Earnings Call Transcript - GSHD Q2 2021

Operator, Conference Operator

Thank you for your patience. Welcome to the Goosehead Insurance Second Quarter 2021 Earnings Conference Call. Please note that all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be a chance to ask questions. I will now hand over the call to Dan Farrell, VP Capital Markets. Please proceed.

Dan Farrell, VP Capital Markets

Thank you and good afternoon. With us today are Mark Jones, Chairman and Chief Executive Officer of Goosehead; Michael Colby, President and Chief Operating Officer; Mark Colby, Chief Financial Officer; and Brian Pattillo, Vice President. By now, everyone should have access to our earnings announcement, which was released prior to this call and may also be found on our website at IR.GooseheadInsurance.com. Before we begin our formal remarks, I need to remind everyone that part of our discussion today may include forward-looking statements, which are based on the expectations, estimates and projections of management as of today. The forward-looking statements in our discussion are subject to various assumptions, risks, uncertainties and other factors that are difficult to predict and which could cause 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 filings with the SEC for a more detailed discussion of the risks and uncertainties that could impact the future operating results and financial condition of Goosehead Insurance. We disclaim any intentions or obligations to update or revise any forward-looking statements, except to the extent required by applicable law. I would also like to point out that during this call, we will discuss certain financial measures that are not prepared in accordance with GAAP. Management uses these non-GAAP financial measures when planning, monitoring and evaluating performance. We consider these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period by excluding potential differences caused by variations in capital structure, tax position, depreciation, amortization and certain other items that we believe are not representative of our core business. For more information regarding our use of non-GAAP financial measures, including reconciliations of these measures to the most comparable GAAP financial measures, we refer you to today’s earnings release. In addition, this call is being webcast. An archived version will be available shortly after the call ends on the Investor Relations portion of the company’s website at www.GooseheadInsurance.com. Today on the call, we will be providing a short video demo of our Digital Agent Platform, which will be going live in the coming weeks. If you are dialed into the call by phone, you will be unable to view the demo and will experience a few minutes of silence between the start of the video demo and our Q&A. As such, we encourage everyone to go to the webcast link for the earnings call, which is posted on our IR website at IR.GooseheadInsurance.com. Also, if you’re using a mobile device, you may need to press play when the video appears. With that, I’d like to turn the call over to our CEO, Mark Jones.

