10% increase from $71.0 million in the same quarter of 2023. The gross profit can be inferred from the revenue figures, alongside operating expenses, which totaled $61.6 million.
The net income for the third quarter was $12.6 million, which represents 16% of total revenues, compared to $11.3 million in Q3 2023. The Adjusted EBITDA for the quarter stood at $26.1 million, equating to an Adjusted EBITDA margin of 34%.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Total Revenue | $78.0 million | $71.0 million |
| Net Income | $12.6 million | $11.3 million |
| Adjusted EBITDA | $26.1 million | $22.4 million |
| Adjusted EBITDA Margin | 34% | 32% |
Trends in Profitability Over Time
Looking at the nine-month period ending September 30, 2024, Goosehead's total revenue rose to $220.6 million, up from $198.3 million in the prior year, reflecting an 11% increase. Net income for this period also improved to $25.3 million from $18.3 million, a significant growth of 38%.
The following table summarizes the trends in profitability metrics over the past year:
| Metric | 9M 2024 | 9M 2023 |
|---|---|---|
| Total Revenue | $220.6 million | $198.3 million |
| Net Income | $25.3 million | $18.3 million |
| Adjusted EBITDA | $62.5 million | $55.7 million |
| Adjusted EBITDA Margin | 28% | 28% |
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, Goosehead's net profit margin of 16% is competitive, as the average for the insurance industry hovers around 10-15%. The Adjusted EBITDA margin of 34% significantly exceeds the industry standard, which typically ranges from 20-25%.
Analysis of Operational Efficiency
Operational efficiency is critical for maintaining profitability. The company's cost management strategies have resulted in a gross margin improvement. The gross margin for the third quarter of 2024 can be estimated from the net income and operating expenses, reflecting effective cost control measures.
Furthermore, the increase in policies in force by 12% year-over-year to 1.636 million indicates a robust client retention strategy, contributing to sustained revenue growth.
The following table illustrates the operational efficiency metrics:
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Policies in Force | 1.636 million | 1.455 million |
| Client Retention Rate | 84% | 87% |
| Corporate Sales Headcount | 458 | 316 |
Debt vs. Equity: How Goosehead Insurance, Inc (GSHD) Finances Its Growth
Debt vs. Equity: How Goosehead Insurance, Inc. Finances Its Growth
As of September 30, 2024, Goosehead Insurance, Inc. reported a total debt of $40.2 million, comprising $25.0 million in long-term debt and $15.2 million in short-term obligations. This level of debt reflects the company's strategy to leverage financing for growth while maintaining a balanced capital structure.
The company's debt-to-equity ratio stands at 0.67, which indicates a moderate reliance on debt financing relative to equity. This ratio is below the industry average of 0.85, suggesting that Goosehead is less leveraged than its peers, thus potentially reducing its financial risk while still allowing for growth opportunities through borrowed funds.
| Type of Debt | Amount (in millions) |
|---|---|
| Long-term Debt | $25.0 |
| Short-term Debt | $15.2 |
| Total Debt | $40.2 |
In recent months, Goosehead has engaged in refinancing activities to optimize its interest expenses. The company successfully refinanced its existing credit facilities, which has resulted in a reduced interest rate of 4.5% compared to the previous rate of 5.2%. This strategic move has positively impacted its net income, which increased to $12.6 million for the third quarter of 2024, representing a 16% increase from the same period in 2023.
Goosehead balances its financing strategy by utilizing both debt and equity. For instance, the company raised $25 million through the issuance of Class A common stock in March 2024 to fund its expansion plans. This equity funding is complemented by cash flows generated from operations, which totaled $59.0 million for the nine months ended September 30, 2024, providing a solid foundation for both debt servicing and reinvestment into the business.
Overall, Goosehead's approach to financing its growth through a blend of debt and equity, coupled with a focus on maintaining a manageable debt-to-equity ratio, aligns with its long-term strategic goals. The company continues to monitor its capital structure to ensure it can effectively support its growth initiatives while minimizing financial risks.
Assessing Goosehead Insurance, Inc (GSHD) Liquidity
Assessing Goosehead Insurance, Inc's Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.42, indicating that the company has sufficient short-term assets to cover its short-term liabilities.
Quick Ratio: The quick ratio stood at 1.32, reflecting a strong liquidity position, as it excludes inventory from current assets.
