Thank you for standing by. This is the conference operator. Welcome to the Goosehead Insurance fourth quarter 2022 earnings conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Dan Farrell, VP, Capital Markets. Please go ahead. Thank you. 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 the 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 filing for 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 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 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 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 various 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 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 An archived version will be available shortly after the call ends on the investor relations portion of the company's website at www.gooseheadinsurance.com. I'd like to turn the call over to our CEO, Mark Jones. Thanks, Dan, and welcome everyone to our fourth quarter and 2022 earnings call. I will provide an overview of the key strategic accomplishments of 2022 and how they help position us for our next phase of top and bottom-line growth. President and COO, Mark Miller, will take you through some greater detail around driving operational excellence across the organization. Mark Jones Jr., our CFO, will review our financials and outlook for 2023 and beyond. I'd like to start by sharing that Q4 of 2022 gave us another opportunity to demonstrate the strength and resiliency of our business model. We overcame housing market headwinds, delivering premium growth of 44% and revenue growth of 43% compared to Q4 2021. Core revenue growth for 2022 was 41%, and EBITDA grew 76% as we gained nearly 400 basis points of EBITDA margin. 2022 was a year of substantial change that we believe was critical for sustaining future high levels of profitable growth as we become a much larger organization. Among these many efforts included an upgrade of the management team across the organization. We've now completed a repositioning of corporate sales to enable us to return to profitable growth in that segment of the business. Early results have been excellent, with December new business productivity growing 44% from a year earlier, and January 2023 new business productivity also up 44% year-over-year. What's most exciting to me, what bodes so well for our future growth, is that January 2023 new business productivity for first-year corporate agents was up 77% from January 2022. We've begun implementing the program to facilitate migration of select corporate agents over to the franchise network very successfully. We market this to recruits as a form of paid apprenticeship. Far in 2023, we've launched six new agencies from corporate and expect to launch a total of at least 30 this year. We are thrilled with the operating results to date. Mark Miller will provide more details in his section, to give you a preview, these corporate conversions have been six times as productive as an average new franchise. If this remains consistent, launching 30 this year has the potential to drive similar production growth as adding roughly 180 new operating franchises. This opportunity is proving very popular in the talent pools from which we recruit, driving strong demand for Goosehead Insurance as an employer of choice for top talent. We've also reset recruiting expectations to our historical standards of quality and anticipate material corporate producer growth beginning in Q3 as the next crop of new college graduates join our team. We continue to rationalize our franchise system, focusing on removing underperforming franchises and reallocating resources toward high-performing ones that are in the scaling phase of their business. Our experience has shown that adding producers to our most productive franchisees is a powerful growth driver. On average, these agents deliver about 1.7 times the new business as adding an incremental franchise. Accordingly, we've created a dedicated team in corporate to support franchise hiring efforts and expect our franchisees to add 150-200 producers to the system this year. Based on precedent, we believe the capacity of these new producers could equate to roughly 250-350 new franchises. Our franchise producer recruiting efforts, combined with conversion of corporate agents into franchisees, represent powerful opportunities to turbocharge the growth of our franchise business. Rationalizing the franchise system takes a little longer than corporate because of constraints in our franchise agreement. That being said, we believe these efforts will be largely complete by the end of the second quarter. We've continued to strengthen our service capacity, focused on setting and achieving strong KPIs in service delivery to support and enhance the most profitable piece of our business, our growing renewal book. This has been accomplished by service agent hiring, reducing turnover, and leveraging lower cost offshore resources to handle non-client facing clerical work. We're expanding our channels of distribution through partnerships. The previous announced partnerships with the National Association of Mortgage Brokers and the Association of Independent Mortgage Experts are good first steps. We're in discussions to partner with several large mortgage lenders and servicers to provide insurance to their new and enforced blocks of business. We're also in discussions with several national real estate organizations. Implementation of digital marketing efforts around cross-selling and other referral business contributed significantly to growth in 2022 and is showing further momentum as we progress into 2023. We're also building on our previous investments to create a world-class technology organization that enhances the client experience, delivers on our potential with quote-to-issue, and accelerates the accomplishment of other key strategic priorities. While we've benefited from pricing tailwinds that will likely continue through 2023, we've also faced macro headwinds, including historically low contingent commission levels and declines in housing activity across the country. We have never allowed the macro environment to be the primary factor driving our results. We remain externally focused on our clients in the market, continuing to adapt and evolve so that we can deliver strong results in any environment. The future of our business continues to be very bright. We believe that our unique business model provides us with