Goosehead Insurance (GSHD) Reports Q1
Goosehead Insurance (GSHD)
reported after the close yesterday that Q1 revenue rose by 53% to $31.2 million (beating by $2.5 million) and adjusted EPS rose to $0.03 from $0.01 in the year-ago quarter (missing by $0.03). That pace of revenue growth was up from 48% in the quarter ended December 31, and well above the 13% revenue growth rate reported in the year-ago quarter.Digging deeper, total written premium growth was up 49% to $319 million, policies in force grew 49% to 788,000, and headcount in the franchise and corporate channels was up 61% and 51%, respectively. The number of operating franchises grew 45% to 987, with total franchises up 61% to 1,628 (the difference in these two numbers represents franchises that are not yet fully operational).
Finally, management raised its full-year 2021 outlook. Total written premium guidance was raised modestly from 38% to 44% growth to a range of 40% to 45% ($1.5 billion to $1.56 billion) and revenue guidance was raised from 23% to 32% to a range of 25% to 33% ($146 million to $156 million). Not big changes, but not bad given previous guidance was given just a couple months ago.
Management has talked about its proprietary comparative insurance quoting platform, and said it is now beta testing it and will release it (along with a new website) in Q3. The big-picture idea here is to build a truly consumer-centric quoting solution that’s actually easy to use and doesn’t send consumers off the edge, looking for information they don’t need and providing bogus pricing for policies that don’t cover what they want. This will bring an increase in costs, but given that Goosehead is currently getting most new business from home closings a consumer-facing quoting service should represent a significant growth opportunity.
Turning to the stock, expectations had come down for the company after a huge 2020 (helped by contingent commissions) and the stock has had a relatively muted reaction to the earnings report. Some of that is due to a blah market today. But also, there’s likely just some time required here for investors to digest the earnings report. On balance, I didn’t hear any red flags and think management is doing the right things to keep growing. The consumer-facing platform will be very interesting. Let’s stick with a hold rating for now and see how GSHD performs in the coming days. HOLD