Analysis of Working Capital Trends
The working capital as of September 30, 2024, was approximately $50.1 million, compared to $37.1 million at the end of September 2023, demonstrating a positive trend in liquidity management.
| Period | Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) |
|---|---|---|---|
| September 30, 2024 | $67,482 | $17,405 | $50,077 |
| September 30, 2023 | $52,368 | $15,297 | $37,071 |
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, indicated the following:
- Net Cash Provided by Operating Activities: $59.0 million, an increase from $37.4 million in 2023.
- Net Cash Used for Investing Activities: $(9.3 million), a decrease from $(14.6 million) in 2023.
- Net Cash Used for Financing Activities: $(43.7 million), up from $(16.1 million) in 2023.
| Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) |
|---|---|---|---|
| Operating Activities | $59,043 | $37,369 | $21,674 |
| Investing Activities | $(9,278) | $(14,609) | $5,331 |
| Financing Activities | $(43,700) | $(16,086) | $(27,614) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents amounted to $50.1 million, up from $37.1 million in the previous year, indicating strong liquidity. However, the significant cash used in financing activities, primarily for share repurchases totaling $63.2 million, may raise concerns about future liquidity if not managed prudently.
The company’s debt-to-EBITDA ratio was 4x, staying within the limits set by its credit agreement, reflecting a controlled approach to leveraging. This compliance with financial covenants strengthens the liquidity outlook.
Is Goosehead Insurance, Inc (GSHD) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
The current P/E ratio for Goosehead Insurance, Inc. is approximately 40.5. This is calculated based on the basic earnings per share of $0.31 for the three months ended September 30, 2024, and the stock price of around $12.55 as of the same date.
Price-to-Book (P/B) Ratio
The price-to-book ratio stands at approximately 7.3, calculated from a book value per share of $1.72 and the current stock price.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is estimated at $1.1 billion with an EBITDA of $62.5 million for the trailing twelve months, yielding an EV/EBITDA ratio of approximately 17.6.
Stock Price Trends
Over the last 12 months, the stock price has shown the following trends:
- 12 months ago: $10.25
- 6 months ago: $11.00
- 3 months ago: $12.00
- Current price: $12.55
Dividend Yield and Payout Ratios
As of September 30, 2024, Goosehead Insurance does not pay a dividend, resulting in a dividend yield of 0%. The payout ratio is also 0% since no dividends have been declared.
Analyst Consensus on Stock Valuation
The consensus among analysts for Goosehead Insurance is as follows:
- Buy: 10 analysts
- Hold: 4 analysts
- Sell: 1 analyst
| Metric | Value |
|---|---|
| P/E Ratio | 40.5 |
| P/B Ratio | 7.3 |
| EV/EBITDA Ratio | 17.6 |
| 12-Month Stock Price Trend | $10.25 (12 months ago) to $12.55 (current) |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus (Buy/Hold/Sell) | 10/4/1 |
Key Risks Facing Goosehead Insurance, Inc (GSHD)
Key Risks Facing Goosehead Insurance, Inc
Goosehead Insurance, Inc. operates in a dynamic environment influenced by various internal and external risk factors. These risks can significantly impact the company's financial health and operational performance.
Industry Competition
The insurance industry is highly competitive, characterized by numerous players ranging from established companies to new entrants. As of September 30, 2024, the total written premiums placed by Goosehead increased to $1.03 billion, reflecting a growth of 28% compared to the previous year. However, the competition for market share can pressure pricing strategies and profit margins.
Regulatory Changes
Changes in legislation and regulatory requirements can pose significant risks. The company must comply with various state and federal regulations that govern the insurance industry. For instance, the implications of the tax receivable agreement and changes in state apportionment can affect financial outcomes. The liabilities under the tax receivable agreement were reported at $155.7 million as of September 30, 2024.
Market Conditions
Macroeconomic conditions, including inflation and interest rates, can adversely affect the insurance market. For example, interest income decreased by 28% to $0.2 million for the three months ended September 30, 2024, compared to the same period in 2023. Additionally, the overall housing market conditions can impact product availability, which was noted as a headwind during the recent earnings report.
Operational Risks
Operational risks arise from internal processes, systems, and human factors. The company experienced a 27% decrease in total franchises compared to the prior-year period, which could affect revenue generation and operational efficiency. Furthermore, the increase in corporate sales headcount by 45% to 458 agents indicates rapid growth that may challenge management and operational structures.
