Goosehead Insurance, Inc (GSHD) Q3 2020 Earnings Call Transcript

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Goosehead Insurance, Inc (NASDAQ:GSHD)
Q3 2020 Earnings Call
Oct 29, 2020, 4:30 p.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Thank you for standing by. This the conference operator. Welcome to the Goosehead Insurance Third Quarter 2020 Earnings Call. [Operator Instructions] [Operator Instructions]

I would now like to turn the conference over to Dan Farrell, VP, Capital Markets. Please go ahead.

Daniel D. FarrellVice President of Capital Markets

Thank you, and good afternoon. With us today are Mark Jones, Chairman and Chief Executive Officer of Goosehead; Michael Colby, President and Chief Operating Officer; and Mark Colby, Chief Financial Officer. By now, everyone should have access to our earnings announcement, which was released prior to this call, which may also be found on our website at 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. I would also like to point out that during this 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 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 our use of non-GAAP financial measures, including reconciliations of these measures to the most 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 at

With that, I’d like to turn the call over to CEO, Mark Jones.

Mark E. JonesChairman, Director And Chief Executive Officer

Thanks, Dan, and welcome to our third quarter 2020 earnings call. I’ll provide an overview of our results for the quarter as well as our strategy and outlook for the full year. I’ll then hand it over to Mike Colby, our Chief Operating Officer, to update you on some of our technology and human capital investments as well as an updated actions around the global pandemic. Our CFO, Mark Colby, will then go into greater detail on our third quarter results and outlook.

We delivered phenomenal results in the third quarter, exhibiting continued strong and profitable growth with exceptional service driving high levels of client retention. We also continued to invest heavily in people and technology, which we believe will sustain our momentum many years into the future. The results further validate our unique and time-tested business model. We run the business putting clients at the center of our universe. This has had a profound effect on the lens through which we view investments in our business.

All of our investments are made with the guiding objective of creating better client experiences and a more loyal client base. We invest in initiatives that create client-focused competitive advantages and our disruptive impact on the industry is without peer, producing truly extraordinary organic growth while delivering high levels of profitability. We are ardent believers in the experience curve and work very deliberately to capture and leverage our accumulated experience and intellectual capital using both human and artificial intelligence.

A simple example of this is the approximately 2,500 updates we have made to our proprietary CRM system just this year. We’re working. We’re constantly improving and by continuously leveraging the experience curve across a larger and larger business base, we deepen our competitive mode. Management remains, by far, the largest owners of Goosehead’s stock and our economic interests are both collectively and individually aligned with those of our outside shareholders. We run the business as long-term owners.

Our decision-making is geared to creating value and achieving our long-term goal of becoming the market leader in U.S. personal lines distribution in my lifetime. Throughout our history, we have been focused on the U.S. personal lines space and our accumulated knowledge in our operating model has benefited from that singular focus. Our technology platform, designed for our agent and client needs, has been iterated over many years. It incorporates the benefits of regular input and feedback, both internally across our organization and externally from partners and clients.

We’ve done this in a disciplined, focused and economically rational way that has allowed for consistent execution on both top and bottom line results for many years. While technology is improving the consumer experience, the role of a knowledgeable agent remains central to educating and serving clients. Our platform is designed to enhance value in the agent-client relationship, not disintermediated. We continue to invest in recruiting, training and onboarding to add increasing levels of high-quality talent in both the corporate and franchise channels.

Investments we made over the last several years are paying increasing dividends today and our investments today will pave the way for our success in the future. In the U.S. personal lines industry, the independent agent channel is poised for continued share gains as many traditional and established personal lines insurance carriers look to other avenues to improve their growth trajectory.

Within the backdrop of this ongoing market shift, we believe Goosehead is uniquely positioned to continue to gain significant share as clients increasingly see the value creation and superior insurance experience driven by a choice product portfolio, knowledgeable agents, best-in-class service and unmatched proprietary technology designed to address personal lines client needs.