Mark Jones, CEO

Thanks, Dan, and welcome to our second-quarter 2021 results call. We had another outstanding quarter of very strong growth. On this call, I will provide a summary of our key results and highlight the meaningful investments we’re making today that will be significant drivers of growth in our business for many years. Our CFO, Mark Colby, will then walk you through some greater detail on our financial results during the quarter and the declaration of a special dividend. We will then hand it over to President and COO, Mike Colby, who will discuss our new Digital Agent Platform that will be available to consumers in the coming weeks and will provide a demonstration of this truly unique and powerful technology. Before discussing the quarter, I would like to spend a minute on a critical element of our competitive moat, our vast accumulated experience. We are a client-focused tech-enabled company. Note the order of priority, clients first, technology second as an enabler. You will see this on vivid display when we demo our Digital Agent Platform. There is nothing like it on the market. It is simple and comprehensive, and importantly, informed by artificial intelligence, leveraging millions of actual quotes by our professional agents. There is no shortcut to gaining and being able to leverage that experience. It can't be replicated by newcomers to the industry. I strongly encourage interested people to try as many competitive shopping offerings as they're willing to endure and see what is actually available, then try our digital platform. You will be amazed. I’d also like to say a word about margins. Our business model has a very long tail. The biggest growth investments we make this year won’t begin to show up significantly in our revenue until 2024 and thereafter. We’ve modeled our business and quantified the tradeoffs between growth and margin. Because there is so much growth already embedded in our business, with a lot of effort, we could slow our growth down to 10% to 12% annually in 4, 5 years, which would likely yield EBITDA margins in the low to mid 40s. That sounds appealing. However, absolute profit dollars are maximized by keeping our pedal to the metal on growth, with the margins we currently produce. While EBITDA margins in our current model may be lower, they are earned on a much larger base of business producing more profits. In addition, it is critical to our competitive position that we maximize our conquests of the land grab in the market at this time and continue to build our competitive moat. Thus, we optimize both our economics and strategic sustainability by continuing to pursue the growth strategy we have been and making the investments necessary to do so. Now, let me turn to Q2. During the second quarter, growth across our business continued powerfully, further emphasizing our significant and expanding competitive moat in the marketplace. Let me take a moment to highlight some of the substantial accomplishments during the quarter. Premium growth, the leading indicator of future revenue growth continues to power ahead. In Q2, premiums increased 46%, while policies in force grew 48%, compared to the second quarter of last year. Our premiums in the franchise channel grew 50% for the quarter. This growth provides excellent visibility into powerful embedded highly profitable revenue growth, as those policies reliably convert to renewal after 1 year, and our commission share jumps to 50% from the 20% we earn on new business. Our core revenues increased 40% over the prior year period. Total franchise count at the end of the second quarter was up 59% year-over-year. Operating franchises also grew 47% in the quarter compared to the year ago. Our franchise mix is becoming increasingly diversified geographically with 77% of franchises located outside of Texas compared to just 42% when we went public in 2018. Operating franchises outside of Texas grew 58% year-over-year. Importantly, because of our rapid growth rates, 63% of our total franchise base is either in their first year or preparing to onboard. While this cohort provides minimal premium and revenue today, their predictable launch and production ramp, combined with our increasing retention rate should fuel powerful growth over the next decade and beyond. Also, while our franchise unit count is growing, the unit productive capacity is also growing as some of our more seasoned franchises begin adding producers, which will be a larger source of growth over time. Our corporate agent team is up 43% from a year ago and continued investments in this channel are critical. As efforts in training, mentoring