Goosehead Insurance (GSHD) Flies Higher
Goosehead Insurance reported last night what can only be described as an outstanding quarter. Revenue of $30 million was up 54% and beat by $5.2 million while adjusted EPS of $0.25 beat by $0.15. Those reported results are enhanced a little because of a change from ASC 605 to 606 accounting in Q4 2019, but that transition is still factored into analyst estimates. With business booming management has the confidence to increase full-year revenue guidance to a range of $104 million to $109 million, implying 34% to 41% growth. That compares favorably to consensus revenue of $100 million (19% growth).
Behind the headline numbers everything sounds quite good. Total written premiums placed jumped 41% to $247 million (ahead of management’s initial full-year guidance for +32% to +40%) while policies in force grew 45% to 590,000. Corporate sales headcount rose 49% to 317 while franchises rose 48% to 1,132. Of those franchises, 730 are now operating, an increase of 36%. The remaining pipeline of 402 should continue to come online in the coming quarters even as Goosehead adds more franchises to the total count.
Management also announced a special dividend of $1.15 per share, payable on August 24 to shareholders of record as of August 10. The total outlay for this special dividend is $42 million. In June management drew down $37.9 million on its term note, bringing the outstanding term note payable to $79.5 million as of the end of June.
Early today the stock is trading up in the 10% to 20% range. That feels good!
The strength is a reflection of the sizeable beat and management’s confidence in raising its outlook in this environment as one would have to assume they would be somewhat cautious (implying beat potential). The special dividend also helps, though as when they did this last time some investors will question whether or not this is the best use of cash. As was the answer the first time, the company throws off a decent amount of cash so management feels comfortable returning some of that to shareholders.
All together this was a very strong showing. With the stock already cranking heading into its report, and now up double digits, I’m keeping at hold. Enjoy the ride. HOLD