Hello and thank you for standing by. Welcome to Goosehead Insurance Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions]. I would now like to turn the call over to Dan Farrell, VP of Capital Markets. Sir, you may begin.

Thank you and good afternoon. 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. 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 SEC filings for a more detailed discussion of the risks and uncertainties that could impact future operating results and financial condition of Goosehead Insurance. We disclaim any intention or obligation to update or revise any forward-looking statements, except to the extent required by applicable law. I would also like to point out that during the call, we will discuss certain financial measures that are not prepared in accordance with GAAP. Management uses these non-GAAP financial measures when planning, monitoring and evaluating our performance. We consider these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period by excluding potential differences caused by variations in capital structure, tax position, depreciation, amortization and certain other items that we believe are not representative of our core business. For more information regarding the use of non-GAAP financial measures, including reconciliations of these measures to the most recent comparable GAAP financial measures, we refer you to today's earnings release. In addition, this call is being webcast. An archived version will be available shortly after the call ends on the Investor Relations portion of the company's website @goosehead.com. Now I'd like to turn the call over to our Chairman and CEO, Mark Jones.

Thanks Dan, and welcome to everyone to our Q2 2023 results call. I'm very pleased to report that we continue to successfully navigate challenging industry conditions with a sluggish housing market and an extraordinarily hard insurance market. Meaning we've been working both smarter and harder but have delivered strong profitable growth. I'm also happy to say that the decisions we've made and actions taken over the last year to restructure our business are helping to drive strong top line growth producing the plans strong and we believe sustainable improvements and profitability. Summary results for Q2 include 31% revenue growth 27% core revenue growth 36% growth in premium and adjusted EBITDA margin expansion of 900 basis points to 33%. These results underscore the strength of our strategy and quality of our execution focused tightly on the distribution link in the value chain with a powerful choice model. Our 20 years in business we've seen many challenging circumstances. But each time we've applied the same maniacal external focus on our clients and the market. While our competitors circle the wagons, wring their hands with worry and focus internally, we've been aggressive and externally focused on capturing share. One example of our proactive approach to industry turbulence is broadening our product portfolio. While reduced product access is a headwind in some regions. Our choice model allows us to seek out carriers that are looking to gain share and distribute through us at scale. So far this year, we've on boarded 24 new carriers to our platform. Our technology, scale, quality control, and unique human capital make us an attractive partner for any carrier looking to grow. Our agents remain completely engaged in acquiring new referral partners and penetrating deeper with their existing relationships to bolster lead flow. Because of this laser focus, we…

Thanks, Mark, and good afternoon, everyone. As I look back on the past year, I'm proud of the business decisions we made and the speed with which our team has executed. Maximizing revenue and profitability has required us to focus intensely on productivity of a corporate and franchise agents. The core of our strategy was simply to drive quality across the organization. I believe we've made meaningful progress in driving quality in almost every aspect of the business. But there is no area more apparent of this progress that in corporate sales. Last fall, we raised productivity expectations across the corporate sales team. As a result, many agents significantly increased their productivity levels. Agents that could not meet these expectations exited the company. These were not easy decisions. But they allowed us to focus on sharpening the skills of our best team members and driving material productivity improvement. Net-net we dramatically increased productivity per agent and maintain overall production levels with much less cost. From a productivity perspective, these efforts are already starting to yield significant dividends. Productivity for corporate agent is increased by 57% since this time last year meeting record levels of productivity were achieved while transferring approximately 25 of our highest producing corporate agents to franchise ownership. While we're optimizing corporate sales productivity, we're also preparing for growth by strengthening and refocusing our recruiting function and reestablishing the hiring standards that historically set Goosehead apart. Now that we've built a healthy and thriving corporate sales organization, we're once again geared to hire agents rapidly over the next several years. This summer, we're quickly adding back top-tier college recruits to the corporate sales team. These hires all met our new rigorous hiring standards. This fall, we are now planning to accelerate our recruiting efforts on 12 college campuses…