and beta testing of new technology and processes help drive our extraordinary growth and improved productivity in the more leveraged franchise channel. These agents represent the gold standard of performance in the industry with new business production levels nearly 4 times industry best practice, which makes them very powerful supporting critical training, mentoring, and R&D functions for the company. During the quarter, we launched an office in Denver and will complete our remaining office openings in Columbus and San Antonio, and second office openings in Chicago and Austin by year-end. We are also expanding our Houston Westlake offices in the third quarter. In addition to providing support to franchisees, these corporate offices help us scale nationally and enhance college recruiting and career advancement opportunities in both the short- and long-term. The 2021 office openings and expansions should efficiently absorb our headcount growth through 2022. Client retention for the quarter was 89%, a record level for our business. Our improving client retention has been driven by significant investments we make in product, people and technology. These improvements in retention will provide material economic benefits for our business over time as the overwhelming majority of our profits are in renewal revenue. The service experience we provide to our clients is second to none with a net promoter score of 92 in the quarter. I could not be more pleased with the consistent and high-quality efforts put forth by our amazing service professionals. In the coming weeks, we’ll be launching our digital platform. Just as our strategy to date has been exceptionally difficult to replicate by competitors, our digital platform is unlike anything in the market. The value we leverage from our enormous client-focused accumulated experience can’t be replicated by tech-focused startups. We are very excited to provide you with the demonstration of this new and innovative technology in the call. We believe this will be unique in the marketplace providing clients with a direct digital shopping experience that leverages our massive accumulated experience in a true choice platform, all while preserving the unmatched benefits a knowledgeable agent brings to the insurance buying process. While we are highly confident this platform will enhance new revenue opportunities over time, we also believe it will further strengthen our existing go-to-market strategy with mortgage lenders and realtors. Finally, we believe this new effortless client experience will make it easier for our existing clients to refer their friends and family to Goosehead, adding additional sales opportunities for our agents from client referrals. While our organic growth top-line results were impressive, I’m proud of our significant tax generation and strong financial position. Our consistent results and financial discipline have created a rock-solid balance sheet with a large amount of cash, rapidly decreasing debt-to-EBITDA leverage and virtually no intangible assets. This provides us with significant flexibility as we look to the future. As communicated since our IPO, we want to maintain an efficient capital structure that includes some debt. In addition, excess cash will be periodically returned to our shareholders. Given these objectives, we will be raising additional debt. We’ll be paying a $60 million or $1.63 per share special cash dividend to shareholders of record as of August 9, 2021. I’m extremely excited about the sustained and powerful growth engine we have built. These results are further evidence of our focus on the client and on the clear benefits of a choice product offering, knowledgeable sales and service agents and industry-leading technology that provides an unmatched insurance buying experience for our clients. Our runway in the market remains enormous and our competitive moat grows each and every day. The substantial investments we’re making today, which by the way flow almost entirely through the P&L provide little premium or revenue benefit in the short-term. However, they will be a substantial driver of our continued high levels of growth, 3, 4, and 5 years out and beyond. In order to achieve our goal of industry leadership in the personal line space, we will stay maniacally focused on providing an unmatched client experience and continually improving all drivers of organic growth, recruiting productivity and retention. I want to thank our employees and franchisees for their tireless efforts in making Goosehead such an exceptional company. And with that, I’ll turn the call over to our CFO, Mark Colby.

