Important disclosures: please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosure. The taking of photographs and the use of recording devices is also not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. Now, with that said, we're very privileged to have Gordy here from The Woodlands Financial Group. It's been an incredible year, right? Maybe before we get started, just maybe a little bit of introduction in terms of post-IPO up until this point. How do you feel about the market today? How do you feel about the overall business? Maybe just start from there and also maybe just a little bit of introduction about the business. Yeah, thanks, Bob. And thank you for being here at the last of the agenda for the conference, though. I know you had better places to be, and I appreciate you spending your time with us. Post-IPO, it's really hard to complain. The market's reacted relatively positive to TWFG. Conditions have been good. And other than that week in April, I'm sure most people would like to forget, it's been pretty good so far. Sure. Yeah. Maybe if we think about the market opportunity, also the growth opportunity you have, right? Personal line premium has been fairly strong for you for quite some time now. This is also driven by, partly driven by an inflationary environment, uncertain weather patterns, and other factors. Can you maybe talk about going forward, where do you see the broader opportunity set is for you? This feels like a $500,000,000,000 market, but just curious as to how you think your best position there. Yeah, personal lines remains a consolidation opportunity on the M&A front. There's also a talent migration out of the captive distribution channel into the IA space. You can see now that direct-to-consumer has kind of had its plateau moment, and we're starting to see some of the DTC markets opening up into the IA channel, giving us good tailwinds going forward. Sure. As we think about your guidance, 2025 guidance of 12%-16% organic revenue growth and then 20%-22% adjusted EBITDA margin, what are some of the main drivers you feel would support your optimism? I mean, obviously, it does feel like the market is opening up quite a bit for you. Yeah, so not touching on guidance, I'll just talk about the positive aspects of what's going on for us in the business. Last two years, personal lines have been a relatively hard market. Capacity was relatively constrained. Carriers weren't literally interested in growth. They were interested in getting back to profitability. As we got through the end of 2024, we've all seen positive improvements to combined ratios, carriers at all-time profitability. Now that's having them come out and say, "We want growth." You are seeing a lot more new business incentives to help drive growth into the market. Carriers are open again for new appointments. Most geography, especially for private passenger auto, is broadly open. Property remains a little more fragmented, a little different story, more geographical narrative required. California remains persistently hard post-California wildfires, post-rate inadequacy. We're addressing that by attracting in the secondary market. We do have admitted carriers that are writing California homeowners, but we also have the non-admitted E&S platforms that we brought to bear. And then, of course, if all else fails, you have the California FAIR Plan. With all the previous two years, hard market, slowed growth, what you're getting now is an inflection of new business growth and rate stability, which is positive for us to add new agents, plus add new customers. Got it. No, yeah, that certainly should be a decent amount of runway from here. If we think about the competitive environment, right, you've been in business for several decades now, and you have seen a shift for personal line distribution from a captive agency-heavy distribution model to now much more of an independent agency model with a direct channel kind of there and getting bigger. Curious to your view on this growth for direct channel distribution, and do you feel that poses a threat to your business model and then to maybe other independent agents? Yeah, so I mentioned it a while ago. Direct-to-consumer on private passenger auto seemed to have hit a plateau. The two largest DTC markets are GEICO and Progressive. Progressive is our largest trading partner. We added GEICO to our platform last year. Really, the two dominant DTC threats or frenemies are actually in our platform. I don't think that there's a threat to the independent agency distribution model. I think there's a collaboration and a realization that both distribution channels are going to exist. I think Progressive and GEICO alongside independent agents will continue to grow together. I think we will both capture market share from the captive distribution channel. That's what you've seen over the past decade. Homeowners insurance used to be majority captive distributed. It's now less than 35%, similarly with private passenger auto. I think we're going to be capturing more of that $500 billion addressable market for personal lines. I don't think DTC is going to impact the IA channels dramatically as originally thought. I do think one of the things that makes that long-term true, none of the direct-to-consumer offerings can actually take care of the homeowners insurance marketplace as a whole. We are in an industry where nobody wants a monopoly of property exposure. That fragmented distribution of homeowners insurance makes it less likely for us to be displaced. Think about the California example, and it lives true in Gulf Coast states and other cat-prone geography. You have to write