Thanks, Mark. We're very pleased to be delivering exceptional top and bottom-line results then increasingly challenging operating environment. I'm incredibly proud of the discipline and grit of our team as they navigate through the unprecedented P&C product challenges. We have continued to gain share, but our runway remains massive. We will still be under 1% market share of this $390 billion industry by year-end. We've done a great job expanding our lead flow and gaining market share in this tough environment. The current state of the P&C product market is more than offsetting the benefits we're getting from higher rates as carriers intentionally slow new business in favor of profitability. Importantly, we believe all the actions we have taken to address the product availability and continued real estate headwinds are making us a significantly stronger company and will be a tightly coiled spring for growth as macro factors improve. Just to highlight a few of our operating improvements that will provide ongoing benefits. Our agents have improved sales processes and activated new referral partners at an unprecedented rate. We expect to see tremendous benefit when the real estate market volume reaccelerates and product options expand. We currently account for about 4.4% of new mortgage real estate transactions in the U.S. up from 3.7% a year ago. While premium increases will likely level-off as market conditions improve, we should be writing a higher volume of business at increased premium levels, further enhancing productivity and profitability. We proactively slow talent addition select states such as California and Florida to align productivity and opportunity for producer growth once our product is reopened in those locations. We've worked diligently to add new viable carriers that help offset the pullback and underwriting appetite from some of our larger existing carriers. This increased product will further…

Thank you. [Operator Instructions]. Our first question comes from the line of Matt Carletti with JMP. Your line is open.

Just have a quick one, you guys were covered a lot of what I had on my mind was very thorough commentary. But I guess what I want to ask is a little longer term. You touched on the digital agent and some of the Quota to Issue, progression has been made. As you look forward, kind of how do you see the digital agent evolving? I mean, I know we're not expecting Superbowl commercials and things like that. But as we think forward as a tool for you guys to use. How do you how do you envision it as more kind of large national carriers get on Quote to Issue? It's a 24 to 36 months sort of question not a next quarter question?

You start. I will add on.

Yes. So I think there's a lot of ways that that can evolve over time. Right now, it's a fantastic marketing resource for our existing agents to hand out to RPs to generate new lead flow. And we're getting a substantial amount of leads through the digital agents. It's about optimizing that process and creating an inbound sales motion, our team right now is very, very good at hunting and generating new lead flow, which means that they're not as good at handling an inbound lead as they could be in the future. So there's plenty of room for us to go with that respect. The carrier product environment, right now, as well as carriers are not necessarily looking to make investments in generating new leads and new distribution networks. They're focused all on underwriting profitability. As that changes over time, we should see significantly more speed and ramp in the QTI projects as well. Very pleased with the way our technology team has been able to add carriers onto the platform, even in today's market really is a good tool for agent productivity over time that could develop to be a very profitable distribution network.

Yes. Great answer, Mark. This is Mark Miller, I would just say along the same lines, right now we're trying to work the technology aspects of it out, we had to back off of it a little bit, kind of rebuild the foundation that QTI runs on. We're really proud of the team for being able to put three new carriers on this quarter. And we'll kind of see where it goes from there. But I think about it in the short-term is really being an automation tool for our agents and moving its way into service and other areas. We'll see where it goes longer term. I want to see how many carriers we can get on it. But the carriers what I'm really happy about is the carriers are really leaning in and helping right now.

That's great. Super helpful color. Thank you very much and congrats on a nice quarter.

Thank you. Please stand back for our next question. Our next question comes from the line of Michael Zaremski with BMO. Your line is open.

I guess just stepping back, I took a lot of notes, gave a lot of great color and a lot of positive momentum, which we can clearly see in most of your KPIs. And you did use the term of the prepared remarks towards the end, I think ramp growth. So just curious, cognizant that growth was a little slower than maybe some expected this quarter. But because is it, why wouldn't you guys take up kind of your growth rate into the back half of the year, if it feels like there's just a lot of momentum, including you said, spending a bit more money to grow as well. This is a naïve question, or do you feel like you're embedding some conservatism?

I think we're doing exactly what we set out to do for 2023, which was get our corporate team as productive and profitable as possible and make it incredibly healthy. So that when we add new agents into the system, they're set up for much, much more success. So we've increased the recruiting standards, increased the accountability on the team, Brian Pattillo, who leads that organization is doing a phenomenal job maximizing every single ounce of productivity. So we're generating a lot of profitability on new business, we're in the point now where we're adding agents back into that system who are significantly more productive than agents we've ever added into the system before. So we feel very good about the long-term growth of the corporate channel. On the franchise side, as we talked about, we're still working through some of the agencies that are underperforming. But we feel great about the progress that we've made there. We're seeing more agencies hire, and the people that they're hiring are continuing to deliver very good profitability and productivity. We just going to need to let that burn in for the rest of 2023. And we should see growth reaccelerate in 2024.