Mark Colby, CFO

Thank you, Mark, and hello to everyone on the call. As a reminder for anyone that may have joined late, you will be unable to see or hear the demo of our new Digital Agent Platform if you only dialed in. As such, we encourage everyone to use the webcast link which is available at ir.gooseheadinsurance.com. For the second quarter of 2021, total written premiums, the leading indicator of our future core and ancillary revenue growth increased 46% to $399 million. This included franchise premium growth of 50% to $286 million and corporate segment premium growth of 36% to $112 million. This growth is being driven by increasing retention rates, strong new corporate and franchise agent growth and increasing agent productivity in the franchise channel. The continued shift in our mix of business towards the faster growing franchise channel implies significant embedded future revenue growth, as the new business premiums reliably convert to renewal premiums, at which time our royalty fee increases from 20% to 50% for ongoing renewals for the life of the policy. At quarter end, we had roughly 872,000 policies in force, a 48% increase from one year ago and another leading indicator of the momentum of our business. Revenues were $38.2 million for the quarter, an increase of 28% from the year ago period, while core revenues grew 40% to $34.7 million for the quarter. Ancillary revenue, which includes contingent commissions, was $1.7 million in the quarter compared to $4.1 million a year ago. Given the weather events thus far in 2021, we anticipate that some of our contingents may trend below average as a percentage of premium for the year, with most of the contingents coming in the fourth quarter as our results with the carriers are finalized. The franchise channel generated core revenue growth of $15.4 million, an increase of 46% from the year ago period. At the end of the second quarter, we had 1,801 total franchises, up 59% from the prior year, and 1,072 operating franchises, up 47% from a year ago. We continue to build on our strategy of national expansion within the franchise channel, with non-Texas franchises accounting for 77% of total units compared to 72% a year ago, and these non-Texas franchises continue to grow their productivity through the second quarter. We also continue to invest heavily in corporate agent hiring and national expansion to facilitate the franchise channel growth and productivity. Corporate sales agent headcount at the end of the second quarter was 452, an increase of 43% from the year ago quarter. Corporate channel core revenues were $19.4 million in the second quarter, an increase of 36% compared to the year ago period, as new agents continue to ramp up productivity over their tenure. Total operating expenses for the second quarter of 2021 were $34.4 million, up 54% from $22.3 million in the prior year period. Compensation and benefits expense was $22.5 million for the quarter, up 41% from the year ago period on 40% headcount growth. This increase in compensation and benefits is being driven by our ongoing investments in headcount across the organization, particularly the hiring of corporate sales agents in support of the franchise channel growth, 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, as evidenced by the launch of the Digital Agent Platform in the coming weeks. General and administrative expense for the quarter was $10.1 million, an increase of 89% from a year ago, with the increase due to an expanding real estate footprint, higher travel and entertainment expenses as the U.S. economy continues to reopen, and investments in our newly designed website and client-facing portal, as well as a number of carrier integration projects. Additionally, 2020 G&A expenses were artificially low due to COVID lockdowns. The hiring of employees and onboarding your franchisees, combined with the opening of new offices has an immediate impact on G&A expense, while the revenue benefits scale over time as we onboard agents and as they ramp up their production. Total adjusted EBITDA in the quarter was $6.8 million, compared to $9.8 million in the year ago period. We have been investing heavily for future growth and producer headcount expanded office footprint and our Digital Agent Platform. While we continue to expect additional new office locations over time, we do not anticipate the same step function increase in real estate investments in 2022. As we focus on scaling within our existing square footage over the next 12 to 18 months. We also expect that the new revenue benefit from the direct client rater will begin to ramp up in 2022, helping to offset the significant development costs. We believe laying the foundation to drive growth is more strategically critical to the business than focusing on margin expansion at this time, as we continue to put distance between us and any potential competitors and continue to load future growth into our business. While 2021 earnings growth has been impacted by uncertain contingent commissions and higher-than-normal investments to drive revenue, over the long-term we expect to deliver high and sustained levels of both revenue and profit growth. As of June 30, 2021, the company had cash and cash equivalents of $35 million. On July 21, 2021, the company refinanced its $25 million revolving credit facility and $77 million term note payable to a $50 million revolving facility, which will be partially drawn down in advance of the dividend and a $100 million term note payable. The company declared a special cash dividend of $60 million, or $1.63 per share, payable in cash on August 23, 2021, to shareholders of record on August 9, 2021. Based on our experience to date, the company is reiterating its full year 2021 outlook with respect to total written premiums and revenue. Total written premiums placed for 2021 are expected to be between $1.5 billion and $1.56 billion, representing organic growth of 40% on the low-end of the range to 45% on the high-end of the range. Total revenues for 2021 are expected to be between $146 million and $156 million, representing organic growth of 25% on the low-end of the range to 33% on the high-end of the range. Our strong first-half results and the important strategic investments we have been making over the last year put us in a great position for the balance of 2021 and into 2022 as we will begin to see revenue benefits emerge from the newer initiatives. With that, I would like to turn the call over to Mike Colby, our President and Chief Operating Officer.