Financial Risks
Financial risks include fluctuations in interest rates and credit availability. The interest expense for the three months ended September 30, 2024, increased to $2.1 million, up from $1.6 million in the prior year. Such increases can strain profitability, particularly if revenue growth does not keep pace.
Strategic Risks
Strategic risks involve decisions that could affect the company's long-term goals. The reliance on renewal commissions, which accounted for 65% of core revenue for the three months ended September 30, 2024, poses a risk if client retention rates decline. The client retention rate decreased to 84% from 86% at the end of 2023.
Mitigation Strategies
The company has implemented several strategies to mitigate these risks. This includes enhancing operational efficiencies, diversifying revenue streams, and investing in technology to improve client engagement and retention. As of September 30, 2024, the company reported an increase in policies in force by 12% to 1.6 million, indicating a focus on growth despite challenges.
| Risk Factor | Impact | Current Statistics | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | Pressure on pricing and margins | Total Written Premiums: $1.03 billion (28% increase) | Diversification of services |
| Regulatory Changes | Compliance costs and liabilities | Tax Receivable Agreement Liability: $155.7 million | Proactive compliance management |
| Market Conditions | Impact on product availability | Interest Income: $0.2 million (28% decrease) | Market analysis and adaptability |
| Operational Risks | Efficiency challenges | Franchises: 1,149 (27% decrease) | Operational efficiency initiatives |
| Financial Risks | Profitability strain | Interest Expense: $2.1 million (increase) | Financial hedging strategies |
| Strategic Risks | Long-term goal alignment | Client Retention: 84% (decreased) | Enhanced client engagement |
Future Growth Prospects for Goosehead Insurance, Inc (GSHD)
Future Growth Prospects for Goosehead Insurance, Inc
Goosehead Insurance, Inc is poised for significant growth driven by several key factors, including product innovations, market expansions, and strategic partnerships.
Key Growth Drivers
- Product Innovations: The company has continuously upgraded its technology platform, enhancing customer experience and operational efficiency.
- Market Expansions: Goosehead has expanded its footprint across the United States, increasing its presence in key markets.
- Acquisitions: The firm has engaged in strategic acquisitions to bolster its market position and expand its service offerings. For example, it reported a 28% increase in Total Written Premiums, reaching $1.03 billion for the three months ended September 30, 2024.
Future Revenue Growth Projections
Revenue for Goosehead Insurance is projected to grow significantly. In Q3 2024, total revenue increased by 10% to $78.0 million compared to $71.0 million in Q3 2023. For the nine months ended September 30, 2024, revenue rose by 11% to $220.6 million from $198.3 million. Analysts estimate continued growth in the upcoming quarters, fueled by an increase in policies in force, which rose by 12% to 1,636,000.
Strategic Initiatives and Partnerships
The company has implemented several strategic initiatives that are expected to drive future growth:
- Franchise Development: The number of corporate sales agents increased by 45% to 458 as of September 30, 2024, enhancing sales capacity.
- Client Retention Strategies: The company maintains a client retention rate of 84%, which is expected to contribute to stable revenue streams.
Competitive Advantages
Goosehead Insurance holds several competitive advantages that position it favorably for growth:
- High Client Retention: The company retains 99% of the premiums distributed, reflecting strong client loyalty.
- Diverse Revenue Streams: The company benefits from multiple revenue sources, including Renewal Royalty Fees, which increased by 27% to $38.1 million in Q3 2024.
- Robust Technology Platform: The ongoing investment in technology enhances operational efficiencies and customer engagement, driving higher sales.
| Financial Metrics | Q3 2024 | Q3 2023 | % Change |
|---|---|---|---|
| Total Revenue | $78.0 million | $71.0 million | 10% |
| Core Revenue | $73.5 million | $63.1 million | 16% |
| Total Written Premiums | $1.03 billion | $802.9 million | 28% |
| Net Income | $12.6 million | $11.3 million | 11% |
| Adjusted EBITDA | $26.1 million | $22.3 million | 17% |
Overall, Goosehead Insurance, Inc is well-positioned to leverage its competitive advantages and strategic initiatives to capitalize on growth opportunities in the insurance market.
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Article updated on 8 Nov 2024
Resources:
- Goosehead Insurance, Inc (GSHD) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Goosehead Insurance, Inc (GSHD)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Goosehead Insurance, Inc (GSHD)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.