a powerful competitive moat. Replicating our accumulated experience and technological leadership would require massive investment in both dollars and time and can't be achieved quickly through acquisitions . The good news is we believe the people who have the money to legitimately challenge us don't have the patience to wait for years and years for a return. We remain focused on investing in and expanding our core business to strengthen our competitive position. Our aspiration remains steadfast on becoming the number one distributor of personal lines P&C insurance in the country during my lifetime. With that, I'll turn the call over to our President and COO, Mark Miller. Thanks, Mark, and hello, everyone. I'm extremely pleased with the progress we made in 2022. We are very well positioned to drive high levels of revenue and earnings growth moving forward. During the year, we sharpened all aspects of our operations across sales, service, and technology. We did this by upgrading talent and tightening our most critical operating levers. Growth remains our highest priority, but we're now relentlessly focused on quality and operational excellence in all areas of our business, so we can also optimize profitability. Let me be clear about our priorities for 2023. We're focusing on increasing productivity across both distribution networks, improving our recruiting function to drive strong and sustainable growth of total producers across corporate and franchise distribution, continuing to invest in our service function to protect our client base and support our growing renewal book, expanding our digital marketing efforts to drive more cross-selling and other referral business, and improving our technology platform to support our core business and expanding distribution through partnerships. Let me take a few minutes to expand a bit more on some of these priorities. I'll start with our corporate sales function. Over the past couple years, we saw a deterioration in per agent productivity levels. In mid-2022, we took swift and decisive action to remove underperforming agents. We strengthened our sales leadership team and redesigned our recruiting processes with greater emphasis on quality. By year-end, the strategy resulted in corporate sales agents returning to their historically high levels of productivity. In the fourth quarter, corporate agent productivity increased 24% year-over-year. This momentum continued in January with average agent productivity up 44% and first-year agent productivity up 77% year-over-year. We expect to begin ramping up corporate sales headcount again in Q3 after our new class of college recruits starts this summer. Until then, we will continue to optimize for productivity and selectively hire experienced sales professionals to bolster the team. Under no circumstance will we substitute quantity for quality. Although we intentionally reduced our agent count by 37% in 2022, our total new business premium for corporate increased 11% in Q4. This premium growth was driven by the large increase in productivity per agent, which helped fuel margin expansion. We are still targeting more corporate productivity improvement in 2023. I'm very confident that the changes we made will allow us to deliver strong year-over-year corporate sales growth in the back half of 2023. On the franchise side, we have aligned management and recruiting compensation to incentivize quality signings and faster launches, focus franchise sales on specific geographies, and established a dedicated recruiting team to source producer talent for our scaling franchises. While we've driven strong results in franchises overall, there's been a wide disparity of performance among our existing franchises. To give you some additional color, the top half of our franchises accounted for around 90% of our new business production in the franchise network in 2022. We continue to put the bulk of our resources into supporting the organic growth of these successful franchises and identifying new franchise owners with the best probability of joining this elite group. Our efforts around franchise recruiting are already starting to take hold with improved launch time and increased productivity of our less than one-year franchises. We have also made great strides in improving the quality of existing franchises. In 2022, we culled over 280 underperforming franchises from our network, the vast majority of which failed by not implementing our model or putting in full-time efforts. This had minimal impact on our growth as these franchises accounted for approximately 2% of our new business production, but consumed a high percentage of valuable resources. Our higher than normal culling slowed operating franchise unit growth by approximately 10 points in 2022. Had almost no impact on our new business generation. We will continue to eliminate low performing franchises at a higher than historical rate during the first and second quarters of this year. Expect our culling to be complete around midyear, after which point we expect operating franchise growth to accelerate. We are also increasing our efforts to launch successful corporate agents into franchises. In 2022, we had 12 corporate agents transfer and open franchises. Their new business productivity was nearly 5x the first year franchise productivity. Productivity has been even stronger for more recently launched franchises from corporate. Those converting from corporate so far this year are tracking at 6 times the average first year franchise productivity. These ex-corporate sales agents are not only strong producers, but they also have the skills necessary to build their own multi-agent franchises. We believe we will be able to convert a significant number, at least 30, of high performing corporate agents to franchise partners in 2023. Just to offer one example, in January 2023, Blaine Brawley, a highly successful corporate agent, opened a franchise. His new business productivity in January was over 7 times higher than the average new franchise. Going forward, you will hear me talk more about the number of agency producers rather than the number of agencies. Our financial results are much more correlated to the total number of agents and their production, not the number of agencies. We ended the year with 2,101 franchise producers. This was up 15% from a year ago. We expect overall franchise producer growth to significantly accelerate in the back half of 2023. This