Now let me turn to our third quarter results. I’m very pleased with our execution across all aspects of our operations in the quarter. First and foremost, our recruiting team has stayed on offense with another quarter of significant talent addition to our organization in a virtual environment. Corporate sales agent headcount and total franchise count grew 60% and 52% over the prior year, respectively.

These newer agents have hit the ground in a full sprint with the August training class then subsequently the September class, both setting company records in production during training, all while operating primarily in a virtual setting. Premium growth, which is a key leading indicator of future revenue growth, continues to benefit from these efforts.

Total premiums placed were $301 million, an increase of 49% over the third quarter of 2019, driven by strong new business growth and continued high levels of retention. Revenues were $32 million during the quarter, an increase of 51%, and core revenue increased 43%. We achieved this strong organic top line growth while delivering EBITDA of $9.3 million in the quarter or 29% of revenues, inclusive of heavy investments in people and technology to continue our momentum into 2021 and beyond.

We ended the quarter with 1,261 total franchises, an increase of 52% from the year ago quarter, while operating franchises increased 41% to 823, the third consecutive quarter of accelerating year-over-year operating franchise growth. Our significant number of signed and operating franchises with less than one year of experience bodes well for transparent and powerful growth for many years to come.

Corporate sales agent count at the end of the quarter was 371, up 60% versus the year ago period. The ramp-up of our new offices in Charlotte, North Carolina and the second Houston, Texas office are proceeding well, and we’re on track to open a Denver, Colorado office in the summer of 2021. The growth and expanded footprint of our corporate channel plays a significant role in driving growth and profitability in the franchise channel.

The corporate channel is a testing ground for new technology and development of best practices as well as training and mentoring resources for the franchise channel. We have previously highlighted the success of our virtual sales coaching program and have continued to expand this effort through the first nine months of 2020, helping drive a 30% increase in productivity among franchise participants.

We continue to manage the corporate and franchise channels as one integrated whole. Efforts and investments in the corporate channel are integral to our overall success as an organization. We’re also actively expanding hires across the broader organization to support our future growth and innovation. Our recruiting team currently stands at 89 compared to 60 individuals at the end of 2019. In the first nine months of the year, we increased our information systems development team by 200%, which is enabling significant progress on our technology innovation road map.

The combination of the omnichannel experience with our world-class service team is having a meaningful positive impact on the overall insurance buying and service experience, as evidenced by our increased Net Promoter Score of 91 from 90 at the end of the second quarter and 89 at the end of 2019. As a reminder, our Net Promoter Scores are higher than any company we’ve been able to identify, while our costs to deliver this extraordinary level of service are roughly 1/4 of industry best practice.

Our technology and human capital investments will continue to drive the client and agent experiences, further strengthening our competitive advantage. Based on our results through the first nine months of 2020 and strong ongoing momentum, we are raising guidance for the year, the details of which Mark Colby will cover in his section. I am extremely excited about the long-term prospects for our business. The first nine months of this year have set the stage for an exceptional 2020 under unprecedented challenges.

We are keeping our foot on the gas pedal and making the important investments in people and technology to double down on our already significant competitive advantage in penetrating the enormous U.S. personal lines addressable market. I want to thank our entire Goosehead team for their dedication and enthusiasm, which makes it possible to continue to deliver for our clients, referral partners, carriers and shareholders.

With that, I’ll turn the call over to Mike Colby.

Michael C. ColbyPresident and Chief Operating Officer

Thanks, Mark, and hello to everyone on the call. Our strong results through the first nine months of 2020 continue to validate our strategy around technology and human capital investment, which is expanding our competitive advantage in the marketplace. We have made substantial progress on our technology development road map and made key additions to the team, all while navigating the challenges presented by an ongoing global pandemic. Before I review our progress in the quarter, let me update you on our current protocols around COVID-19.