admitted, non-admitted, and use state-backed programs in those complicated states. That's where the majority of the population resides between California, Texas, Florida, and New York. Those very complicated sales processes don't lend themselves to a DTC platform. No, that's very helpful. You mentioned that you now are onboarding additional carriers. Obviously, the market today is very different from what it was several years ago. Not naming names, maybe if we can just think about from a scale of 1 to 10, 1 being the least competitive from a carrier perspective, 10 being just all-out pricing war. Where are we today in terms of the carrier competition and their willingness to open up business to you and others? Private passenger auto is probably sitting at a 7.5. Seven and a half. Okay. Where you've gotten rate stability. You might even have some rate deceleration in markets where their combined ratios are greatly improved. Private or not private passenger property, homeowners insurance is probably sitting around a two and a half to three. So lots of room for improvement on the property side, but private passenger auto is getting ready to get into a very competitive environment. That's an interesting point, right? One side is much more competitive than the other, but a lot of folks bundle. Does the lack of willingness to do homeowner business make bundling harder? Is that an observable trend, or is that not a thing? If you think about independent agencies, one of the things that we have an advantage in is that we can still bundle a customer with us. If the consumer is looking at their insurance package as what insurance advisory firm did they buy their insurance from, rather than the carrier that makes up the underlying coverages, we are still bundling and packaging up our customer's needs. In our programs business, the Woodlands Insurance Company, we actually have a companion policy discount built into that property program. We actually have incentives for our consumers to actually bundle their insurance within the agency. We get the discount regardless of which preferred private passenger auto carrier the customer has, so long as it is with the agency. We are bundling disparate coverages. That sounds like it's an advantage to you, but a limitation to the direct channel then in that case. It's a benefit to us for sure because we have that built-in packaging discount. We built the product actually to be bundled, understanding that our auto capacity providers that do have property do not want it all. It is a way for us to continue to grow with those capacity providers. In geography, they still want to grow private passenger auto, but they do not want to add any more property exposures. We are able to actually partner with them and bring that additional capacity alongside. Got it. No, that's very helpful. In that case, right now, independent agents channel is about half of the homeowner distribution, give or take. It's about 1/3 of the personal auto, kind of like we said before. Is there an ultimate steady state where you feel independent agency channel will eventually achieve? It really depends. We saw what happened with Nationwide a few years ago where they converted their captive distribution into independent agents. If more captive distribution organizations do that, then we'll have a larger market share from those captives converting into independents. As individual agents choose to exit the captive model and come into the IA channel, that also could actually impact how much of the market share we grow. I do think that what we talked about with the difficulty of personal property, having that fragmented marketplace, I think that tends to drive more market share to us long-term as customers want their insurance with the same insurance advisor. I do think that there's tailwinds for the IA channel. Got it. In that case, do you ask the independent agency channel continue to have seemingly uncompetitive advantage? How do you view other competitors of yours in this case? Maybe if you can talk about your competitive moat, and then we'll certainly get to some of the operation side of things. Yeah. In our world, we have two different offerings. We have our agency in a box, TWFG branded locations. We think that we have the best and brightest agents coming into that model. Average experience is 17 years in the industry. That gives us a high-quality retail partnership to continue to grow the branded distribution. Our competition, other independent agencies in the marketplace, many of them access product from our MGA. We have our own wholesale brokerage and programs division where we have product, that same product that I mentioned earlier that has that bundling advantage, is available to our retail distribution and our MGA distribution. In many cases, we actually get growth actually from our competition. Got it. No, that's helpful. Yeah. On the agency in a box solution, right, it's relatively simple to set up, and it provides comprehensive solutions. Are there ways for other competitors to copy this platform and product offerings? Can you maybe talk about your ability to use that product to attract more agents onto your platforms? There's really only one other company that I can think of that has the full suite of support where you have training and technology and everything integrated and everything's on the same brand, and that's going to be Goosehead, right? Could anybody go out and copy any business model? Sure. One of the strategic advantages we have is we own the agency management system. That technology cost per user, that training and ease of integration from disparate systems to consolidate