growth will be driven by the addition of net new agencies as well as organic agent growth from our enhanced recruiting efforts. Switching to the service function. We made substantial progress in 2022. We grew our service agents 50% to around 600 and materially improved service agent turnover through the year. This investment has resulted in substantial reduction in our call wait times and has sustained our NPS of 90. Our service team is now well-positioned to support our growth as we continue to deliver high NPS and retention in a tough operating environment. We are now also focused on driving automation and reducing cost per policy in force. Last year, we also made substantial progress on various digital marketing efforts, driving higher cross-sell and other referral business from our existing book, increasing new franchise leads to our recruiting team, and increasing our brand recognition. While we have made quick and substantial progress through our marketing efforts, I feel like we're only beginning to scratch the surface of our potential in this area. On the technology front, we're continuing efforts on direct quote-to-issue with a number of carriers, and I'm looking forward to giving you more detailed updates on our progress as we move through the year. With our existing capabilities and new investments, we are in an enviable position to lead the digital transformation of our industry for the benefit of our clients, agents, and carriers. I see no other company with the opportunity we have to shape the direction of the industry and to drive strong, profitable growth for a sustained period of time. I couldn't be more excited to help drive the next phase of this already incredible organization. With that, I'll turn it over to Mark Jones Jr. Thanks, Mark. Hello to everyone on the call. Our strong results in the fourth quarter further demonstrate the embedded strength and consistency of our business model. Insurance is a necessary product for the majority of the population. Our ability to gain increasing market share is enormous. Our choice product platform, expert agents, and industry-leading technology provide an easy, seamless shopping experience for clients. Our client value proposition is even more powerful as consumers navigate the challenges posed by the current hard insurance market. We are in a unique position in the marketplace as a fast-growing, disruptive model with strong and expanding profitability and cash generation with limited balance sheet risk. We do not see a peer in the market that matches our abilities. We believe our competitive moat will only continue to expand. 2022 was a year of significant change as we addressed challenges emerging in our business. We saw an increasing disparity of performance among our agents, both corporate and franchise, where the most successful producers drove the majority of our growth. We also identified a significant number of underperforming producers whose low productivity was eroding profitability and consuming valuable corporate resources while creating management distraction. We took decisive steps in 2022 to improve the quality of our recruiting process and manage out unprofitable agents, leaving us with a much stronger and more efficient sales force. While executing these strategic improvements, we continue to drive strong results. For the fourth quarter of 2022, total written premium, the key leading indicator of future core and ancillary revenue growth, increased 44% to $585 million. Performance of our renewal book, which represents the majority of our underlying profit, has been exceptional. This is driven by investments in execution and servicing, high client retention of 88%, and benefit from P&C pricing, with the net effect being premium retention of 100%. As we progress through the year, we expect a gradual slowdown in premium growth as lower new business growth from 2022 impacts growth for our renewal book in 2023. We are already seeing improved agent productivity that should allow us to pivot back to stronger producer growth in 2023. We believe this productivity improvement and expected growth in producers will have a greater benefit in overall premium in 2024 and beyond. Increased culling of underperforming franchises is continuing to moderate overall operating franchise unit growth, and we expect this to continue through the H1 of 2023. At the end of the fourth quarter, operating franchise count was 1,413, up 18% from a year ago. Fourth quarter agency turnover was approximately 6%. We expect franchise churn to be high relative to history in the H1 of 2023. However, we anticipate the culling of weak agencies to be offset by improved productivity, our efforts to add producers to scaling franchises, and launching of new franchises from corporate producers. As a reminder, these terminated franchises have virtually no impact on premium and revenue growth as they account for approximately 2% of our new business production. We will continue to focus our resources on our most successful franchises, which drive the vast majority of our growth, and remain diligent in demanding high standards of production from our producers. Our 98 launches in the quarter were up 11% from a year ago as we're balancing our robust franchise pipeline with increasing standards of quality for recruiting new franchises, which we expect maximize their probability of success. To give some perspective on the range of performance among franchises, the top 25% of franchises account for about 70% of new business production, and the top 50% account for about 90% of our production. Experience has taught us that differential management investment and resource allocation to these agencies moves the needle materially on productivity, and you will see more of that. Operating franchise unit growth will be a little slower than our historical rates as we rationalize our portfolio of agencies. However, we expect increasing growth of total franchise producers in the back half of 2023, which were 2,101 at year-end. We are very excited with our newly dedicated recruiting resources to help scaling franchises source talent. Adding new producers to existing franchises continues to be about 1.7 times more beneficial to new business than adding a new franchise. We have early indications that the producers we are sourcing for our existing franchises are performing at a higher level on average than the producers the franchises are sourcing separately. We are having