Hello, and welcome to Goosehead Insurance third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. I would now like to hand the conference over to his first speaker, Daniel Farrell. 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 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 including potential differences caused by variations in capital structure, tax position, depreciation, and 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 In addition, this call is being webcast, and an archived version will be available shortly after the call ends on the investor relations portion of the company's website at goosehead.com. Now, I'd like to turn the call over to our Chairman and CEO, Mark Jones. Thanks, Daniel, and welcome everyone on the call. Our third quarter results continued to demonstrate the strength and consistency of our business, even in the face of substantial macro headwinds around both product availability and housing activity. For the third quarter of 2023, total written premiums increased 30%, total revenue grew 23%, adjusted EBITDA was up over 100% from a year ago, with adjusted EBITDA margin expansion of 13 points to 32%. I'm very pleased that we have continued to make strong progress on the strategic goals we laid out at the beginning of the year, driving producer productivity improvement in both corporate and franchise networks, upgrading the quality of our producer force by raising the standards of our recruiting process to ensure the best possible talent acquisition for the company. Focusing our resources on scaling our highest potential franchise partners, investing in technology efforts to progress toward creating Quote-to-Issue capabilities for our agents, clients, and carrier partners, and strengthening our management capabilities to support accelerating growth and driving a culture of excellence throughout the organization. Our results this year are unfolding just as we expected. The strategic actions around quality in every part of the organization have resulted in significantly higher margins and a stronger, more sustainable base to support reaccelerating growth. As we continue improving the quality and consistency of our distribution force through the remainder of 2023 and beyond, the next phase of our execution will be driving, reaccelerating new business production growth in 2024, which we expect to springload into strong revenue and earnings growth in 2025 through a combination of producer headcount growth, further agent productivity improvements, particularly in franchise distribution, continued focus on retention, and increasing momentum of our digital business and partnerships. With our improved foundation, we're in a strong position to execute on these growth objectives and deliver a combination of headcount and productivity improvement over time that will support our goals of a 30%+ compound annual growth rate in premium through at least 2027. As our growth accelerates, we'll be doing so at much higher margins than we have historically. As we stated previously, we believe long-term margins will be in the 40% range. Let me take a moment and share some brief thoughts on key areas of the business, and Mark Miller will provide more detailed comments in his remarks. With the tremendous improvements we've made in corporate productivity, we were very excited again to start growing our corporate sales force this quarter. Despite the addition of a significant number of new agents, we've continued to drive strong productivity growth, with overall agent productivity up 42% compared to a year ago. I'm particularly excited about the caliber of talent we're attracting from college campuses. Our ability to articulate the opportunity for business ownership through our franchise offering provides a truly unique and extraordinary career opportunity with a clear path to a seven-figure income, and that is resonating incredibly well on campus.... We're now operating at very high levels of corporate agent productivity, and we look forward to unlocking even stronger productivity as macro headwinds moderate. Our scale corporate agent team is unique to Goosehead. We believe there is no other more productive group of agents in the personal lines space. Our corporate agency also serves as a rich recruiting pool for future franchise agents, and the average corporate conversion to franchise is more than five times as productive as franchises we hunt in the wild. Accordingly, growing this talent pool is a strategic priority for us and a key future growth driver. Brian Pattillo has done a tremendous job turning our corporate distribution around to achieve record levels of agent productivity. Given his powerful contributions over time, we've promoted Brian to Executive Vice President, with oversight across both our corporate distribution and franchise distribution networks. I look forward to Brian's continued leadership to drive overall growth and profitability. In the franchise network, we're continuing to improve the quality of our agent force and are seeing corresponding improvement in producer productivity. During the quarter, our franchise new business productivity increased 18% compared to a year ago, and the runway for further franchise productivity growth is substantial. We continue to put increased focus and resources on scaling our highest potential franchises, adding 107 producers to existing franchises in the quarter. As a reminder, agents that are added to successful franchises are substantially more productive than the average new franchise. We also recently hosted a mega agency retreat, which was focused on supporting our most promising franchises in their expansion efforts and helping them leverage our accumulated experience from growing our corporate agency. Shifting to technology, you've heard us speak