and integrate, we have that advantage having that technology into ourselves. It's much different than just, say, wholesale aggregation where you have a pool of agencies that are owned separately and they only aggregate for higher bonus, higher commission. The infrastructure for commission payables, the infrastructure for agency bill reconciliation, management of email for hundreds of locations, most of the other types of businesses do not do any of those things. They would have to then create an infrastructure and an integration strategy to really try to replicate that retail model. There are a couple of other franchises out there worth mentioning, Brightway out in the southeast, but it is really only a few companies that are actually doing the single brand, single system, handling the reconciliation of all the accounting infrastructure for the insurance agencies. Most everything else out there is a wholesale aggregator type model. This certainly helps retention, it feels. Yeah, because the business that comes into our retail division is wholesale California. It stays with us. The agencies that are building these portfolios, they have exit value, but when they exit, the portfolio actually stays with TWFG, and we just perpetuate to the next principal operator. I think one thing I remember clearly, and this is throughout your earnings thus far, right, you talk about retention being one of the key, agency retention being one of the key. Can you maybe help us think about the philosophy behind it? We obviously talked about the solutions that help them to remain on your platform, but maybe the philosophy behind retention, but also how you think about just driving retention going forward as well as we enter into a relatively competitive environment, I would say. Retention for our agents. Yes. They keep 100% of the profit they generate out of their local location. There is a huge advantage for them to continue to grow their operations. With us doing the commission processing, not just for the agency, but also for all the producers within the agency, there is no barrier for them to hire more producers because we are going to handle the back office support that helps, one, make sure they are licensed, getting appointed to the various carriers, and then, two, doing the compensation calculations for them. I think the platform itself, the efficiency of it, the advantage of them being able to retain the profitability at their own local level, there is not really an incentive for them to exit and leave the portfolio behind and go do something else. Right. That essentially should theoretically also help to maintain a level of productivity and then that drives future growth and revenue. Yeah. The fact that they get to keep the profitability off of their efforts certainly is an unlimited upside into the profitability that they have in partnering with TWFG. Right. Maybe shifting a little bit into the broader expansion, right? You are expanding into Ohio, New Hampshire. What are some of your priorities as you think about expansion into outside of your core states? Can you maybe talk about the progress so far as well? Yeah. Last year, we added 15 new states. When we're looking at going into new geography, it's really where does the talent line up to our platform, whether that's our agency in a box platform or the MGA wholesale brokerage platform. We had an opportunity last year with a market exiting captive property insurance, which gave us access to distribution to acquire or recruit into our business model. Really, as we look at other states, we're either going to go into the other states by recruiting talent that's already in that geography or through an acquisition where we can acquire a portfolio at scale. We entered Ohio a few years ago, to your point. We acquired a decent-sized location. We had two or three sub-acquisitions on top of that, and then we were able to expand in Ohio from a position of strength. North Carolina is another market that we've acquired ourselves into and have had good growth coming out of those acquisitions and done subsequent acquisitions since the initial launch into North Carolina. We also look at our MGA, and one of the areas we have that we think is a good lever is programs. We've had a lot of success with that program I mentioned earlier where we have unique homeowners' capacity in a difficult state. What other states can we expand programs into? We are looking at going into other states that would be benefited by having additional homeowners' programs. Got it. When you think about expanding into other states, do you first say, "Okay, this is an interesting state to get into, so we'll look for talent," or do you say, "Oh, this is an interesting group of talent, and then we'll get into that state"? Is there like a formula or not really? It's opportunistic. It can come, we have a pretty healthy M&A pipeline. I know that'll come up a little bit later. As you have your recruiting out there, you have existing agents that are referring agents to us. We've got our own direct recruiting efforts. When that talent comes into the pipe, you evaluate the talent, you evaluate the markets and platforms that we have to offer in that geography. If we have something that has a high probability of success, you go ahead and enter into that marketplace. Same thing with our acquisition. If we get in acquisition pipeline agencies in new geography, we look at the composition of their portfolio, their staff, what's the leadership retention, what's the producer retention, is there organic growth, tailwinds from that acquisition, and then you look at what is it going to cost us to acquire. You