Good day, ladies and gentlemen, and welcome to the Goosehead Insurance First Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program, Garrett Edson, Senior Vice President of ICR. Please go ahead.

Thank you, Jonathan, and good afternoon. With us today are your hosts, Mark Jones, Chairman and Chief Executive Officer of Goosehead Insurance; and Mark Colby, Chief Financial Officer. In addition, Michael Colby, President and Chief Operating Officer, will be available during Q&A. By now, everyone should have access to our earnings announcement, which was released prior to this call and which may also be found on our website at ir.gooseheadinsurance.com. Before we begin our formal remarks, I need to remind everyone that part of our discussion today may include forward-looking statements, which are based on the expectations, estimates and projections of management as of today. The forward-looking statements in our discussion are subject to various assumptions, risks, uncertainties and other factors that are difficult to predict and which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not guarantees of future performance and therefore, undue reliance should not be placed upon them. We refer all of you to our recent filings with the SEC for a more detailed discussion of the risks and uncertainties that could impact the future operating results and financial condition of Goosehead Insurance. We disclaim any intentions or obligations to update or revise any forward-looking statements, except to the extent required by applicable law. In addition, this call is being webcast and an archived version will be available shortly after the call ends on the Investor Relations portion of the company's website at www.gooseheadinsurance.com. With that, I'd now like to turn the call over to CEO, Mark Jones. Please go ahead.

Thanks, Garrett, and welcome to our first quarter 2018 earnings call and our first call as a public company. We're excited to be with you today. And let me thank everyone for participating on our call and for your interest in Goosehead. I will provide a bit of an overview on our company and Goosehead's competitive advantage; and our CFO, Mark Colby, will follow and provide some details about our first quarter results, absent per share details since we were not yet a public company in the first quarter. Given that we are a newly public company, I think it would be helpful to spend a few minutes providing some context on our business and share how we've created a company that is bringing meaningful value to our clients and to our shareholders. We've built one of the fastest-growing companies in not only the insurance industry, but also relative to most any consumer-facing business. Goosehead has demonstrated that it can and is disrupting one of the largest financial industries in the country, changing how business is being won. Our clients are benefiting and ultimately, our investors are going to benefit as we focus our efforts to become an industry leader over the long term. Goosehead Insurance is a pure play personal lines property and casualty insurance broker. We primarily sell homeowners insurance and auto insurance as well as other insurance [ like ] -- to consumers throughout the United States. Over the last 15 years, we've built a unique business that is disrupting the massive $300 billion a year personal lines insurance industry in terms of delivering exactly what consumers both desire and need from their insurance broker. We've accomplished this by successfully leveraging our extraordinary human capital and our innovative technology to provide a world-class client experience. Importantly, our…

Thanks, Mark, and good afternoon to everyone on the call. Let's go right into our first quarter results. For the first quarter of 2018, we produced a 47% increase in revenues of $14.6 million, compared to $9.9 million in the prior year period, driven by growth in both our corporate and franchise channels from new and renewal business. Total written premiums during the quarter, which is a good proxy for the growth of our business, grew 43% year-over-year to $100.9 million. At the end of the first quarter, we had almost 252,000 policies in force, a 33% increase from 1 year ago, and 11% growth from the end of the fourth quarter of 2017. As a brief note, regarding the variability of timing of contingent commission payments we receive, we do not fully control the timing of these and thus, they can vary year-to-year and quarter-to-quarter. In the first quarter of 2018, we received an annual contingent commission payment from one of our larger carriers that in 2017 had been paid during the second quarter. We wanted to note the shift in timing and that we would expect to receive a minimal amount of contingent commission in the second quarter of 2018. Total adjusted EBITDA grew 74% year-over-year to $5.1 million, while our adjusted EBITDA margin of 35% rose from 30% in the prior year period. Adjusted EBITDA growth and margin expansion was driven by higher-margin renewal revenue and contingent commission in both channels, partially offset by additional employee compensation and benefit related to higher corporate headcount and the number of operating franchisees. Breaking down our results by channel. In the first quarter of 2018, our corporate segment generated revenues of $7.9 million, a 42% increase over the prior year period. This increase was driven by new business revenue, primarily…

[Operator Instructions] Our first question comes from the line of Sarah DeWitt from JPMorgan.

First, on the franchise count and the agent count, that was a little higher than I was expecting. I was wondering if you could just talk about, are you seeing the productivity of the new agents and franchises remaining consistent as you aggressively expand?

Sarah, this is Mike Colby, President and Chief Operating Officer. Thanks for the question. Yes, we are seeing productivity remain consistent, and also our ramp up's to remain consistent in both channels.

Sarah, this is Mark Colby. Yes, we are a little bit over where we thought we would be. Again quarter-to-quarter, there's going to be fluctuations, up or down. But again, we're comfortable with where we're at, at the end of the quarter.

Okay, great. And then my second question. You may have seen today that Amazon said it was contemplating getting into -- or there was an article that they could get into homeowners insurance. And -- wanted to get your thoughts on that, and the implications for Goosehead if that were to happen?