of developing our Quote- to -issue capabilities and the investment of time and money to make it a reality. This has been very challenging, and it has taken longer than we would like, as we are inventing a truly unique business model that relies on heavy tech investment from ourselves and our carrier partners. Well, we have done it. Since our Q2 call, we successfully launched Clearcover and Nationwide Auto. We're planning additional carrier launches for both home and auto products through the end of this year, and look forward to ultimately having a majority of our carrier premium base enabled for Quote- to- issue over the next 24 months. We anticipate that we will be implementing an additional three-five carriers in the fourth quarter, which includes both home and auto lines of business, and some of our largest volume carriers, including Safeco, Nationwide, and SageSure. We believe this technology will have a profound effect on the efficiency and quality of execution for our agents, allowing us to better and more quickly match risks with carrier underwriting appetite and to more efficiently execute on growing incoming partnership leads, open new partnership opportunities over time, and allow us to be very specific on the type of clients we onboard, again, matching carrier writing appetite with client demand. Our carrier partners have devoted significant time and resources to developing quote-to-issue capabilities with us, further underscoring the value they put on partnering with us as a consistent, tech-enabled, large-scale independent distribution partner, and the confidence they have in the long-term attractiveness of our personal lines insurance marketplace. While the current hard P&C market has created product and profitability challenges for our carrier partners, it has forced us to take our game to a higher level, and for that, I am grateful. It's also shown us who our friends are. I take partnerships very seriously. When you are a partner, you back your partner's play in good times, but more especially in challenging times. We will forever be grateful for the support we've received from companies like SageSure, Progressive, Safeco, and Mercury. We've been able to continue to succeed and grow because our partners backed our play, and we will reciprocate. I'm extremely pleased with the improvements we've achieved across people, process, and technology this year that will allow us to drive very high levels of revenue and earnings growth many years into the future. I feel incredibly excited about our ability to continue to execute on our strategy and continue to deliver for clients, agents, carriers, and shareholders. With that, I'll turn the call over to President and Chief Operating Officer, Mark Miller. Thanks, Mark, and good afternoon, everyone. I'm very proud of the progress our team has made on our key strategic initiatives for 2023. In 2023, we have experienced the tightest insurance market in our company's 20-year history, but our team has rallied and dialed in on the things we can control. As a result, we have seen significant lift in our new business productivity levels from both corporate and franchise agents. We've also refined and intensified our recruiting efforts to lock in a steady stream of high-quality talent for 2024 and beyond. Our service team has greatly improved many of our key performance indicators, and we're now focused on driving cost efficiency across this team. From a technology perspective, we have quickly built a world-class team with technologists from outside the insurance industry. This team is rapidly implementing our QTI platform that will radically simplify the way insurance is sold and serviced in the future. This technology will help agents come down the learning curve significantly faster and dramatically increase efficiency. Instead of having to learn 20 different carrier systems, our agents will utilize one integrated platform. As compared to a year ago, I believe the changes we implemented have significantly strengthened our core operations and positioned us to move quickly and effectively in coming years. Turning to corporate distribution, we are now in a very strong position with our corporate sales team from both a quality and new business productivity perspective. We ended Q3 with 316 corporate agents, up from a low of 250 agents in May. As MJ noted, average productivity is up substantially this year. On a year-to-date basis, our new business productivity is up 28% for greater than one-year agents and 73% for less than one-year agents. I'm particularly excited about the caliber of the talent we are attracting from college campuses. Our ability to articulate the opportunity for business ownership through our franchise offering provides truly unique and extraordinary career opportunity with a path to a seven-figure income. This summer, we have had large start classes, and these agents are some of the best we have recruited in years. To give you a sense of their strong early performance, our summer recruits this year are producing nearly 50% more new business than last year's class, and three of our new hires are pacing six-figure incomes. To give a quick example of the success our new corporate agents are having, I'd like to highlight Bryson Ramsey in our Austin office. Bryson joined Goosehead in June after graduating from Baylor University with a degree in business. Since starting, Bryson has well exceeded his monthly ramp-up goals and has already activated six referral partners, laying the groundwork for what we believe will be a fruitful career. Most recently, in September, Bryson exceeded our lofty ramp-up goals by over 200%, generating over $16,000 in new business commissions and finishing in the top 10% of corporate agents. We're very proud of Bryson's accomplishments, and we look