Okay. And if we -- you said to invest a little bit more near term, which could kind of cause less of uplift in the year-over-year margin, you correct me if I'm wrong. But can you just -- I know there's lots of investments, are there other a couple you'd like to highlight? Or is it mostly just, is one of the big ones hiring folks out of college that are just inherently going to be way less productive, or anything you'd like to call out there?

Yes. We'll be onboarding a significant amount of individuals over the next. We started that in June and over the next several months, but as well investments in the marketing function to drive inbound lead flow for new franchises as well as new policies, it's significantly more efficient than having an outbound motion with hundreds of people pounding the phones. So that takes a little bit of setup on the front end but pays off very nicely on a back end, you'll also get a more highly qualified candidate who understands the opportunity a little bit better. And you can pre-qualify them with some of the information and they submit. That takes some infrastructure, build out, some technology build that to continue to operationalize the Vivint partnerships, so we can maximize and get as much out of that as possible. As well as just continuing to grow the rest of the back office to scale the entire organization that we saw very substantial margin improvements over the last six months, we continue to expect to see margin improvement over next six months, but probably just not at the same rates as the first half of the year.

Okay. That's helpful. And maybe lastly, also kind of on the macro level, there's very hard kind of market pricing on the personalized side, clearly, and that's probably going to persist. But those are my words. But just curious so, when we're asked to think about that dynamic versus you talked a lot about the challenging real estate market and also just less capacity. To those three macro elements kind of net out to be a wash ultimately? Currently, because it sounds like, eventually you're talking about -- eventually if the real estate market opens up more. It sounds like you're saying there could be even if hard market pricing falls a bit there still net-net going to be some positives in the outer years.

No, I would say that the product challenges in the P&C environment today are more of a drag than any of the tailwinds we're seeing from pricing. Housing, certainly we would prefer it to be running super hot, but our agents do a really good job of just taking share, when the housing market contracts like it is today. We don't expect that to continue forever. So that will be a tailwind eventually, again, in the future product is the thing that we're dealing with the most right now and a significant amount of our agents are in areas where there's very real product challenges that will alleviate our expectation at some time over the next 12 to 18 months. It's not necessarily up to us. But we're doing a really good job of pivoting and finding new partners to distribute with as well. We mentioned in our prepared remarks, we added 24 carriers onto the platform so far this year, I really think our choice platform shines in this environment better than anywhere else. But ultimately, I wouldn't say it's a net wash or even a positive I'd say we're doing a good job of fighting through an incredibly challenging environment today.

And I promise, this is the last follow up. How does -- you've talked about a lack of capacity a number of times. Can we see any of that showing up in any of the KPIs? Or is it more of a soft like you just know that your producers could produce even more if they had more options?

Yes. We have a bunch of KPIs that we look at internally that can point to product challenges are hamstringing productivity a little bit, which makes the productivity gains we're making today all that more impressive. So we're trying to be cognizant and not measure productivity on a dollars basis but on a unit basis. Are we selling more policies today than we were previously per agent? And the answer is yes, our agents are becoming even more productive in an environment where they have less products to sell. So that will eventually switch from being a headwind to a tailwind? The carriers just need some more rate to take hold.

Our next question comes from the line of Meyer Shields with Keefe, Bruyette, and Woods. Your line is open.

This is Tommy McJoynt on for Meyer. My question is on contingent commissions. Obviously, we saw some good growth there in the quarter. And you mentioned that there's contribution from both the growth side and the underwriting profitability side. Could you just put a finer point on how much of that contingent commission growth was driven by the growth side versus the profitability side?

Yes. It's really a de minimis amount related to profitability-based contingencies. The reason why it looks more in this quarter comparatively is, the ones that are mainly volume based or more uniform throughout the year. Just logistically, the way the revenue recognition works for GAAP. So we don't expect to have a gangbusters contingency year we mentioned again in the prepared remarks you should expect somewhere in the neighborhood of 40 basis points of total written premium which that is around all time lows. So I wouldn't look at the second quarter contingencies and think, yes, we should continue to model that level of growth going forward.