We began bringing employees back to the office on a reduced and rotational basis in the third quarter. Our focus on the return to the office was first on newer hires and their managers to ensure a positive onboarding experience and successful start in these critical early months of employment. By the end of the third quarter, we have almost all employees back in the office for at least 50% of the work week. Additionally, we resumed live in person initial training with our corporate start class in October and provided an option for franchise trainees to attend in person.

We believe that live in person training at our headquarters is the most effective way to onboard new team members where we can provide access to our subject matter experts, top performers and senior leadership. However, we do not anticipate returning to a required in person training until the second quarter of 2021 at the earliest. We are taking these steps carefully and deliberately and have implemented a number of COVID mitigation practices at our facilities including a screening process upon entering the office, requiring face coverings and social distancing.

We will continue to follow all local government and CDC guidelines in our approach to reopening fully while continuing to prioritize the health and safety of our team. I’d like to highlight that since the start of the pandemic, our team has delivered or outperformed our internal expectations for all key performance indicators set at the beginning of the year, including agent recruiting and onboarding in both channels, new business sales productivity and client retention. This has been a tremendous accomplishment by our people and demonstrates the benefits from many years of significant and consistent investment in technology and human capital.

Now as it relates to the technology investments made in the quarter, we have made steady progress on our technology development road map that will further improve the already powerful tools our agents have to compete in the marketplace, streamline our carrier interactions and enhance the digital experience that we provide to our clients. The quarter saw further progress with omnichannel engagement to more effectively communicate with clients through channels they prefer.

Nearly 50% of our clients are now on our direct client-facing portal, and we are achieving a Net Promoter Score of 95 for this channel. Within the portal, we have added a new feature for clients to quickly and easily schedule calls with service agents allowing these interactions to take place seamlessly and at the clients’ convenience. And we have also observed a 150% increase quarter-over-quarter in clients using chat and SMS features for service.

We have made further improvements on back end carrier integrations, the ongoing blocking and tackling that is a key driver of enhancing the client experience and achieving greater cost efficiency in our service delivery. This quarter, we added significant resources in the form of additional technology developers, exclusively focused on these integrations. And our overall technology team has nearly tripled in size versus a year ago as the current employment environment has created opportunities for us to remain firmly on offense.

We are also continuing to streamline and expand the effectiveness of our comparative rating application with the addition of the ability to quote from interest insurance and motorcycle insurance on the platform. Earlier in the year, we added flood insurance to the Comparative Rater and year-to-date have seen a 53% increase in flood insurance sales. Keep in mind the profound impact that flood insurance sales have on our client retention. Not only it gives us a very important coverage for our clients to procure, it is a powerful anchor policy that will improve retention results over time.

Each of these new product additions in the third quarter will continue to provide further improvement to sales and retention going forward. In addition to improvements in the capabilities of the agent-facing application, we have made strong progress on the client interface. We expect to have the first version of our client-facing comparative rating application available to clients in 2021, providing a uniquely powerful tool for clients and referral partners to engage with us. The competitive advantage of our accumulated experience in servicing personal lines clients over many years cannot be overstated.

While many of the enhancements we make in a given quarter are not material in and of themselves, it is the cumulative benefit of these enhancements over time that has a powerful impact. Since the beginning of the year, we have added over 2,500 new features and enhancements to our technology platform, many of which are the result of progress with carrier integrations and direct feedback from clients and agents.

I’d like to join Mark in thanking our entire team for their commitment to excellence and fearless execution this year. They have delivered outstanding results in an unprecedented time. Our teams remain enthusiastic and laser-focused on achieving our goal of industry leadership and delivering and unmatched personal lines experience.

With that, I’ll turn the call over to Mark Colby to provide color on our financial performance.