forward to his continued success. The success of this year's new class is amplifying our value proposition at 12 college campuses this fall as a recruiter scout for the class of 2024. With all the changes we've made in sales management, incentives, process, and career development, we will be in an even stronger position to attract and retain the highest quality sales talent in the industry. Longer-term career paths for highly successful agents is even more compelling, with the option to start their own successful franchise operation or to move into, management ranks. Moving to franchise. We're making tremendous progress on our growth objectives, which include scaling our best and fastest-growing franchises, converting corporate agents to franchises, and driving significantly higher productivity among the franchises. During the quarter, our existing franchises hired 107 producers to scale their businesses. Many of these hires were facilitated by our new franchise talent acquisition team. We're continuing to add recruiters and infrastructure to this team to keep up with the increasing demand from our growth franchises. We also had eight corporate agents convert to franchise ownership in the quarter, and we expect about 30 conversions for the full year. These conversions remain five times more productive at generating new business than our traditional franchise launches. Although we've seen consistent franchise productivity improvements over the last couple of quarters, we still have significant untapped potential in our existing agent base. Franchise productivity is still only about 51% of corporate agent productivity on average, and we see no reason why this gap will not close meaningfully with better recruiting and support. To give one example of what is possible with the Goosehead franchise, I'd like to highlight the Hazeltine agency. Chad and Chance Hazeltine, two brothers, founded a franchise seven years ago in their hometown of Sarasota, Florida. Today, they have a $15 million premium book, and they have grown by over 50% in the last 12 months. That allows the Hazeltine agency to take home roughly $1.3 million per year. They currently have five producers that sell at equivalent levels to our corporate agents and recently added a new sixth producer. We believe the best way to grow our franchise business is by investing time and resources behind our very best franchise partners to help them grow scaled businesses. The Hazeltines are the type of owners that we want in the franchise community, and we could not be prouder of what they've accomplished. Last week marked Goosehead's 20th anniversary, and we're well on our way to achieving industry leadership. We will continue to revolutionize the personal lines insurance brokerage experience with our talented employees, disruptive technology, and unique go-to-market approach. I believe our employees will outhustle and outsmart the competitors, and we will grow more rapidly and profitably than any company has ever done in our industry. This will provide amazing opportunities for our employees, agency owners, and shareholders. We're in a great position as we close out 2023 and move towards higher growth in 2024 and beyond. With that, I'll turn the call over to Mark Colby Jones. Thanks, Mark. ... Before touching on key areas of results, I'd like to spend a moment on how we have been operating to mitigate the unique market headwinds on product availability and housing transaction declines. As we have previously indicated, product challenges are representing a larger headwind for our growth than the tailwinds we've been experiencing from carrier pricing actions. These headwinds have manifested in several ways. A pivot away from recruiting new franchises in certain geographies because of a lack of product and carrier appointments for new offices, some reduction in our bind rates and package rates on new business, both measures that remain high, but are down from historically very consistent levels, and a modest decline in client retention, despite significantly improving our service function, generating a Net Promoter Score of 92 compared to 90 a year ago. Our response to these challenges has been to improve our operations and processes across sales, service, and technology to gain increasing market share and relentlessly focus on serving the needs of our clients and partners. On sales production, year to date, we've added a record number of referral partners, despite intentionally reducing our producer headcount. Our lead generation is up 18% year to date, helping to offset the impact of lower bind rates and package rates amidst product challenges. This is allowing many of our agents to achieve record new business generation, despite unprecedented challenges in our 20-year history. In this environment, our value proposition is even more evident to our referral partners, because rising insurance costs and interest rates affect an individual's buying power, and our agents are able to add more value at the home closing process. We are also diversifying our lead generation from the housing transaction through partnerships and digital lead generation efforts. In the service function, we have significantly reduced call wait times and increased the service headcount by 50% to meet the demands of the environment. We're pressing forward with increasing geographic service specialization. This quarter, we opened a service office in Orlando, Florida, dedicated to meeting the unique needs of the Florida and East Coast markets. Our service function is uniquely powerful in the industry, and I have no doubt in a more normalized market, our client retention will reach new highs. We see no long-term structural impediment to getting our client retention into the 90s over time, and every point of retention has a