Michael Colby, President and COO

Thanks, Mark, and hello to everyone. We are extremely excited to be approaching the official launch of our Digital Agent Platform. And we appreciate the opportunity to preview this technology for you today. As I’ve mentioned previously, this platform will provide an effortless and completely differentiated client experience compared to the incredibly cumbersome process buyers face today, shopping for personal lines insurance. The online market for personal lines insurance today includes: one, direct-to-consumer insurance companies; two, lead generators; and three, online independent agencies. Each of these options have inherent deficiencies that negatively impact the client experience, resulting in a customer that is oftentimes frustrated, underinsured, and paying too much for their insurance solution. Direct carriers are structurally disadvantaged in that they offer only one product option with what is usually a lengthy process of gathering personal information that can include as many as 100 questions, many of which the client will not easily be able to answer. For a choice shopping experience, the process must be repeated with multiple insurance carriers to determine the appropriate coverage at the best possible price. Throughout this process, clients will be presented with options to increase or decrease their cost based on coverage additions or subtractions, choices that can be confusing and overwhelming to the buyer. This is precisely where getting the advice of an expert agent is critical, but gaining access to agent advice on these platforms can be difficult, if offered at all. Lead generators, digital independent agencies, or a hybrid of the two create an even more frustrating experience for the customer by misleading them to think that they’re being shopped and will be presented with accurate price quotes. A similar lengthy information gathering exercise is required to start the process, then only a few options are returned with a pricing indication. Other brand options are returned without any indication of potential price. What’s happening here is typically a lead generator gathering the customer’s information and selling it to multiple insurance companies and agencies, all of which commence an incessant solicitation campaign to the customer. Disturbingly, some of the purchasers of this data include other lead generators who turn around and sell the customer’s information again. A frustrating experience by any measure, certainly lacking any consideration for consumer privacy concerns. The Goosehead Digital Agent Platform requires as few as three data points: name, date of birth, and address. Leveraging our integrated external data providers, we can populate all of their home and vehicle data. Within 60 seconds, the client will be provided with multiple home and auto quotes, which typically can vary by thousands of dollars. Because our process is driven by artificial intelligence, informed by expert agent behavior over millions of quotes across the country, we provide more accurate initial quotes with appropriate coverage assumptions. It’s important to note that our system learns from the behavior of licensed expert agents, compared to the other artificial intelligence designs that learn from customer behavior, resulting in uninformed decision-making. The complexity of insurance policies and the differences in coverage options and pricing across insurance companies are exactly the areas where a knowledgeable agent can add critical value. Immediately upon providing the initial quotes, we introduce the client to one of our more than 2,000 knowledgeable agents across the U.S., who will then review all available options, make recommendations, and ultimately issue the home and auto insurance policies, a process that can take as little as 15 minutes. Most importantly, we will never sell our client’s personal information, whether we win their business or not. With that, we will now play a short video within the webcast, where Vice President, Brian Pattillo, will take you through the Goosehead Digital Agent experience. We’re very excited to debut this new platform. There’s truly nothing like it on the market. You don’t have to take my word for it. I will echo Mark Jones and encourage you all to test what’s available on the market today. We would like to remind you that if you’re dialed in by phone, we recommend you watch the video online at IR.GooseheadInsurance.com or you will experience a few minutes of silence. Also, if you’re using a mobile device, you may need to press play when the video appears. At the conclusion of the video, our call operator will open the phone line for Q&A.

Brian Pattillo, Vice President

Good afternoon. My name is Brian Pattillo. And I’m excited to demo our brand new Digital Agent Platform. As you will see, we have built a quoting platform that provides an effortless experience for the client at every step of the process. Although less than 10% of consumers buy home insurance online, many will start their research using comparison sites. As Mike mentioned, these platforms are fundamentally broken, and most of these experiences end with a client’s data being sold. Our platform is completely different than anything on the market today, providing the shopping experience consumers are looking for, while making sure their privacy is protected. It all starts when the client visits Goosehead.com or the unique link provided to each one of our agents, which routes directly to them. Our mobile-first design provides an extremely simple and intuitive interface, catering to the modern consumer. After starting to type their address, we finish the pre-fill and immediately start pulling data about the home. We will ask if it’s a new purchase and confirm ownership details, then display some of the most important property data where the client can update if needed or simply proceed to the next step. At this stage, we pull in the names of the client and spouse, they enter their date of birth, and we then search for any additional drivers in the household. They can easily add with one click. On the next screen, we pull in any vehicles registered to the client, so they can quickly select the vehicles they want to insure. All these data integrations provide a more convenient user experience and increase the accuracy of the quotes they are about to see. The client is now done with their portion, allowing us to take the data they provided and pin it with hundreds of additional data points using our agent-driven machine learning. We know based on millions of quotes, what coverage our expert agents would recommend, given the unique risk needs of this individual client. To get a fair comparison, each company is quoting with similar coverage levels, and we are including critical coverages many clients are missing, such as replacement cost and internal water damage. We aren’t presenting lowball quotes to drive calls; rather, we are showing accurate quotes that an expert Goosehead agent would recommend to drive a great client experience. Because of our extensive carrier integrations, within 60 seconds, a client is presented with multiple home and auto insurance quotes. Not only can they see the insurance companies we recommend, but also review other companies we shopped with to see how they compare. Our digital agent has analyzed every home carrier combined with every auto carrier to find the option that delivers the best combination of coverage and price. It’s also important to note that while carriers offer discounts for bundling, about half the time it ends up being in the best interest of the client to choose two separate carriers. We do the analysis so the client can simply see the best overall solution. In contrast with other online options, we never use this screen to sell clicks, where a client has been routed to another site to start the process all over again. The client is immediately introduced to one of our more than 2,000 knowledgeable agents. This is a critical differentiator. Insurance policies are complex, offering many different coverage options and pricing, with financial consequences of getting it wrong. To move forward with the quotes, a client simply contacts the agent or requests a call where they will review available options, make important recommendations, and ultimately issue the home and auto policies. This is an important milestone on our roadmap to deliver a complete purchase experience, with quote issuance informed by expert agent intelligence. We are excited to release this technology in the coming weeks, and we’ll now move into Q&A.