early success in launching new franchises from our strongest corporate agents. These franchises that launched this year are 6 times the new business production on average of new franchises. Importantly, they will be well-positioned to quickly scale their own operations as many of these new owners previously managed teams of producers in corporate. We have reduced the corporate sales team from 503 at the end of the second quarter to 320 at year-end. While the reduction in corporate sales headcount was significant, it was necessary to restructure the corporate network for profitable growth in the future, and results overall have been exactly what we were striving to achieve. We have produced meaningful and sustained improvements in productivity for agents and are already showing improved profitability that naturally follows. Our overall corporate new business premium in the fourth quarter grew 11% despite a 37% reduction in headcount from a year ago. As we mentioned, we're beginning to add headcount back to corporate sales strategically for optimal growth without sacrificing profitability and to create the capacity to see corporate agents converting into franchises. We expect material headcount growth beginning Q3 with the next big wave of recruits joining us upon their graduation from college this summer. Total operating expenses for the fourth quarter of 2022, excluding equity-based compensation and depreciation and amortization, were $45.5 million, up 30% from a year ago. Compensation and benefits expense, excluding equity-based compensation, was $30.5 million for the quarter, up 30% from the year ago period. The increase in compensation and benefits is being driven by increased overall headcount, particularly in the hiring of service agents to manage our largest revenue stream, renewals, recruiting and onboarding functions to continue our growth trajectory, and systems developers to ensure our technology is on the cutting edge for our clients and internal users. General and administrative expenses for the quarter, $13.5 million, an increase of 33% from a year ago. Growth in general and administrative expense was due to investments in technology, systems and marketing efforts to drive growth and continue to improve the client experience. Our bad debt expense was $1.4 million compared to $1.2 million a year ago, with the increase largely driven by our culling of signed franchises that have yet to launch. Total adjusted EBITDA in the quarter grew 123% to $11.9 million compared to $5.3 million in the year ago period. EBITDA margin was 21% versus 13% a year ago. Excluding contingent commissions, EBITDA margin expanded 12 percentage points over the previous year quarter. Adjusted EPS was $0.11 versus $0.06 in the year ago period. Income tax expense for the quarter was $2.6 million versus $354,000 in the year ago period, with the increase being driven by changes in state deferred taxes and changes in deferred taxes related to management departures. Going forward, we expect to drive annual margin expansion, excluding contingent commissions, for the next several years as we continue to scale our operations. Our expectation is over the medium term, the next 3-5 years, we can grow premiums in the range of 30% annually and achieve EBITDA margin in the range of 30% over that time period. Over the long term, we expect the normalized EBITDA margin for this business is north of 40%. As of December 31, 2022, the company had cash and cash equivalents of $28.7 million. We had an unused line of credit of $49.8 million at year-end, and total outstanding term note payable balance was $94.4 million at the end of the quarter. Our guidance for full year 2023 premium and revenue is as follows. Total written premiums placed for 2023 are expected to be between $2.83 billion and $2.96 billion, representing organic growth of 28% on the low end and 34% on the high end. This assumes slower growth in premium pricing in the back half of the year, no material benefit from our new distribution partnerships or direct-to-consumer efforts, and a continued challenging housing market in 2023. Total revenues for 2023 are expected to be between $258 million and $267 million, representing organic growth of 23% on the low end of the range, 28% on the high end of the range, driven by continued high levels of core revenue growth, offset by an assumption of still historically low contingent commissions of around 40 basis points as a percentage of premium. The gap between revenue growth and premium growth will be larger in the near term due to our strategic efforts of productivity improvement in corporate. Over time, premium will remain the best indicator of future revenue growth. We expect to grow total EBITDA margin in 2023 with more meaningful growth of margin excluding contingencies. Our business is continuing to exhibit significant momentum despite some short-term challenges, and we are positioned for sustained high levels of profitable growth going forward. We look forward to continuing to deliver on our goals in 2023 and beyond. I want to thank everybody for their time. With that, let's open the line up for questions. Operator? Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Meyer Shields with KBW. Go ahead. Sorry, thanks. Good afternoon, everyone. One, I guess, big picture question. You talked, I think, several of you in your prepared comments talked about a wide range of productivity. Is that only in the newer recruits? Are you seeing that variance in productivity among longer-tenured agents as well? I'll take that. This is Mark Miller. I would say it's predominantly in the less than two-year agencies, but there have been some in the, you know, beyond two years agencies, but mostly newer ones. Okay. Do you have the ability to sort of identify, where some of the longer tenured agents might also be facing productivity challenges going forward? Not sure I quite understand the question. Can you try it one more time? Yeah, I think, Meyer Shields, it's Mark Jones. I think, if I understand you correctly, it's are we able to identify productivity down to the agency level- Oh. That we can help support those that may be facing productivity challenges? The answer to that is yes. We've got kind of all the data down to the Agent, agent level, not just agency level, cut by line of business and geography and every other way that you cut it. Meyer, we're taking all the steps that we can to continue to drive productivity