Mark S. ColbyChief Financial Officer

Thanks, Mike, and good afternoon to everyone on the call. For comparability purposes, my comments on our third quarter 2020 results will be discussed against the third quarter of 2019 as if recognized under ASC 605. A reconciliation of ASC 606 accounting to ASC 605 accounting for 2020 has been provided as a supplemental schedule in our earnings release. For the third quarter of 2020, total written premiums, which are an important leading indicator of our future core and ancillary revenue growth, increased 49% to $301 million.

This included franchise premium growth of 57% to $213 million and corporate segment premium growth of 33% to $89 million. This growth is being driven by continued high retention rates, strong new business generation and increasing agent productivity in the franchise channel. The continued shift in our mix of business toward the faster-growing franchise channel implies significant embedded future revenue growth as new business premiums convert to renewal premiums after year first, at which time, our royalty fees increase from 20% to 50% for ongoing renewals.

At quarter end, we had over 657,000 policies in force, a 47% increase from one year ago. Our consistent and rapid year-over-year growth in both premiums and policies positions us well for long-term success. Revenues were $32 million for the quarter compared to $21.2 million in the prior year period, an increase of 51%. If Q3 2020 was reported under ASC 605, revenue grew 42% to $30.1 million. Importantly, core revenues increased 45% to $26.7 million, if reported under ASC 605.

During the third quarter, our franchise channel generated core revenues of $11.3 million, if reported under ASC 605, an increase of 55% from a year ago, with the results driven by continued strong growth in new business and renewal royalty fees, from an increasing increase in operating franchises, combined with higher productivity plus sustained high levels of retention. At the end of the third quarter, we had 1,261 franchises, up 52% from the prior year, and 823 operating franchises, up 41% from a year ago. We’ve continued to build on our strategy of national expansion within this channel.

Non-Texas franchise now represent 73% of our total operating franchises compared to 66% a year ago. We are continuing to invest in our recruiting team, which currently stands at 89 people, and our franchise pipeline remains very strong. As a reminder, the fourth quarter of each year has historically been our strongest quarter for franchise signings. If reported under ASC 605. Corporate Channel core revenues were $15.4 million in the third quarter, an increase of 39% from the year ago period, driven by an increase in agents and continued high levels of retention.

Corporate sales headcount at the end of the third quarter was 371, an increase of 60% from the year ago quarter. As a reminder, because of our college recruiting for the corporate channel, the summer months are historically our largest for corporate sales onboarding. And COVID has had little impact on our ability to successfully recruit and onboard large volumes of exceptional candidates. We continue to invest in the success of our franchise channel agents via our corporate channel agents through our virtual sales coach program.

As Mark mentioned, our corporate agents, virtually code franchisees, helped drive a 30% increase in productivity among franchise participants. This is a highly leveraged area of investment, not only for our productivity gains, but for the retention impacts from both our franchisees being more successful and our corporate agents having additional coaching opportunities leading to attractive career paths and management. Total operating expenses for the third quarter of 2020 were $25 million, up 43% from $17.5 million in the prior year period.

The increase is due to higher employee compensation and benefit expense, which was up 57% versus the year ago period as we continue to play aggressive offense in adding talent to our organization. For instance, corporate agents grew 60% in the quarter, our franchise sales team grew 62%, and our information systems development team tripled its size from a year ago. While many of these hires bring nominal revenue benefits initially, the investments should fuel our growth for many years to come.

The increase in compensation and benefits is being partly offset by slower growth in general and administrative expenses, which were up 14% compared to the year ago quarter. G&A expense growth is benefiting from our increased scale and reduced travel and entertainment given the COVID environment. Adjusted EBITDA for the quarter was $9.3 million compared to $4.6 million in the prior year. If reported under ASC 605, adjusted EBITDA was $6.9 million, an increase of 50% versus the year ago quarter, with growth driven by strong core revenue and margin improvement.