Operator, Conference Operator

We will now begin the question-and-answer session. The first question comes from Ryan Tunis with Autonomous Research. Please go ahead.

Ryan Tunis, Analyst

Yeah, thanks. Just a couple on the margin front. First of all, it looks like adjusted EBITDA margins are down about 9% year-over-year. Is that a good way to think about how that’ll probably trend in the back half of the year as well?

Mark Colby, CFO

Yeah. Hey, Ryan, this is Mark Colby. So specifically for this quarter, we had significantly fewer contingent commissions than we did last year, just given where the economies are opening back up. We are no longer in the COVID environment; people are driving again. That was the main driver of the margin decrease, along with some investments that we’re making, like in real estate. Again, with the economy reopening, we are resuming many more travel and meals and entertainment investments that we did not make last year. As for margins, yes, it will be challenging to grow EBITDA this year, just given the tough comparison to last year with contingent commissions and the much lower expense level than we had anticipated last year. Overall, we are continuing to hold true to our message of driving high levels of premium and revenue growth, but it will be a little more challenging year for earnings, specifically EBITDA.

Ryan Tunis, Analyst

Got it. And thinking about 2022, that’s helpful. You mentioned that you don’t expect the same ramp-up in real estate costs and some of the other expenses associated with comparative rater. Could you give us an idea of what that step-up this year was though in real estate costs, and the comparative rater as well, just so we can kind of think about that order of magnitude out to 2022?

Mark Colby, CFO

Yeah, we are – I don’t know the specific number off the top of my head, but we’re probably adding at least 25% to our real estate square footage this year with these new office openings. Our plan for next year is not to open any additional offices or expand further. So the level you’ll see by the end of the year, once all these office openings happen, will be the level for next year as well. As for the client rater, it’s something we’ve been investing in for years now. Specifically this quarter, it was to the tune of several hundred thousand dollars of investment that will continue as we roll out the product. That will be more of a steady state going into next year as well. We’ll continue to maintain it and add new developments. Some additional developments will come to us next year, but this is likely the biggest technology rollout we’ve ever done, and it’s hard to imagine anything of this magnitude would happen again next year. And all this spending again, we believe, will help drive significant revenue, which we’re very excited to scale out next year.

Ryan Tunis, Analyst

Yeah, so on the total written premium growth, another pretty good quarter there, 46% year-over-year growth, so the guide is for 40% to 45%. I guess that implies some deceleration. I’m not seeing recruiting slow. So, I mean, why are you thinking that number is going to decelerate in the back half of the year? What do you have your eye on?

Mark Colby, CFO

For guidance, specifically for premium guidance, we really don’t want to get in the habit of changing it every quarter. We had a very strong first quarter and were able to raise the guidance, that was kind of it for the first half of the year for us. We’re going to continue to wait and see. You’re right, recruiting momentum is continuing as is new business generation. However, one of the reasons we aren’t raising it higher yet is just some uncertainty surrounding the COVID delta variant. We want to be conservative in our guidance and give you numbers that we’re extremely confident we can hit.

Mark Dwelle, Analyst

Yeah, good afternoon. A couple of questions. Firstly, related to the dividend. It seems like it’s a substantial dividend, but it seems more than your cash earnings over the last year and a half. With so much investment going on right now, why effectively borrow to pay a large dividend?