through the agent's life cycle. We have all kinds of training programs that they continue to go through, not just in their first year, but in years two, three, and four as they develop their business to make sure that they're onboarding, they're hiring, they know what the carrier portfolio looks like in their region today, help maximize their time so they can drive higher levels of productivity. Some of that is still just working its way through the system. Like we talked about in Q3, right? We're still churning out some of those underperforming agencies. We just wanna drive more productivity out of fewer agents to maximize profitability. Okay, that's helpful. If I can follow on one last question, I guess it's for Mark Junior. It sounds like you are still cautious on 2023 contingent commissions, despite the rate related tailwinds that you're seeing in written premium productivity. I was hoping you could talk us through that. We're continuing to see rate maintain very high levels. I still think carriers have a decent amount of work left to do to recover from some of the 2020 and 2021 rate give backs. I think loss ratios have remained very high for a lot of carriers. We're seeing a very hard P&C market right now. There's maybe potential for upside in that in 2023, but I don't wanna promise something that's outside of my control. You know, I would rather tell you a number that's 40 basis points and maybe we can outperform. Okay, fantastic. Thank you so much. The next question comes from Matt Carletti with JMP Securities. Please go ahead. Hey, thanks. Good afternoon. Just a couple questions. On the first one, you know, this would be high level. I know you can't drill down into numbers on it, but maybe I'm just looking for more of a gut feel. You referenced a number of times on the call kind of the housing market headwinds and also in the release and on the call kind of the benefit from auto and home rates and kind of the expecting those tailwinds to persist. The question is kind of how you put those two together, where do you think you'll land? Is the pricing that's coming through on auto and home a bigger benefit than the housing headwind, other way around, or just can't tell? Yeah. Matt, I would say, you know, housing initially, when we were still trying to figure out how to get agents out pounding the pavement more, developing more RP relationships and trying to recover that lead flow, you know, 6 or 8 months ago, maybe that was a little bit of a different story. Now we're seeing agents hit all-time highs, still every month, even in a more deteriorated housing environment. Like we've been messaging for the last 6 or 8 months, is housing is not impacting us as much as I think the market is expecting it to. Our agents are still out there being very productive. We're seeing huge productivity increases on a year-over-year basis, especially with our corporate agents. We've got the P&C pricing tailwind to boot on top of that. My expectation is when that pricing tailwind starts to slow down, we get product, better product on the shelf across the nation, and that's gonna allow us to drive even higher levels of productivity. It's kinda two sides of the same coin, and I think we're well positioned to win in either environment. Okay, great. Just a follow-up on, you know, some of the partnerships that you mentioned that you've already announced, and I think you mentioned there should be some other ones coming. Just high level, like how do you look at those in terms of how big a contributor they could be to your growth, you know, over a several year period? You know, look out three-five years. Just functionally, if you've figured it out yet, how will that kind of, you know, how will that work in terms of, you know, flow going to the agents and commissions and things like that if there's a referral from one of those partnerships? Yeah. Matt, I don't. This is Mark Miller. I don't really wanna go into the specifics on how it's gonna flow yet 'cause each one of these relationships is different. I can talk to you about the ones that we've done so far with the Mortgage Bankers Association. Those are two of the largest mortgage broker associations. I think they are the two largest mortgage broker associations in the United States. You know, they announced us as their exclusive agency partner. It's still early innings, but some really nice wins there. It's cracking the door open in some large mortgage brokers that we've been trying to get inside of for quite a while. We had one really good win in Austin this last week where it opened up a whole bunch of referrals. I'm very optimistic about what it could do for the future. Until we get one of the major partners that we're talking to right now in the boat, I don't really wanna speculate on how big it could be, but I think it is upside. It's not built into our models at this point. Yeah. Matt, these two that we've just announced are really hardening our current go-to-market strategy. That should help drive additional lead flow and kind of maximize agent productivity. Some of the other ones that we've kind of got in the hopper from mortgage services companies or real estate organizations, those could have the potential to be a brand new channel of distribution for us outside of what we're doing today. I think there's very material upside in future partnerships, and we just gotta continue to work at those throughout the year. I will just add that some of the mortgage- Great. Oops, go ahead. Matt, some of the mortgage... This is Mark Jones. Some of the mortgage companies that we're in discussions with right now, we're talking to them about not just helping them with kind of inbound deal flow that, you know, will go up or down based on what's going on in the housing market, but also their in-force block of business that they're servicing. If you think about it, every year, that escrow payment comes up for review, and You know, when there's a significant increase in escrow payment because of insurance, we can provide a clean, simple solution to them that is completely decoupled from the housing market. It's just, it's coupled with the calendar, but not the housing market. We're pretty excited about that. Great. That's really helpful color. I appreciate all the answers. Thanks, Matt. The next question comes from Paul Newsome with Piper Sandler. Please go ahead. Good afternoon. Thanks for the call. Just to maybe step back a little bit on the commentary