make your decisions on which ones you're going to go after based on composition of all those things. That's very helpful. As we think about growth opportunities, as we think about expansion, one thing from our perspective we tend to look at is personal line pricing, right? Pricing homeowner, obviously, a little bit complicated, but it looks like auto pricing is slowing down or decelerating at least. How do you see that impact your business from a pricing perspective? Should we think the growth will naturally offset that pricing deceleration? When you talk to your folks, how do you guys think about that? Yeah. So we look at it, and we've looked at it historically. We've been through multiple pricing cycles given us we've been in business now 25 years. If I go back and I look at COVID, COVID had pricing deceleration forced upon it by regulators, right? This state says, "You must reduce your rates because no one's driving and frequency has dropped, and now you're making too much money." On the backside of those forced reductions came inflationary loss costs, supply chain issues, and then we hit that hard market. As you look at our growth during COVID, even in a price deceleration time period, we still had the same double-digit growth. The difference is more of it came from new business than from retention. Premium retention suffered because you had price deceleration, but it was offset by new business growth opportunities, by new rate sets. As we look at where we're at today, coming out of the higher pricing models and into rate stability, we've already seen a decrease in retention, but an increase in new business as a mix of the total growth. Got it. So it's really an all-weather portfolio that allows you to be successful going forward. It's a product that's required by law, contract, or common sense. It is recession-proof, and we do get lift by rate organically, but we also get lift by adding new customers. In periods of these hard soft market cycles, the growth just shifts between renewal and new business. We're going to see higher new business as a mix of total growth in the current periods. In hardening periods, we'll see the shift into retention as a higher percentage. Got it. That very much makes sense. Thank you for that. One thing that's been interesting is the growth in the MGA programs. You are also expanding your MGA programs. Are there specific niche that they occupy that really make you find them attractive? Are there any areas of growth within MGA that you're excited about? Yeah. I really like the program side. It's an area that we can lean into. We've been doing programs for over 20 years. Cat-exposed property is our core. So homeowners' insurance and geography that's difficult for the admitted markets and non-admitted markets. The ability to have some capacity within our control allows us to throttle our growth up or down, depending on what the climate is. Take last year where market was hard in our core state of Texas, we had capacity that we were able to allocate to our branded locations in those hardest market areas. We also were able to open up in other geography through our independent agents and actually got growth from them as well. Just that ability to have some internal solution for one of your core products is beneficial. Creating the companion policy discounts and incentives that help sell other products just has a magnifier in how that impacts growth as a total. Yeah. Thanks for that. If we think about the M&A market, right? Obviously, commercial insurance broking, we see a lot of this happening. In fact, we saw that a few days ago. When we look at your business, do you see a harder or harder to find appropriate targets, or do you see that it might be M&A is required to operate your business because scale? Can you maybe talk about how you think about M&A in the personal line broking space? Yeah, just curious your thoughts there. Yeah. I'll answer the last question first. M&A is not required to operate our business, right? We've had good double-digit organic growth historically for multiple decades. It is an enhancement to our business model. It allows us to stack on additional growth that then becomes part of the total business. It's also a unique separator for us. We talked about other businesses that have similarities to us. I don't know of anybody that works within our retail agency in a box type business model that also participates in M&A activity with those sub-agencies. We will partner with our agency in a box branded locations to do an acquisition with them. We will co-fund that acquisition for our portion of the revenue share agreement and allow them to scale up alongside us. That's a unique separator for us. The ability for us to be flexible in acquiring retail, MGA, specialty niche underwriting, wholesale, and brokerage also is a unique thing for us. Part of the purpose of us going public was to build more awareness of our organization. It was a primary offering, so we retained the capital at the company level. That gives us a lot of dry powder. We have now a lot more deal flow coming from investment banks, traditional M&A brokers focused in the insurance space, and it's giving us the ability to be highly selective in what we want to transact. M&A will be part of our longer-term story with the high free cash flow that our business generates, being able to reinvest that into a creative M&A just as an extra tailwind for the business on top of the already exceptional organic growth. Right. In that case, there is no M&A target every year. It's just nice to have, it sounds like. Right. We have a base case in the model, but it's really muted because we want to