Mark Colby, CFO

That’s been a consistent part of our balance sheet strategy since we went public, Mark. We want to maintain an efficient capital structure, which involves some debt. We deleverage quickly in our business; periodically we’ll increase that leverage. As you pointed out, we don’t need this cash for operating expenses or future growth, so we are going to return it to shareholders.

Mark Dwelle, Analyst

I saw the video on the new technology that’s pretty cool. One question I have related to that is, how do you – I mean, there’s a lot more I could say. I’m going to try to keep focused on the questions rather than my impressions.

Mark Jones, CEO

Well, I appreciate that, Mark. But it’s hard for me not to agree with the description of 'pretty cool.' We would beg anyone who has any interest to drag themselves through the competitor offerings, each of which is singularly horrific, and then try ours at the end. There is nothing like it; this is a complete game-changer for the industry.

Mark Dwelle, Analyst

As you know, I’m one of those people who looks at those competitor websites for a living. So I’ve been to most of them. I do know cool when I see it. But the question that I had was really one. I guess, it’s kind of an internal channel conflict question, which is to say, if I operate your website from where I happen to live in Virginia, who will get the commission credit within Goosehead for the sale I eventually place? Will that be somebody in my local market, a franchisee I may have never met? Or will it go through the corporate channel and be house sales, so to speak?

Michael Colby, President and COO

Hey, Mark, this is Mike Colby. It’s important to understand that technology cannot be developed without input and years of accumulated experience from expert agents. Secondly, it will continue to be refined and developed with contributions from our agents. Ultimately, the client experience can’t be delivered without the fulfillment and execution of our agents. No way are we creating a conflict that would undermine our agents’ experience. This is simply a different way to engage with customers who prefer to engage with us digitally. If you’re an existing client coming to our site, our system is smart enough to allow you to engage with your existing agent. If you’re new to Goosehead, exploring options, we will start with your local area. We will distribute leads through a round-robin distribution for agents who qualify based on qualitative metrics to ensure agents who create the most value deliver the best level of lifetime customer value. This is a very powerful concept to encourage improvement in performance across our agent force. Our agents will not be undermined, nor created any channel conflict as we believe in the role of the agent, and this is a powerful tool to augment their efforts.

Mark Colby, CFO

And we will be agnostic by channel. What we want is for the agent that’s going to do the best job with the lead to get it. We will look at things like net promoter scores and cross selling retention numbers, all those things that create the best client experience while maximizing the value for the business. We believe that if you do what’s right for the client, the money will take care of itself, and that’s our approach here as well. Good question.

Mark Dwelle, Analyst

Okay. That’s helpful. And one last one on that, if I may. Any reactions from your carrier partners, I know a lot of them in the past have been, I’m going to say resistant or concerned about being presented in comparative fashions like this? Any feedback or pushback from your carrier partners related to this?

Michael Colby, President and COO

Mark, this is Mike again. I agree that carriers are reluctant to be presented in this fashion. The key differentiator with us again is expert agent intelligence. We can use our tool, our data, and our agents to understand how to match risk effectively. Our insurance company partners are excited about this. Without the agent, you would have a hard time convincing insurance companies this is in their best interest. Just not even 10 years ago, you saw the Google insurance shopping experience, which quickly folded within 18 months. That’s because the carriers were concerned about the type of business they were looking at, and the costs involved without the agent. When we have an agent integrated into the process, we deliver high close rates and provide precision to the insurance companies on products that match their risk appetite. It’s a win-win for both us and our partners, and they view this as a foundational tool to ensure long-term profitable growth.

Mark Dwelle, Analyst

Thanks for that. I appreciate the color, and I’ll let somebody else jump on, so they can express their enthusiasm emphatically than I did.

Mark Jones, CEO

Yes, I’d like to thank everyone for joining us. And just as a reminder, the video of the Digital Agent Platform is on our Investor Relations website. You can go back and look at it at any time at IR.GooseheadInsurance.com. Thank you, and good night.

Operator, Conference Operator

This concludes today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.