about productivity and continuing to call a little bit and the expectation for a resumption or an acceleration of franchise growth in the back half of the year. Should we expect that the revenues should be, if we sort of mix all these things together, should also be a little bit more back-ended loaded because of the continued culling? Should we expect a sort of similar seasonality to what we've seen in the last year or so? Yeah, Paul, I would expect probably similar seasonality, because when you think about what a franchisee begins to add to revenue, when they onboard somebody and they're very heavy new business bias as opposed to having anything in their renewal book, we're only getting 20% of that. But I would point you to the gap between premium guidance and revenue guidance for the year. That can help show the difference of how we're transitioning some corporate agents into franchise and where that revenue splits. We're still keeping those policies on the book, but now we're recording, you know, 20% of new business revenue as opposed to 100%. That's fantastic. The scaling of existing agencies as well. You know, as they continue to add producers throughout the summer months, you know, that new business is going to come in in the H2 of the year. But again, it's a twenty cents on the dollar type deal, so you would expect that to follow the kind of the normal seasonality, but really start to take hold in the renewal book in 2024 and 2025. With our corporate agents, we should see- Correct ... you know, with it, the kind of recruiting cycle, the place that we're in the recruiting cycle, right now is that we're not gonna have a lot of incremental corporate agents really before the start of the third quarter. Once we hit the start of the third quarter, we've got our new college graduate classes coming in, and so 100% of that revenue is recognized. You know, that will help us in the back half of the year. Yes. All right. That's it for me. Thanks. Appreciate the help. The next question comes from Andrew Kligerman with Credit Suisse. Please go ahead. Hey. Good evening. First question is around the retention ratios. We calculated 78.5% for franchises. I guess prior to COVID, it was in, like, the low-mid 80s. During COVID, 2021 period, it was, like, 90-92. Do you kind of anticipate getting back to that sort of mid-80s retention? Would that timeframe be as soon as the H2 of the year? Andrew, I would say we're focused on driving success out of the existing operating agencies, but as well as adding total producers. Less totally focused on the operating agency number, more totally focused on the total number of producers out there. Our expectation is the culling of underperforming agencies will be largely complete by the end of the second quarter, which is when you would start to see the turnover rate start to slow down. You might not see the growth rate in operating agencies as high as you would have historically, but that's because we're funneling those resources into the agencies that are producing a disproportionate amount of our new business growth, so that we can work with more scale, individual franchises and maximize the total producer count, not necessarily the total operating agency count. Some improvement, just hard to say at this stage in the game and more focused on productivity. I got you. With respect to kind of the, you know, I was kind of reading the press release, you increased terminations of signed franchises that have yet to launch. I think about this, these 180 franchises that didn't work out, but they only generated 2% of volumes. You know, two parts to this question. One, what was it in the recruiting of these franchises that didn't work? What is the solution that's going to fix it? I mean, I think I heard that you were saying you've hired more servicing people and so forth. you know, very curious as to kind of what went wrong with this group and what exactly is the fix? I'll take that. We had this weird market phenomenon of the COVID pandemic that none of us really knew with certainty how we were gonna manage through it. Recruiting became very easy. Franchise recruiting became very easy, particularly early on in the pandemic because people thought they were gonna lose their corporate jobs, and they were looking for another way to earn a living as things progressed. They signed up, but they didn't really commit. You know, we had a bunch of people on our books that we hoped would launch, but their lives changed when they realized they could go back to their corporate jobs. We had a number of them that sorta just didn't materialize. There's a few things that we're doing to make sure that that doesn't happen again. One is we are increasing our kind of quality threshold. We're letting many fewer potential franchisees through. We're trying to make sure that we're very comfortable that they're gonna actually be able to build an agency. We have changed compensation for both the recruiting team and the team that manages those franchises so that they're sharing in the success of the new business that's being generated by those new franchises. That tends to sort of focus everyone on what we need them to do. Importantly, we're really kind of doubling down on investing where it is going to really move the needle, and that is, helping scale agencies that are in the... at the stage of their maturation where that's possible, and we, you know, we indicated that we have that dedicated recruiting group and corporate. Each agent that we add to a successful franchisee has been generating about 1.7 times the new business of an entire new franchise. We're getting a lot of leverage out of that. The other lever that we're pulling there is opening the aperture for corporate agents to convert into franchisees. That is really, that's recruiting on steroids because those guys have been generating. So far, the ones that we've opened this year have been generating 6 times the new business that another, you know, the average new franchise was. You think about it, the impact of us recruiting into agencies, the impact of us doing just the planned corporate conversions this year could get us the impact of in the ballpark, in the ZIP code of another 500 launches. We are being just, like I said, much more careful about who we let through. There's basically that's a long answer to a short question, but it's, there's a bunch of levers that we're pulling. Excellent answer. Very helpful. Maybe just one