Got it. Thanks. And then my second question is, is just thinking about this hard market cycle and P&C, to the extent that rate adequacy from the personal line carriers takes longer than some expect, does that in any way temper your sort of growth expectations? Or are you guys pretty committed at this point, with your sort of recruiting a new franchise initiatives that you have for the rest of the year?

I'd say we're pretty committed. I mean, I'm not certainly wouldn't say I'm satisfied with the levels of productivity that we're seeing. But I'm incredibly pleased with our agents ability to continue to make productivity gains even in this challenging market. So if it continues to persist for a while, okay, our agents will get the increased paycheck on renewals, they'll continue to have to fight through this environment from a new business perspective. But it will eventually come back the other way. So it's about patience. It's about being long term greedy, and not short term greedy.

Our next question comes from the line of Mark Hughes with Truist Securities. Your line is open.

You suggest that the margin improvement ought to be more modest through the balance of the year but the coming off of a 10-point gain more modest could be two points, or it could be eight points, or something else? I wonder if you could maybe provide just a little more clarity on that?

Yes. So historically, we haven't been incredibly specific on margin guidance, really to give us the freedom to make decisions that may impact timing of when some expenses may flow through. And so we'll continue to keep that level of, I would say specificity on margin guidance. We've got some projects that we need to do to secure future growth as well. And those require investment and, whether that falls in Q3 or Q4, I wouldn't want to get too specific on that.

Okay. And then, did you give the number for how many franchises you onboarded in the quarter?

Yes. So we onboarded 72 agencies in the quarter.

And then, when some of the corporate agents switch over to franchises, do they take some of the renewal economics with them? Do they go from a flat start or is there some amount of commission volume that they take that might switch from the corporate channel to the franchise channel?

No. They are starting over.

The next question comes from the line of Paul Newsome with Piper Sandler. Your line is open.

Congrats on the quarter. Sorry, if I'm just confused here, but I was hoping you could help me understand a little bit about the timing of both the other corporate agent ads with new recruitment. Is all the folks that you hired through the summer essentially showing up in June numbers, or do they get added on in July and August as well. And so I'm just trying to think about the timing of what you've been talking about onboarding people, compared with what their numbers you see on a quarterly basis? Probably I'm not clear here.

Now, that's very close. This is Mark Miller. They will continue to onboard throughout the summer, and we will continue to recruit all the way into the fall. So we have expectations of a certain amount of recruits. I won't get into that. But I will say that in my prepared remarks, we said that we wanted to be at about 320 by the end of the year. That's what we're targeting. Now, it depends somewhat on what attrition levels are there. Our attrition levels are very low right now. So it's easier to hit the number based on where we are but I can't control where attrition goes from here but that's about what we expect it to be.

Interesting. Any thoughts on this impacted distribution outside of your company specific. Imagine a lot of franchise recruitment employment depending upon what's been happening with other agency systems especially at nationwide, getting an independent agent from. Just like your broader thoughts on, what you think is happening with distribution in general.

Yes. I would say we've probably had the best carrier portfolio out there of any independent agency. And I don't know that for 100% fact. But I don't imagine there's anybody with a team as strong as ours out there acquiring new product as aggressively as we are. So I don't like it when a carrier shuts down, state farm shutting down in the state of California, hopefully that helps California in their DOI, understand some of the challenges that they're imposing on the consumer. But it is one less competitor for us out there to work against. But it is an incredibly challenging market out there for anybody trying to distribute personal lines insurance, I think we have the best offering. So it does help us from a recruiting standpoint, when we can say look at the number of carriers we've onboarded in your specific region that can help you out compete anybody else that would be trying to operate an independent agency or be a single product platform out there. So it's definitely not necessarily a net positive, but I think we're doing it better than anybody else.

Our next question comes from the line of Katie Sakys with Autonomous Research. Your line is open.

I wanted to dig a little bit deeper on some of the questions about producer economics. So I guess first, it looks like the producer count is only up about 3%, year-over-year. I was curious if you guys have a bogey as to where that might end the year. And what are some potential opportunities to exceed that mark?

Yes. So we said in our prepared remarks that it would be flat to moderately down. And importantly, the follow up to that is the agents that are exiting the system are doing close to if not zero, and the agents we're adding back into the system are much more productive than anybody we've added in for. So while the agent count may be going in the direction that is inconsistent with the actual revenue generation. So the productive capacity of that workforce is continuing to increase, even if the total number doesn't look that way.