As a reminder, our business has natural operating leverage and should continue to see gradual margin improvement over the long term, but we do not manage the business on a short-term quarterly basis. We focus on maximizing overall profits over the long term, and we are continuing to make investments for future growth that will have a moderating impact on margin in the near term. As of September 30, 2020, the company had cash and cash equivalents of $20 million and an unused line of credit of $19.7 million. During the third quarter, we paid a $42 million or $1.15 per share special cash dividend to shareholders.

Based on the strength of our results through the first half of the year and the confidence in our business platform, we are raising our full year 2020 outlook with respect to written premiums and revenue. Total written premiums placed for 2020 are now expected to be between $1.05 billion and $1.07 billion, representing organic growth of 42% on the low end of the range and 45% on the high end of the range.

Total revenues for 2020 under ASC 606 revenue accounting are expected to be between $109 million and $112 million, representing organic growth of 41% on the low end of the range and 45% on the high end of the range. We are very pleased with the momentum in our business and believe we’ll remain well positioned to deliver consistent and sizable growth even during uncertain and challenging environments.

With that, I would like to thank everyone for listening, and we will now open up the lines for Q&A. Operator?

Questions and Answers:


[Operator Instructions] And we do have a question from the line of Mark Dwelle with RBC Capital Markets.

Mark DwelleRBC Capital Markets — Analyst

Just — really just one quick question. You were commenting on the addition of offering flood insurance and a few other products. Can you talk to that again and explain like why — how that is that that works? How it enhances your retention?

Michael C. ColbyPresident and Chief Operating Officer

Mark, this is Mike Colby. Thanks for the question. Our goal with every account, with every customer is to capture full share of wallet. So if that means — and the standard package would be the home, auto, umbrella and as we’re learning the flood, I think, is a great addition to that. But obviously, if they have second homes, cars, etc. It’s very powerful retention tool to be able to cross-sell into all lines of business. It increases switching costs. It allows us to really demonstrate our value-add in the process. So that is a focus of ours and always has been and is a focus across both channels.

What you see especially with our go-to-market strategy is leading with the home and specifically during a mortgage origination, whether that’s a new purchase or refinance. So there’s a lot going on for the agent. There’s a lot going on for the customer. And to the extent that we can make it easier and remove obstacles, it dramatically increases our likelihood of capturing those other lines of business. If it’s a super cumbersome process, the agent — neither the agent nor the client are going to want to deal with it. So when we can streamline that, it dramatically improves the likelihood of us capturing that full share of wallet.

And not to mention, the data that we’re bringing into the system is also alerting us where the opportunity is before it would be up to the agent to really inquire. But now we’re pulling in data, and we can see they own a motorcycle. We can see if they’re in a flood zone that makes sensitive to purchase a flood policy. So we’re excited because removing those obstacles, streamlining the quoting process and presenting it front and center for the agent will increase the likelihood of us capturing those lines of business, which will drive retention. That is statistically true in our business and every business.

Mark DwelleRBC Capital Markets — Analyst

I see. So ultimately, at the end of the day, it’s just to basically make sure that you can satisfy all the customers’ needs. And I mean, I guess, equally, it doesn’t let some other agent get a foot in the door or anyway, if you can kind of click all the boxes for them.

Michael C. ColbyPresident and Chief Operating Officer

Great point. For sure. It insulates the client from other competitors. And I’ll mention it to you the standard comparative rating applications that are available in the market are typically just for the primary homeowners and the auto. So what we’re doing is unique, bringing those other lines of business into that comparative rating platform.

Mark DwelleRBC Capital Markets — Analyst

I see. Okay. One other question, just kind of, I guess, generally in the marketplace. We’ve seen a lot of commentary from some of the big homeowners and auto writers that — lowering prices, particularly on auto insurance. Is that something that you’re seeing across your platform as well? I mean, it probably only has a minor impact on the commission revenue, but…

Mark S. ColbyChief Financial Officer

Yes, I think that’s consistent with what we’re seeing, Mark. But when we’re growing total written premiums at the rate, 49%, we’re not going to feel those single-digit kind of rate declines. We don’t feel it as a headwind when they’re lowering rates, and we don’t really feel a tailwind when they’re raising rates. Really, what we’re focused on is driving growth through new agents, focusing on productivity-enhancing tools for those agents and increasing new sales and focusing on client retention. Those are areas that we can control, and that’s where we’re focused on driving growth.