last quick one. Just in terms of who you're recruiting into the franchises, are they predominantly coming from these exclusive agent channels, or are you getting people that are not necessarily insurance producers at the time? This is Mark Miller. I'll answer that question. I would say probably at least 75% of them come from a captive sort of environment, where they were an insurance agent or they were an independent agent at one point in their time. It's one of the things we look for when you were asking, how do we qualify these people? That's one of the qualifications that we look at is, do you have prior insurance experience? Not exclusively. We've got some excellent agents that never sold insurance before when they entered our model. It's, it's both, but more heavily weighted towards people that have sold insurance before. Very helpful. Thanks a lot. The next question comes from Mike Zarembski with BMO. Please go ahead. Hey, good evening. Hoping you could help unpack the margin expansion guide for full year 2023 over 2022. Maybe it'd be helpful if you could offer any color on what kind of drove some of the margin gains in 4Q, if maybe that's some of the momentum we should be thinking about into 2023 'cause it sounds like contingence isn't a big driver based on the commentary, so that maybe there's some upside there. Anything. A lot of positive momentum you guys have given color about on the call. Anything specifically you'd want us to think through? Productivity, especially with corporate agents, drives a significant amount of earnings. You know, when you have an agent that's producing, you know, below what we would expect from a break-even perspective, that it makes it really challenging to drive really high margins. What we've seen is in, you know, in Q4, 24% increase in corporate agent productivity. That's very helpful for driving margin expansion. The other thing is our renewal book is performing extremely well, 88% client retention. Layer that on top of P&C pricing, I think we should take credit for where we are in the value chain to the tune of 100% premium retention. Renewal business is far more profitable than new business. That was also very helpful from a margin perspective. On top of that, we've done a lot of cultural shifting, to really create smarter and tighter controls in the way we're investing capital. People are making better decisions from an expense perspective today than we have, in the past. Okay. Thank you very much. The next question comes from Mark Dwelle with RBC Capital Markets. Please go ahead. Yeah, good evening. Just building on that, the last set of questions related to the margin guidance. Just to be clear, where the baseline guidance we're starting with is 18% adjusted EBITDA margin that you achieved for 2022, that's the baseline, and you'll grow off of that base? Correct. Okay. In some of your comments, you suggested getting to sort of a 30% EBITDA margin over, say, a three-five year timeframe. Would it be right to assume any linearity between the 18 that we're at now and 30 in, say, five years, that would be two or three points a year? Is it gonna be more, you know, nonlinear than that? Yeah. There's, there's puts and takes in any given year. Contingencies can swing that number relatively wildly, but if you normalize for all of that would not be an unreasonable assumption, a relatively linear fashion. I mean, a contingency year in excess of historical average could make that happen faster. A contingency year that's below what we've seen this year could cause that to slow. In general, we're expecting to scale our G&A and our compensation expense on core revenue growth. Okay, thanks. On that topic of contingencies, if I'm doing my math right, at the midpoint of your premium guide range, that would be contingents for the year in the 11 a half million dollar range. Again, kinda just at the midpoint using 40 basis points. Is that? Am I thinking about that the right way? Yeah, you've got that ballparked about right. Got it. Well, two other questions. One question, can you just talk through again, you indicated some increases that impacted the tax rate in the quarter, and I couldn't write that fast. Could you talk through those real quick again? Yeah. Some non-cash deferred tax asset changes related to management departures, as well as a couple of effective state effective tax rate changes that impact the deferreds, just a flip from deferred to current. That's- Got it. kind of how I would explain it without having to have a tax degree. The management departures part, that would be hopefully unlikely to be a recurring component, that the other part would be presumably somewhat ongoing. Right. Got it. The last question that I had, this apropos of all of the things that have already been previously discussed about, you know, how you plan to, you know, kind of reposition your franchise, intake rate and so forth. Would it be right then to assume that the initial franchise fee component of revenue, that would also probably see a lower growth rate than it has in the past and, you know, potentially be a little bit more back-end loaded this year relative to, you know, the more linear that it has tended to be, or is, am I over-interpreting that? I think that's about right. I mean, really what's driving that level of increase in this year was some of the increased culling of agencies, because from a GAAP perspective, you know, you fast-forward the franchise fee revenue to the extent you have cash when you terminate an agency. There's no cash flow impact, but there's just regular P&L impact. By the time we get through the second quarter, that termination rate should slow down, which would then cause that franchise fee revenue piece to slow down from a growth perspective. It also, the offset of that is you should not see as much bad debt expense be flowing through from culling of the signed but yet to launch franchises. We're getting relatively close to being done with that pipeline as well. You may see franchise fee revenue not growing as quickly, but in reality, that is just a cost recovery mechanism. That's not what we're trying to do to drive long-term profitability in the business. We're focused on adding new business and retaining the existing clients. The other side of that is you'll see bad debts slow down in the H2 of the year as well. Understood. Thank you very much. The next question comes from Pablo Singzon with JPMorgan. Please go ahead. Hi. Thank