meaningful impact on our long-term economics. In technology, our quote-to-issue efforts will revolutionize the way our agents serve clients and carrier needs. The time and resources our carrier partners are putting towards this effort in an environment where most are not looking to grow, is a validation of the value our scaled independent agent model brings and the long-term attractiveness of the personal lines industry. This technology, over time, will help us more efficiently match clients to carrier risk appetites across product lines and geographies. Importantly, we believe these challenges in the marketplace will abate in time, and we are encouraged to be seeing some early signs of better underwriting profitability from our carriers, which may indicate we're beginning to see an inflection point with more products becoming available in the near to medium term. We have no doubt that our organization will act like a coiled spring for growth as market conditions ultimately normalize across product and housing. Our agents have taken this time to hone their sales craft, become more efficient, and learn how to overcome more objections. We believe that the productivity gains we will see from improved product availability will be substantial. Moving to our results in the third quarter. Our total written premium, the leading indicator for future revenue growth, increased 30% to $803 million. This includes franchise premium of $620 million, up 34%, and corporate premiums of $182 million, up 21% from a year ago. Our policies in force at quarter end were 1,456,000, up 18% from a year ago. We expect a re-acceleration of the policies in force growth rate in 2024 as aggregate new business production increases, more highly productive producers are added, and we see retention rate improvement from a more normalized product environment. Total revenue for the quarter was $71 million, an increase of 23% over the prior year period. This includes core revenue of $63.1 million, up 22%, driven by continued high client retention, improvements in agent productivity, and pricing tailwinds. Conversion of highly productive corporate agents to franchises will temporarily moderate our revenue growth, but should result in accelerating revenue and earnings growth longer term as these franchises onboard new producers. The effects from aggregate new business production acceleration in 2024, driven by increased product availability, new producer additions, and increased agent productivity, are not fully realized in the same year because the royalty fee rate on new business is 20% compared to the more favorable 50% on renewal business. Our actions taken over the last 12-18 months have set us up to drive accelerating revenue growth in 2025 and beyond. Contingent commissions in the quarter were $4.8 million, compared to $2 million a year ago. We continue to expect full-year contingents to be around 40 basis points of premium. Shifting to expenses, we continue to perform well as we optimize expense discipline and reinvestments for growth. Total operating expenses, excluding equity-based compensation and depreciation and amortization, were $48.6 million, an increase of 4% compared to the year ago quarter. Compensation and benefits, excluding equity-based compensation, increased 7%, driven by our investments in partnerships, technology, marketing, and service functions, partially offset by a decline in producer count. Other G&A expense of $14.8 million was up 10% from a year ago.... Bad debts declined to $797,000 from $2.3 million, as we have substantially improved the quality of our signed but not yet launched pool of franchises. Adjusted EBITDA in the quarter was $22.4 million, up 104% from the year ago quarter, while adjusted EBITDA margin increased to 32% from 19% in the year ago period. Our margin has been strong in the first three quarters of this year. Given the timing of investments and normal revenue seasonality, we expect only moderate margin expansion for the fourth quarter over the previous year. Looking further out, we continue to expect to grow annual margin off of our 2023 base. Our intermediate-term margin goal remains 30%+, and our long term, we see our business operating around 40% margin. As of September 30th, 2023, we had cash and cash equivalents of $35.2 million. Our unused line of credit was $49.8 million, and total outstanding term notes payable balance was $79.4 million at quarter end. With our net debt to trailing four-quarter EBITDA at just 0.7x, we have substantial balance sheet flexibility to drive future value and returns to shareholders. We are reiterating our guidance for the full year of 2023. Total written premiums placed for 2023 are expected to be between $2.87 billion and $2.99 billion, representing growth of 29% on the low end of the range to 35% on the high end of the range. Total revenues for 2023 are expected to be between $260 million and $267 million, representing growth of 24% on the low end of the range and 28% on the high end of the range. Again, thanks to our team for their hard work, discipline and focus, delivering such strong financial results as we continue on our journey to industry leadership. With that, let's open the line up for questions. Operator? Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star one one on your telephone and then wait to hear your name announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Michael Zaremski with BMO. Your line is open. Hey, good afternoon. I guess first question, maybe, on your comments, reminding us about your 40% long-term margin goal. Just curious, what would you be able to share any breadcrumbs on what level of productivity lift that would imply versus kind of today's levels, or any kind of breadcrumbs around to help us kind of put our heads around a 40% margin? Hey, Michael, this is Mark Colby Jones. So in order to get to 40%, you don't necessarily need to see massive productivity improvements. Now, we've seen nice margin expansion this year. Some of that is driven by productivity improvements and generating profitability on new business. But naturally, the way that this business works, as you get more and more renewal bias in the book, you just become more profitable given that the servicing on a renewal policy is significantly less than a new business policy. There's much less fulfillment effort, all of those type of things, and the compensation to an agent is roughly 50%. So over time, as the renewal book becomes a larger and larger piece, and you see the growth rate trend down, naturally, you get a lot of operating leverage out of the business. Okay. And maybe just sticking to productivity, since it's been a big plus lately, and from your comments, you expect it to continue to increase. And I know that you gave different, you know, that you think about it differently, productivity, franchise versus corporate. But I guess, you know, you said a number of things about why productivity is likely to improve in the coming year. You talked about more product availability, knock on wood, if you know, the industry heals. You talked about the existing franchises being substantially more productive as they hire new folks, and the corporate conversions being five times more productive. Are. And then I guess there's QTI, too. So I know there's a lot going on, but what, you know, are... It feels like there's a lot in the mosaic that's gonna be more of a big positive. Like, what are you - Am I characterizing things correctly and there's kind of a lot of levers? Yeah, I think absolutely. And I would point to the product challenges we're seeing today are dramatically, I think, reducing where productivity could be today, given the amount of leads we're receiving. So we mentioned in the prepared remarks that lead flow is up 18% year-over-year in a pretty challenging housing environment. Now, if we can get the product environment and carrier underwriting profitability back at a level where there's a wide variety of carriers looking to grow, there's no reason why we shouldn't continue to see pretty strong productivity improvements on a year-over-year basis for a while to come, along with all of the other technological efforts we're making with QTI and partnerships and things like that. This is Mark Miller. I would just add one thing on top of it. One thing we're also seeing is our retention rates of our, of our employees is, is increasing. As that happens, your tenure goes up, and there's a direct correlation between tenure, and productivity. So last year, year before that, higher attrition rates, lower attrition rates now. That also factors into your equation. ... Okay, that's helpful. And maybe lastly, on QTI, and, you know, I think it's, you know, since an outsider looking in, you know, we appreciate your saying it's a heavy lift and whatnot. But, I guess just trying to better articulate why its impact could be profound. Like, I guess if a majority of your carriers went into kind of a QTI type, you know, I guess KPI or plug-in with you all, like, would it save your average employee like X amount of minutes per day, that they could use that saved time to just sell more? Or is that the way we should think about it, or is there—is it just more profound than just saving time and giving them more time to sell otherwise? Yeah, this is Mark Miller again. I would say in this world's current state today, I would think of it as a significant efficiency play for the sales team. So if you... All the trailing paperwork and everything else that has to happen after the sale of the policy, it helps with that greatly. And then the service team that has to service it afterwards, today, they have to go into a native system of the carrier. What we want to do in the future is the QTI connections are the same ones that you would have to use in the service side to get in to service a policy. So, great efficiency savings, and I think we mentioned, you know, it will help direct exact type of customer to the exact type of policy we want in the future. Yeah, I think there's also a kind of an ancillary benefit here, that this is a technology that doesn't exist anywhere else in the marketplace. And so as you go to acquire new talent and people evaluate their options for an independent agency, why would you ever choose anywhere else that has lesser technology and- Yeah Something that they don't even have a roadmap to be able to accomplish? We already have it. We've got first mover advantage there. Interesting. Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Paul Newsome with Piper Sandler. Your line is open. Check to see if you're on mute, Paul. Paul, are you there? Please stand by for our next question. Our next question comes from the line of Brian Meredith with UBS Securities. Your line is open. Hey, thanks. A couple quick ones here for you. First one, I'm just trying to understand a little bit the margin guide that you've got for the fourth quarter, just modest increase, given what we saw this quarter. It looks like comp and benefits has stayed relatively low, and usually we see a ramp-up there. Is there some seasonality or something going on that just not seeing? Yeah. So typically, if you look at the seasonality of revenue from Q3 to Q4, you don't see a big lift in revenue from Q3 to Q4. And if you think about our revenue guide, you can get to where you would expect that to be for the fourth quarter. On the cost bar, I'm not expecting a big move from the third quarter to the fourth quarter. So you can come up with what you should expect a margin number to be for Q4, I think. Gotcha. Appreciate that. And then second question, I'm just