[Operator Instructions] And our next question is from the line of Meyer Shields with KBW.

Meyer ShieldsKBW — Analyst

I want to follow up on one of Mark’s questions, if I can. When you’ve got rate decreases, I guess, historically, we’ve seen less shopping because people aren’t frustrated. Is there any way of disentangling that retention benefit from the other operating improvements that you’re making?

Michael C. ColbyPresident and Chief Operating Officer

Would that help with retention, I guess it was on the margin. I mean, I think the question kind of gets at a couple of things. One is, I think retention impact would be a positive one, whether that’s a material impact or not, I don’t think it’s material. So — as it relates to retention. As it relates to our new business opportunities, I think, it is worth, again, emphasizing we leave with the home at a point-of-sale transaction, and we cross-sell into the automobile. And typically, even in a softening rate environment, we’re — because we’re working with auto insurance companies across the country, we can find a competitive rate as part of that homeowner insurance procurement.

Meyer ShieldsKBW — Analyst

Okay. No, that’s helpful. You mentioned another point that I want to touch on. I understand that the market strategy is leading with the home. Is there a potential pathway to leading with, I don’t know, renters or motorcycle? Would that — would it make you to have complementary penetration strategy?

Mark S. ColbyChief Financial Officer

No. I mean, look, I think the renters insurance market that customer segment is actually quite unattractive. Lower retention, smaller accounts, similar acquisition costs. So when we’re looking at go-to-market, we want to lead with where we can add the most value and where the most opportunity is, and we feel like that’s in the property side. And then we cross-sell into those other lines of business. Now we certainly can accommodate in renter’s customer, but that’s not where we’re investing dollars for client acquisition is there. We’re going to start with where the big revenue opportunity is.

Meyer ShieldsKBW — Analyst

Okay. No, that certainly makes sense.

Michael C. ColbyPresident and Chief Operating Officer

Homeowners own other assets. And that’s not always true with renters.

Meyer ShieldsKBW — Analyst

Right. No, that’s certainly true. Mark, you talked about the sales classes in August and September setting records in production. I was hoping you can get a little bit more color about what you think is driving that. In other words technology, training. Is that moving people faster to overall productivity? Or should that productivity improvement last — that product improvement margin left as these agents gain more experience?

Mark E. JonesChairman, Director And Chief Executive Officer

Well, I think it starts with recruiting, and we’re getting better and better at identifying candidates that can come into the system and produce at very high levels very soon. So I think it definitely starts there. Definitely, I want to give a lot of credit to our training team who has — continues to iterate the training program and make it better and better every single month. And especially in a virtual environment, I mean, they’ve continued to be able to bring people on and get them ramped up very quickly. So it’s yet to be determined if those outsized contributions will continue in the ramp-up process, but we are pretty confident that they will at least hit our production ramp-up goals for them.

Michael C. ColbyPresident and Chief Operating Officer

You’re starting your career in a better spot. When you’re — when you have that momentum in your training class, it’s certainly a better position to be in than maybe climbing out of the hole that you dig. So I think — and by the way, the work on our end doesn’t stop at initial training to make sure that these agents want successfully and we invest very heavily in our agent support and sales leadership infrastructure to make sure that, that momentum carries into their wide operating environment. And I think it’s worth noting as well, we’ve talked about in the past, our implementation process and some changes that we’ve made in the implementation process.

And part of that was we want them to be better prepared, and we’re seeing the performance. But we want them to go live immediately after coming to training. So that’s an important timing consideration as well. When you come to training and then you have some type of life event, say, or something going on that would prevent you from going live right out of training, maybe a couple of months, you really lose that momentum.