you. Most of my questions have been asked already, but I just wanted to, I guess, follow up on comments you can give on the corporate side because you sort of discussed the changes you're making on the franchising side. Maybe talk through, you know, changes that you're gonna make in the corporate with regards to maybe recruiting or even compensation. How to think about, you know, what you're doing differently now versus what you did the past couple of years. Sure. Hey, Pablo. This is Brian Pattillo. As you know, we had been seeing kind of a lower productivity in corporate sales, we took aggressive action this past quarter to really get that turned around. To your point, the first thing is we had to raise the bar on recruiting and make sure that we're slowing down hiring to make sure we have just absolute top-quality talent coming into the team. Then, yeah, we managed out bottom performers. Really those things combined really shifted the culture to create just a culture of excellence where just mediocrity isn't tolerated, which led to significant productivity gains that we saw in December and January. I think most importantly is the fact that we were able to produce more new premium in Q4 with significantly fewer agents. That's a much more profitable business and really just a stronger foundation to grow on in the future that I think now we have stronger absorptive capacity because we're plugging in new agents to a highly successful, highly productive team with a great culture that's ready to win. It's across the board. It's changing recruiting, you're managing out low-performing agents, improving the culture, and just getting back to a point where we're seeing productivity where we want it to be. Yeah. Pablo, just to piggyback off that, for the future of corporate sales, we should be looking at this as an awesome feeder program into very successful franchisees that we know are going to grow and scale. It's not necessarily like we wanna hold onto a corporate sales agent for 10 years. We want them to turn into a business owner and multiply themselves and create an army of producers underneath them. Understood. It sounds like you didn't change much on the compensation side in the corporate channel. You know, we made a couple of little tweaks, changing some annual things to monthly-type things. Nothing wholesale. Understood. Last one for me, just a quick numbers question. The revenue retention above 100, I might have misheard, do you expect that to persist just in the H1 of 2023 or through most of 2023? Sorry, Pablo, I didn't quite get your question. Could you repeat? Yep. The revenue retention over 100, right? Basically, renewal premiums being, you know, more than new business you wrote last year, right? Like, because of pricing. You expect that positive comp to persist through most of 2023 or just through the H1, right? 'Cause you do. Yeah. end up bumping against the H1. Yep. We expect premium rate to continue to be a tailwind through at least the second quarter. There's a potential that that could continue through the back half of the year. I'm not counting on that. Our guidance doesn't include continued acceleration through the back half of the year. It'll really depend on how successful the carriers are on generating underwriting profitability. Understood. Thank you. The next question comes from Ryan Tunis with Autonomous Research. Please go ahead. Hey, thanks. Yeah, I just, I guess listening to, I guess the two issues are sort of the disparity of productivity in the franchise channel, some of that in the corporate channel as well, and you have fewer corporate agents selling. I guess just, like, looking at the results, it's surprising a little bit to me that, it's difficult to really see that much of a negative impact from a new business standpoint. I guess for whatever reason, what you're describing, it would seem to me like maybe I'd see renewal royalties down quite a bit more than they actually are. I'm just wondering, are there headwinds associated with this from a new business perspective that we should expect to see in the coming quarters and we haven't yet? We talked about in the prepared remarks that in 2023 you're gonna see that premium growth gradually decline as the lower new business for 2022 converts to lower new business or lower renewals in 2023. We plan on pivoting that new business growth back to accelerating by the H2 of 2023 as we add producers into existing agencies, you know, that we've talked about are 1.7 times as productive as a new agency as we launch corporate agents into franchises that are 6x as productive as a new agency. There's a lot of levers we're pulling to juice productivity and get the new business growing again faster. We had to take all of those actions in 2022 to make sure that we could maximize profitability and get a foundation to drive productivity and the right culture in the entire organization. Got it. Then, I guess just, I mean, it's pretty interesting that you're finding that you're actually more productive with so many fewer corporate agents. Yet it still sounds like there's a strategy to continue to or to accelerate growth later on in the year. I guess, you know, are you rethinking why is that the solution rather than to try to figure out, like, what the right size of the business should be and then continue to, I guess, right size the cost base and continue to grow at a decent clip? Yeah. We're gonna grow corporate sales, but not indefinitely and forever to an infinite number. We have the productivity now to where it can sustain growth at a reasonable and responsible level, and we would be foolish to not take advantage of that. We're creating a pipeline of future highly successful franchisees as well as creating a pipeline of talent that can manage things like initial partnership, lead flow. If we don't have a force of well-trained and highly talented corporate agents, some of the economics on partnerships may be a little bit more challenging. It's important that we have this W-2 workforce that we know we have high quality and we have good control of, that we can move around. corporate is not just a source of new business policies, it's a great lead flow into the rest of the organization as well. Thank you. With that, I would like to turn the conference back over to Mark Jones for any closing remarks. Just wanna thank everyone for your participation, and good night. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.