curious. You gave contingent commission guidance, I guess, for the year, but it was pretty strong in the third quarter. Just curious, what's driving that contingent commission? I know last quarter you talked about some volume benefits, but, you know, really stepped up again. Yeah. So there's a couple of things going on there. One being, you're right, more volume benefits. So the majority of our contingencies are made up of a handful of carriers, and if the premium in those carriers grow faster than the premium of the whole book, you'll see slightly outsized contingency. The other thing is there's a couple of smaller contingencies that are loss ratio-based, that we are, it looks like now at this point, tracking to hit. And the way that the revenue recognition would work on that is you've got to wait until you have that information to actually record it. And so that could look more like nine months of contingency in the third quarter, as opposed to an even distribution throughout the year that you would see from a growth-based contingency. Gotcha. And then last question, I'm just curious, geographically, if you kind of look at, you know, geographically where things are, is there any kind of area that you see opening up a little bit more from a product perspective, carrier perspective, versus others, other areas of the country? It's pretty tight across the board. But I think we're doing a good job on adding product where we can, whether that be admitted product or E&S product. And we have a few really, really good carrier partners that are keeping us open in places where they've shut down other agents. I think that's just the value of our model. Great. Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Mark Hughes with Truist Securities. Your line is open. Yeah, thank you. Good afternoon. In times past, you've given the source of new business. I think you earlier on, it was kind of 60% came from the mortgage market. I hear what you're saying, that you're looking at expanding that, going through other electronic sources. Is there an updated mix of new business you might be able to share? So today, that's still about right, where it's in excess of 50% of the lead generation from new business comes out of a mortgage transaction. We're building up the partnership and the digital lead generation efforts, which I think that's why it's even more impressive that our lead flow is up 18% year-over-year, with fewer agents and considerably less housing transactions. Our agents have just been doing a really good job marketing out there, and the value to referral partners today, as we mentioned in our prepared remarks, is never more evident than it's been in our history. The insurance cost on a mortgage transaction now is a real consideration, especially with rising interest rates, and so we're able to provide a really differentiated service today in the face of those headwinds. I had a question around about the geography or the flow in the income statement. When I think about renewal commission, say, for this quarter, the line items that flow into that would be renewal commissions in this quarter. Last year, presumably, that business would be renewing again. And then the new business commissions, those would also be up for renewal and therefore would be reflected in the renewal commissions. Is that right? It's those two categories from last year that flow into the renewal commissions this year, and that, and that's all- Yep. Corporate agent activity. Is that correct? Yep, that's the right way to think about it. Okay. And same with the renewal royalty fees, that renews with the new business royalty fees. They step up, you know, kind of the 5%-2.50% retention versus the 20%. That, that's- Right. So the way you would do the math of the royalty fees is you would just gross them up. So you would do your new business royalties. Our portion of that is only the 20%, so you gross that up, and then same thing on the renewals. Our portion is the 50%. And then to get to the next year's, you obviously just multiply that by 50%. That would be our portion. Yeah. Yeah, exactly. Okay, and then one other quick question. Just the rate contribution to growth, any meaningful changes this quarter? By that, I mean, the kind of pricing, the premiums that the policyholders are paying for, auto and homeowners insurance. How has that contribution changed, perhaps? We're still seeing price inflation, but in our minds, the product availability, that's the other side of that price inflation, has been a bigger headwind than the price inflation has been a tailwind. You can see that in retention. You can see that in some stats that we track internally, like policies per lead. We mentioned bind rate and package rate as well in our prepared remarks. We believe that the product environment is more of a headwind today than price inflation has been a tailwind. Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Meyer Shields with Keefe, Bruyette, and Woods. Your line is open. Great. Thank you. A couple of small questions. First, are there additional expenses associated with pursuing leads through the partnerships and digital channels that change the equation at all? Now, so we... You know, the digital channels, A, our digital agent, as well as leads from our partnerships, events and other organizations. The digital agent, all of that is already built in from previous spending. The partnership leads, there's some reciprocal dollars that flow back and forth, but there's not any more customer acquisition costs than would be a traditional go-to-market strategy. Okay, excellent. And going back to contingents, I'm probably a step behind, but if the increasing certainty with regard to loss ratio-based contingents is what drove the contingents in the quarter, shouldn't that and the year-to-date