I think it's also important to remember that we have just gone through a major restructuring exercise with our corporate sales force, and you would expect it to be down in conjunction with that effort. As we said, on the call earlier, that restructuring is now complete. And we're seeing extraordinary productivity for the new people, I said in my remarks, it's over 65%, it's actually about 70%. That our June -- the class that went through in June training is producing 70% more than their counterparts were a year ago. So we're adding back real high-quality people. So I think that's important context on the actual number of buds and seeds.

Yes. So just to be clear, as a follow up to that makes no confusion. Corporate sales ended the quarter at 280, which was up from Q1, down significantly from last year. We expect corporate sales to be ending the year around 320. Total franchise producers, we are expecting to trend flat, to moderately down in the second half.

That restructuring process is still ongoing.

But the ones we're taking out are not very productive, the ones we're adding in are much more productive. So you can average up the productivity level per agent.

That makes perfect sense. Thank you so much for the clarification there. And as a quick follow-up, it looks like you guys are still growing your tenured agents in Texas a little bit faster than those that are outside of Texas geography. I'm kind of curious, do you anticipate that to continue to be a trend going forward? Or do you anticipate having a bit more growth outside of Texas as you guys continue to look at hiring and transitioning agents from the corporate channel into the franchise segment?

That's a great question is exactly what we're trying to do which is spread the franchise agents out more geographically across the United States. It doesn't mean that we wouldn't support our franchises in Texas, if they want to grow, we help them hire on their behalf, we bring candidates to them. However, when we're looking for new franchises, our candidates to be franchise owners, we're paying particular attention right now to geos where we'd have -- we're under penetrated. So yes, I would think if you look at the map of where our franchises are, you'd see more growth outside of Texas in a year from now than you do today.

Thank you. I'm sorry. One quick follow-up to that. I mean, we've heard quite a bit about, particular states where personal lines underwriters are no longer writing new business. I'm kind of curious of those underpenetrated states that you guys can see on your own maps. Are there any particular states that you guys would call out as growth opportunities for Goosehead, keeping in mind that these are also markets maybe where underwriters are no longer open for any business?

We're specifically prioritizing a way for markets, where are the underwriters are risk-off. So like for example, Florida, California, where we're only responding to inbound calls out of Florida, and I don't think -- I think we're completely shut off all of our recruiting activity in the state of California. So what we're trying to do is focus our franchise development efforts on the most attractive markets for our carriers, and the most attractive markets for us. And because we've been in Texas for 20 years, we have a big business in Texas, and all the carriers want us to give them, not Texas.

Our next question comes from the line of Scott Heleniak with RBC Capital Markets. Your line is open.

I had a question on cross-selling. I'm just wondering what kind of traction you're getting there in terms of customers that have multiple products this includes some of your ancillary products that are being flood and renters' condo. I know those are smaller, but just any kind of update in terms of what you're seeing on the cross-selling part and customers buying multiple products from you, versus where it had been trending.

Yes. That's a best practice that we preach with our agent workforce, as you want to try and capture full share of wallet get as many lines of business as you can with a client as possible. I think our agents do that best-in-class, probably better than any of the other insurance agents out there. But I would say it remains high. We haven't seen a material change. And I think in any direction on that. That's a good retention lever having another line of business as multiple years to the clients' life. So not a lot of news to report on that. But I believe our agents do it better than anybody else.

Okay. And then this is sort of along the lines, but just curious to how much increase in shopping activity that you're seeing just because of where rates are in auto and home. And I imagine a lot of people are -- more people are coming your way. If you can comment on that and I'm also just curious how many people that you're seeing are actually switching that they come across the Goosehead agent, the typical person. Just any kind of trends there?

Yes. We are seeing a significant increase in shopping behavior from clients, which if you look at our client retention numbers remaining at 88% is strong credit to our service team for being able to deliver phenomenal client experience in the environment where some people have premiums going up 20%, 30% So I'm very proud of our team and the way they've been able to deliver incredible service throughout this. It's certainly not a tailwind for us shopping behavior you would expect potentially, more clients are leaving their existing insurance agent but it also means that our entire book is continuing to ask for reshot as well.

Okay. That's helpful. And just the last one too. I was just curious if you had anything or you could comment on in terms of the franchisee restructuring. Are we kind of 18% to 19% done or is there is any more context you can offer on that?