Sarah, it's Mark Jones. At this point, to our knowledge, Amazon itself hasn't commented on that article. So we kind of just view that as speculation, but I would point out the most recent data that I have seen would suggest that only about 6% of homeowners insurance is purchased online and there's a lot of real strong reasons for that. So we're going to -- before we kind of come to any conclusions or formulate a response, we're going to wait and see what they're really going to do as opposed to try and respond to speculation.

[Operator Instructions] Our next question comes from the line of Christopher Campbell from KBW.

Just quick question. What is the current mix of like the business that you're writing between like homeowners and auto? And has that been changing?

Yes. So we see about, annualized, about 47% of our business is homeowners versus 43% auto. We're starting to see that switch a little more to auto as we expand outside of Texas, but also as we do -- get better and better at packaging business. Obviously, our -- with our marketing strategy, we're leading with the home and cross-selling the auto. So the better we can package that business, the more auto premium we're going to write.

Okay, got it. And then one thing I noticed on the press release is that it looks like the operating franchise is less than a year tenured in Texas, that dropped to 49% from 60%. Any color on kind of what's going on there? Is it just people are -- your agents are becoming more tenured? Just any color on that would be wonderful.

Chris, this is Mike Colby. I think that's just quarter-to-quarter fluctuations and also, as our agents continue to mature and mature out of that, less than 1 year bucket.

Okay, got it. And then are there any -- are you seeing any change in like the churn metrics, as you're bringing on more and more agents? Kind of, what are you seeing with the old agents? Are they being -- are they kind of consistent with your historical experience?

For Q1, it's actually a little bit better, but I'd hesitate to call that a trend. We'll continue to monitor that throughout the year, but again, it's -- we're comfortable with the attrition levels where they are at Q1.

Okay, great. And then just one more. Like I know that there is like a greenshoe or something outstanding. Now if that were to be exercised, what would be the plans for those proceeds?

The greenshoe -- Chris, it's Mark Jones. The greenshoe was actually exercised the first day of trading. And so we have received those proceeds and right now, we're kind of holding them for general and corporate purposes. So that's where we are.

Our next question comes from the line of Adam Klauber from William Blair.

A couple of different questions. Franchise, obviously, has had pretty big growth. How big is your franchise team today versus a year ago? And are you still growing that team of people?

Chris, this is Mike -- sorry, Adam, this is Mike Colby. Yes, we are continuing to recruit new franchise recruiting talent into that team. Currently, we're at about 24 full-time equivalents there.

Okay. And just so we'll know, generally what was that roughly a year ago?

Last year, that was 18 -- oh, sorry, excuse me, 13.

13. Okay. Looking at the growth again, big growth in franchise generally, but in particular, year-over-year your non-Texas franchise really jumped up from 30 to 105, which states are you seeing the most success in outside Texas?

Our core markets outside of Texas right now are California, Florida, Illinois. We're making some big push into the mid-Atlantic area, North Carolina, South Carolina and Virginia as well as the Northeast and Pennsylvania. We launched New York, New Jersey, Connecticut this year as well. Michigan also would be included in kind of our Midwest expansion.

Okay. And of those big ones, California, Florida, Illinois, would you say 1 or 2 of those are leading? Or would you say it's more equal across the states?

Yes, from a total written premium perspective, Adam, California and Florida, we've been in there the longest. So we've seen some significant growth there as those agents mature, and as we get more traction on boarding agents. We've also seen some great success in Illinois. It's a little bit younger state, but we're excited about moving into that state even more.

Okay. And could you give us some idea of the production of those non-Texas states after a year? How is that today versus a year ago, roughly?

Yes. Again those agents continue to mature and get better and better, and we continue to try and disseminate best practices to those agents. So we've seen some improvements in the non-Texas production levels as well year-over-year.

Okay. Okay, good to hear. But then as we think about your expense ramp, but the G&A actually seemed to hold down pretty nicely for the quarter. Is that sustainable? Or does that need to expand throughout the year?

No, I think that's sustainable. Again, it's quarter-to-quarter, especially just 1 quarter of the year being done, it's hard to identify new real trends, but we're comfortable with where that's at. And as we continue to grow throughout the year, we feel like that's in a good place.

Adam, it's Mark Jones. Can I just kind of go back to the one question you had about productivity growth outside of Texas? We don't have particular specific data for 2018 yet because we're so early in the year, but in 2017, we saw new business production per office ramp up 46%, that's for new franchisees coming into the system outside of Texas. So we've gotten better and better at helping these new franchisees get their feet under them in kind of markets outside of Texas, and that 46% growth and productivity is evidence of that.

That's really helpful, Mark. Is it -- as you have presence in a state longer, say, if you're -- you've been in Florida longer or California longer, does the productivity tend to ramp more as you have more critical mass of that? Does that sort of follow that playbook?

Yes. We do expect as we mature into the different states, to see productivity continue to improve both by agents coming down the learning curve, but also from a recruiting standpoint, us coming down the learning curve and continuing to increase the quality of new agents that we're bringing onboard.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Mark Jones for any further remarks.

Thanks. We just appreciate all of you dialing in, appreciate your interest. And thank you for your support of Goosehead.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.