numbers imply more than 40 basis points for the full year? Yeah, you know, the language we use is around 40 basis points. You know, things could still happen in the fourth quarter that could have adverse impact on that. But we feel comfortable that we will be at least a 40 basis point slope. Okay. No, that's helpful. And I guess final question, just because I don't know if there was an explicit comment. I think, Mark, you talked about some initial signs of carriers' appetites expanding. Is there any initial change or inflection in what you're seeing with regard to housing? We have not seen a sort of a turnaround in the housing market yet, no. Okay. I wish it were different, but it's not. Absolutely understood. Thank you. Please stand by for our next question. Our next question comes from the line of Paul Newsome with Piper Sandler. Your line is open. Paul, check to see if you're on mute. Please stand by for our next question. Our next question comes from the line of Scott Heleniak with RBC Capital Markets. Your line is open. Yeah, thanks. I was just wondering, with the franchise reductions probably just about over, it seems like at least that's kind of what you had said on the last quarter of the call. Can you just comment on the franchise inquiries that you're getting and your plans to expand that in 2024 and beyond, and just any kind of information or backlog information you can share on the franchise side? ... Yeah, Scott, just to clarify one point. On the last call, we said we were over the halfway point in franchise terminations in those calling efforts. So, you know, in this quarter, we had 89 terminations. We still think it will be high in the fourth quarter, higher than historical average. We believe in 2024, we will trend back down towards that historical average of 15%, and we don't see a reason why kind of medium term, it should be higher than a 10%-15% range as we gross up the gene pool. Yeah. And Scott, this is Mark Miller. So if we just go back and think about franchises in general, the way that I think about it, it's not about the absolute number of franchises, it's more about how many agents we have. And so where we're really doubling down is adding franchises or adding agencies back into the franchises that we feel really strongly about. What you're seeing is, in the numbers, is kind of a net out number. So you're losing about quite a few agents that aren't very productive and replacing them with highly productive agents, and that includes corporate agents that are converting to franchise ownership. We're also being very, very selective in the franchises that we're putting into the community now. So the number of launches you'll see are greatly reduced from what it was last year, but they're much more productive, and they're in the geos that we want. I think the final part of your question was, you know, how many kind of inbounds are we getting now? We've transformed the way we hunt for franchises, if you will. Instead of doing a lot of outbound calling, about 50% of our leads will be coming from, in this quarter, from inbound digital marketing type of capabilities, which is a new muscle for us and working tremendously well at finding really high quality franchises. Okay. That's helpful detail. And then just the agent to franchise conversions, you said, expect to do 34 this year. Is there any kind of target you have in mind, just annual conversions kind of going forward? Is that kind of a good number to use, you know, just- Yeah ... assume, you know, the next few years, or? I mean, it is our best source of high quality franchises. I'd love to ramp that up, but I also don't want to jeopardize the health of the corporate business. So a lot of it depends on how big the incoming class is gonna be, which we mentioned, we're doing really, really well on college campuses. We're still in the budget process, and so we literally budget out how many people we want to convert and how much we can take out of the corporate business. But I would say consistent with this year would be a good estimate for next year until we have better information. And if the class grows bigger and we have more qualified people, I'd certainly like to up that, but right now I would use what we had this year. Okay, that makes sense. And then just finally, last question, just the product availability that you're citing, I'm assuming that's in Florida, California, and Texas, or are you seeing that anywhere else, or is it just mostly those, those three states? Hey, this is Brian Pattillo. It's really across the board. Those are certainly the most difficult states. You know, California and Florida have been difficult for a long time. In fact, California, we've actually seen, in many ways, a better market because many of the large captive carriers have shut down new business, which has given us actually a lift on that. But really, it's across most states. We're seeing, you know, many of these carriers are looking to slow down growth as they seek to restore profitability. So almost every single state has been challenged from a product perspective, just some more pronounced than others. Okay. Appreciate it. Thanks. Thank you. Please stand by for our next question. Our next question comes from the line of Joshua Shanker with Bank of America. Your line is open. Yeah, thank you. Good evening, everybody. A couple quick numbers questions. What were onboarding for the quarter, and how many contracts for new franchises do you have pending? Hey, Joshua. We launched 30 franchises in the quarter, and I believe the signed but not yet launched pool is in the 200s. Okay. You know, I'm looking back to 2019 before the pandemic shook everything up, and by my count, it seems like, you know, this is a winner or loser type environment that you guys operate. And maybe about 30% of