Yes. We talked about the majority of it is done so that we're over the 50% line. And it does just take a little bit longer for that to work through the system, given the way that the franchise law works, we need to give those agents a little bit more time to cure than you would a W2 employee. So the second half of the year, there's still going to be a significant number of terminations, but we do believe we're nearing the finish line.

Our next question comes from the line of Pablo Singzon with JPMorgan. Your line is open.

My first question was a numbers question. Are you able to share written premiums for the corporate and the franchise channels?

Sorry, what was that publisher or what for –

Written premium, sorry, just a breakdown between corporate and franchise/

Yes. That was included in the prepared remarks.

Okay, sorry. All right. Next question. So as I look at policy in force, or new business revenue growth, those metrics are still [indiscernible] right, but seems like you're willing to refine distribution, you're ramping up recruitment, on the corporate side? Would it be reasonable to expect those metrics to start picking up, a second half of this year, maybe in certainly in 2024?

Yes. We certainly are expecting policies enforced growth to reaccelerate in the direction of 30%, I would not expect that number to have a three handle in front of it in 2024. But we are gearing the organization around achieving a 30% policy enforced growth rate.

And we've managed extraordinary high levels of growth in the past. I mean, this is something that is not theoretical to us. This is something we've demonstrated a very high degree of proficiency. And as we complete our restructuring efforts, we'll be sort of turning on the gas all the way.

Yes. Understood. And that's actually a good segue into my next question. So as we think about your long-term premium growth target of, I think you said 30% CAGR? Can you walk through the different components that build up to that growth rate? And I'm thinking of number of agents productivity and the National benefit from yearly premium increases, I think, if you look at your premium growth, pre-COVID, the number of agents has always grown faster than written premiums. And it sort of makes sense, right? If you think about the ramp up and those sorts of things, but I guess for this new model, now, how will those different components build up to that 30% CAGR premium growth.

It's a combination of productivity improvements, as well as increases in the number of sellers in the field. So that I don't believe the number of sellers in the field needs to increase at a 30% rate as we generate more accumulated experience, we will be getting more productive over time. And we're continuing to invest in technology and tools that make our agents more productive. And, again, that's not theoretical either. We are really seeing that in real-time agents are getting better, every single month that is incredibly impressive to generate a 30% premium CAGR over the next five years, you don't need 30% producer growth, you need some producer growth, but really you need productivity gains, you need the productive capacity to continue to increase. And so that's how we're structuring the business.

And also there's three elements of producer growth, right, and some are more productive than others. So the traditional agency, we know historically how productive they are, we should expect that to increase because we're just bringing on better people now. But secondly, this whole motion of adding producers to successful franchisees is relatively new. But those people for every producer, we add into a successful franchise, they produce 1.6x or 1.7x the new business that an entire new average franchise would produce. So that channel is super leveraged, and then the one that is just the channel on like nuclear steroids is converting corporate agents into franchisees. Those guys crank it out. And they're there much more productive -- they're as productive as many traditional franchises. So we're working and part of the restructuring that we did in our corporate channel was to make sure that we could provide sort of volume inputs to see the franchise channel with new high-quality franchisees. So it's different than kind of the arithmetic you would have seen in the past, just because we have these other new channels that are either very productive on the case of adding a producer to an existing franchise are unbelievably productive. If you're converting a corporate agent into a franchise.

That's clear. Thank you. And then, the last one for me. Maybe for Mark Jones Jr., I think in the past, when you talked about margins, you had sort of reference that you think the improvements will be readable over your long-term target, right? And I think you'd said 3%. So I suppose in the context of a really good margin, quarter, right, I think X contingency your margins are 29%, right? Pretty good, then, in fact your target already? Is it still reasonable to assume that from here, over the next couple of years, we should sort of have a steady upward march towards your long-term targets? And clearly, you're saying that 29% is not sustainable. But just thinking about the cadence from a year and how you get to long-term targets?

And we continue to expect to see margin expansion and improvement year-over-year, quarter-over-quarter. We don't believe that 29% is an unsustainable level. Now, that may not happen every single quarter, some quarters have better margin profiles than others given the way that seasonality works, someone hiring works and then raises work. But I certainly don't believe that 29% is a cap for us. We continue to expect strong margin expansion every year.

Thank you. I'd now like to turn the call back to CEO Mark Jones for closing remarks.

Thanks, everyone. For your questions on the call. We appreciate your attention and have a good day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.