be able to be opportunistic, not obligated. By not putting too much into our model, it allows us to be selective and not try to force M&A for the sake of forcing M&A. Right. In today's environment, if we look out into 2026 or maybe even 2027, what areas in your business where do you feel are the opportunities from that M&A perspective? Is it just a normal kind of roll-up M&A, or are there capabilities that you want to acquire? Anything that kind of you're targeting, so to speak. Yeah. So it's a good question. We want to continue to do the easy to accrete into the small books of business into existing stores. The ones that are scaled into corporate locations, those are kind of down the fairway. Where you're looking at, where do we pick up some new skill sets? Maybe it's an underwriting team and an MGA that has a niche business that would be highly accretive, and we already have some within our existing sales book. That would be we acquire a portfolio, but then we're immediately able to get synergy lift off of our existing production. Expansion into new geography, underwriting teams that might be available there. Those would be unique things. If you're looking at an MGA wholesale broker, anything we acquire where we can bring our existing suite of products and add it to what we just acquired that has an extra synergistic value would also be of interest. Right. Generally, these M&As, I think kind of like you said earlier, the synergies as well as the revenue contribution is fairly immediate just given your entire setup. Maybe moving away into technology a little bit, you made significant investments in technology as well as technology infrastructure, right? Maybe if you can talk about the ability that you have today to scale your business based on the technology investment you had and as well as the ability to support that agency growth, kind of what we talked about before, revenue growth, as well as margin efficiency. Yeah. I think technology is going to be part of every company's dialogue for the foreseeable future. I think in the near term, we're all going to hear AI in every conference we go to and what are the user cases for AI within any of our businesses. We haven't put a marker down on how much margin expansion AI can create. We do look at there's a user case in almost every corner of our business for an AI solution. We already have automated robotics and workflows, but then how do the new low-language models, large-language models, maybe minimum size, how do each of those different applications either improve already existing automation or supplement workflows for existing workforce? I do think you'll get more scale with the new technologies that are out there once fully deployed and implemented. The conversational AI has a lot of promise. I know that one of our agents has already deployed that in his agency, and the new receptionist was so polite that his mother called him and asked him where he found her and where she's from and how did he hire her. She's fantastic. His mother had zero clue that she was talking to an AI conversational agent. There are going to be some areas in the business that we're going to be able to deploy it, and it should give us lift across the organization. When you deploy technology tools, that's usually centralized, but in this case, it was something that the agent decided to do on their own. Yeah. In many cases, we'll get agents that will test out different functions, and then if we like how that functions, we'll look at it at an enterprise level. When we're working on things, we're working on a solution that is integrated with our tech stacks and all of our workflows, and it becomes beneficial across our platform. We might take what he's using for a receptionist and then make it available to all 500+ locations, or he may continue to use something different than the solution we end up implementing. Whatever we do create, it does become available to the whole organization. Got it. One thing when we think about technology is that today's technology will be outdated tomorrow, which is an unfortunate truth. If you think about your investments into technology, how should we think about the size of that investment going forward? How do you think about the dedication into expenses as you manage that technology expense going forward? Yeah. I mean, I'd frame it as ongoing. You're going to probably have a constant tech spend. For us, I look at it as if I can improve a workflow process for our one agency, and then I get to take that investment that I just made to make it work for one, it immediately becomes beneficial to 500. We look at it as a significantly wise use of capital because it has a multiplying impact across the entire organization. If we make any of our 500 locations more productive, that inners to our organic growth, that inners to our margin, it's just a compounding impact. Different than a single agency out there trying to figure it out on their own, us doing that for the benefit of the whole organization, it's a huge benefit for all. It's really a focus on scalable technology. And as M&A comes in, there's additional compounding effect, essentially. M&A or new agents or even existing locations, because we fully integrate everything we acquire. So anything we're building will benefit all operations once fully integrated. Okay. Got it. No, that's very helpful. We're almost at time. I don't know if anybody has questions on the floor. We can give a couple of minutes. If not, we can end it here. Gordy, I really appreciate your time. Thank you very much. All right. Thank you, Bob. Again, thank you guys for making it to the end of the day with us. Yeah.