So that’s part of our thought process as well and implementation is we have the time training to be immediately before they go live, and that’s where we’re getting the best results. So I think it’s a combination of things from recruiting to the better onboarding experience, better training experience and then the support that we continue to deliver after training.


And our next question is from the line of Adam Klauber with William Blair.

Adam KlauberWilliam Blair — Analyst

A couple of different questions. I know East Coast has been a pretty good growth area. Is that still — as far as new franchises. One, is that still growing really well? I am not looking for exact figures and numbers, but just anecdotally, which states are doing really well?

Michael C. ColbyPresident and Chief Operating Officer

We’re not really seeing any recruiting challenges in any of our markets that we’re focused on. The Mountain West and the West Coast is still growing quickly for us. We’re starting to — as we’ve talked about in the past, we’ve put more recruiting resources on the State of Texas, and we’re starting to see those results — those efforts pay dividends in Texas growth, the Midwest, mid-Atlantic, a fast-growing markets for us, Georgia is a new fast-growing state for us, including the Northeast. So I — not to paint with a broad brush on this, but we truly are seeing great results in all of our markets.

Adam KlauberWilliam Blair — Analyst

Okay. And then how is the churn running, I’d say, in the last three, six months compared to a year ago? Either agents or franchise or just across both forces.

Michael C. ColbyPresident and Chief Operating Officer

We certainly took — I guess, display some patients during the early months of the COVID pandemic and obviously, want to work with folks who are struggling. And certainly, maybe they’re start of or exacerbated through the COVID process. I’d say we’ve kind of resumed our normal approach to sales management, whether that’s managing people up or managing people out. I think we’re back to kind of our approach that’s worked for almost two decades now. But I would — I’d take the market about the specifics on churn.

Mark S. ColbyChief Financial Officer

So the corporate sales channels remained relatively stable over the past few years, and we continue to see some improvement in the franchise channel for the year.

Adam KlauberWilliam Blair — Analyst

Okay. Great. And then finally, what’s the size of your franchise recruiting staff at this point?

Mark S. ColbyChief Financial Officer

89. So that’s combined corporate and branch op recruiters.

Adam KlauberWilliam Blair — Analyst

And for — I guess, just for example, just roughly what would have that been roughly a year ago?

Mark S. ColbyChief Financial Officer

I think I mentioned in my script, it was about 60% — 60?

Michael C. ColbyPresident and Chief Operating Officer

60 people at the end of 2019.

Mark S. ColbyChief Financial Officer

Sorry, at the end of Q3 of 2019. So it’s about 55% growth year-over-year. So continuing to invest there. And again, those investments don’t really pay off for two, three years at the earliest. It takes them a while to get burned into our system. And then from there, everyone they recruit, don’t really contribute to our P&L for two to three years after that. So we feel like the investment — what we’re seeing right now in our P&L is a result of investments we made in 2017 and 2018. And so the investments we’re making today, we’ll hopefully see in ’22 — 2022 and 2023 and beyond.


And we have no further on at this time. I will now turn the call back to Mark Jones.

Mark E. JonesChairman, Director And Chief Executive Officer

I just want to thank everyone for joining us, and appreciate your support and let you know that we’re going to continue to work hard and do our best to dramatically outperform the industry. Thanks a lot.

Michael C. ColbyPresident and Chief Operating Officer

Thanks, everyone.


[Operator Closing Remarks]

Duration: 40 minutes

Call participants:

Daniel D. FarrellVice President of Capital Markets

Mark E. JonesChairman, Director And Chief Executive Officer

Michael C. ColbyPresident and Chief Operating Officer

Mark S. ColbyChief Financial Officer

Mark DwelleRBC Capital Markets — Analyst

Meyer ShieldsKBW — Analyst

Adam KlauberWilliam Blair — Analyst

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