franchises didn't make it out of their first year, could get traction. Is that a good way to think about, long term, how the company ought to operate, among, among new hires, new franchisee hires? I mean, Joshua, this is Mark Miller. You know, I would assume that we can bring that number down with the way that we're like, corporate franchises are not that are corporate agents that convert into franchise ownership are not gonna fail at the same rate. And we're bringing in much higher quality franchises, so we would certainly expect to bring that number down over time. Yeah, and I would point to you, in this quarter, franchises we launched in Q3 of 2023, were 48% more productive, excluding the corporate launches. So just ones we hunted in the wild compared to last year, 48% more productive. So it. The quality of the franchise pool is going up dramatically, which helps that we don't need as much volume. We still would like to see some increase in volume on new franchises, but the productivity is so high at this point that we feel very good about the success rate of new launches. Yeah, and obviously- And if I can- Productivity correlates directly to the success. Like, they're gonna stay in the system a lot longer if they're more profitable. If I can get one more in, you talked about the opportunity to earn a seven-figure annual compensation from a college hire. Just to understand the pathway, so someone joins as a corporate agent, they prove successful, you convert them into a franchise agent, and they work for a number of years and get up there. You know, and do we have examples of corporate agents who have become seven-figure earners? ... Yes. Yeah, we do. And it's a pretty clear path of, you know, these are typically people that have had a team underneath them before. They know how to recruit, they know how to onboard and to get people down the ramp. And so it's a relatively, I won't say easy proposition, but it's simple for them to understand. They know how to be a good producer. They know how to get people up to be a good producer, so you don't need very aggressive hiring targets to get there. It, it's a very clear path, and we have examples of it in the past. Are the corporate agents still those seven-figure earners, or are they franchisees at this point? Franchisees. Okay. All right, thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Pablo Singzon with JP Morgan. Your line is open. Hi. Thanks. Mark Colby Jones, if I heard you correctly, I think you suggested that revenues and costs would be roughly consistent sequentially when you were thinking about the fourth Q. Would that then suggest a similar margin profile for the fourth quarter, or are there discrete items that we should think about? Yeah, so we've got the revenue guidance for the full year. I would point you to that for the fourth quarter revenue numbers. From a cost bar perspective, those should be relatively consistent with the third quarter. Now, we've onboarded a few people, but nothing that's gonna move the employee comp and benefits line too dramatically. So I would just point you to the way seasonality looks from Q3 to Q4 historically, our revenue guidance, and then a relatively consistent cost bar from Q3 to Q4. Okay. Yeah, that, that's clear. Thanks. And then as I look at employee comp maybe beyond the fourth quarter, right? So clearly, this quarter grew much lower than revenues. I think partly reflecting what you had said about, you know, the renewable book hitting a much leaner expense base. Do you think you can sort of maintain this, comp ratio as you scale up in 2024 and 2025, or is there some giveback as you, you know, ramp up hiring and, you know, do more investments? Yeah, so as we stay laser focused on productivity, specifically with corporate agents, that will help make sure we don't see that employee comp and benefits start to lose scale. The other big piece of that, and actually the biggest piece of that, is the service department. And so making sure we can drive efficiencies and scale out of the service department will keep that employee comp and benefits line continuing as a smaller and smaller piece of total core revenue. And then we'll obviously, we'll make investments in areas that we need to make investments in, things like technology, in the partnerships department, franchise development, those type of areas. But you shouldn't see us losing scale dramatically in employee comp and benefits as we onboard new agents. We're just too focused on productivity to let that happen. Okay. And then last question for me, also related to employee comp. If you look at stock comp as a percentage of overall employee comp, it's increased from, let's call it, high single digits to the mid-teens level now. Is that a consistent ratio to think about, right? So say, mid-teens for the foreseeable future. So we, we've talked about stock comp a lot, and the way we think about it is the dilution effect on the total share count. And so what we, what we've said historically is a 1%-2% dilution rate in annual stock option awards. Obviously, the GAAP recognition of that is a Black-Scholes valuation, which has other factors outside of our control that drive that compensation number. And so, as you go forward on an annual basis, you should expect a share count dilution in the 1%-2% range, and the Black-Scholes calculation will be what it be, depending on volatility in the stock market and risk-free interest rates. Got it. Thank you. And it is a non-cash expense, so... Thank you. At this time, I would now like to turn the call back over to CEO, Mark Jones, for closing remarks. Thanks, everyone, for your time and participation. We appreciate it, and hope you have a good day. Ladies and gentlemen, this concludes today's conference call. Thank you to the-- you may now disconnect.