Earnings call transcript: TWFG Q4 2024 earnings miss, stock dips

TWFG Inc. (Ticker: TWFG) reported its Q4 2024 earnings on March 19, 2025, revealing an earnings per share (EPS) of $0.19, which did not meet market expectations. Despite achieving a total revenue of $51.7 million, the company’s stock fell by 5.91% in after-hours trading, reflecting investor disappointment. According to InvestingPro data, the stock currently trades at a rich P/E multiple of 78.4x, though analysis suggests the company remains undervalued relative to its Fair Value. The stock closed at $32, down from its previous close, and remains below its 52-week high of $36.5, despite delivering an impressive 45.39% return over the past year.

Key Takeaways

• EPS of $0.19 fell short of expectations, affecting investor sentiment.
• Revenue growth of 30.8% year-over-year in Q4 2024.
• Stock declined by 5.91% in after-hours trading.
• Continued expansion with 144 new retail locations in 2024.
• Projected 2025 revenue between $235 million and $250 million.

Company Performance

TWFG demonstrated strong revenue growth in Q4 2024, achieving a 30.8% increase year-over-year. However, the earnings miss overshadowed these gains, contributing to a negative market reaction. The company expanded its footprint significantly in 2024, adding 144 new retail locations and entering 15 new states, which positions it well for future growth.

Financial Highlights

• Total 2024 revenue: $203.8 million, up 18.4% from 2023.
• Adjusted EBITDA: $45.3 million, a 44.7% increase year-over-year.
• Q4 net income: $8.2 million, up 56.3% from the same quarter last year.
• Total written premium in 2024 reached $1.5 billion, an 18.3% increase.

Earnings vs. Forecast

TWFG’s earnings per share of $0.19 did not meet analyst expectations, contributing to a negative market reaction. The Q4 revenue of $51.7 million, however, represents a healthy 30.8% increase from the previous year. Despite this growth, the earnings miss was significant enough to impact investor confidence.

Market Reaction

Following the earnings release, TWFG’s stock price dropped by 5.91% in after-hours trading. This decline reflects investor concerns over the earnings miss and its implications for future profitability. InvestingPro data shows the company maintains a healthy financial position with a current ratio of 6.15, indicating strong liquidity. The stock remains below its 52-week high, indicating room for recovery as the company executes its growth plans. Notably, analysts maintain a consensus target range between $31 and $38, suggesting potential upside from current levels.

Outlook & Guidance

Looking ahead, TWFG projects its 2025 revenue to be between $235 million and $250 million, with anticipated organic revenue growth of 11% to 16%. The company plans to continue expanding its geographic footprint and pursue mergers and acquisitions to drive growth.

Executive Commentary

CEO Gordy Bunch emphasized the company’s commitment to leveraging technology and operational support to enhance agent capabilities. "Our model provides agents with cutting-edge tools, technology, and operational support," Bunch stated, highlighting the company’s strategic focus. He also expressed confidence in TWFG’s ability to adapt to changing market conditions.

Risks and Challenges

• Potential market saturation as TWFG expands into new states.
• Macroeconomic pressures that could impact consumer spending and insurance demand.
• Ongoing capacity constraints in property markets, particularly in California.
• Competitive pressures from other insurance distribution platforms.

Q&A

During the earnings call, analysts inquired about the company’s acquisition strategy, specifically regarding EBITDA multiples for larger transactions, which range from 9x to 12x. Questions also focused on the profitability timeline for new agencies and potential expansion opportunities in Florida, reflecting investor interest in TWFG’s growth strategy.

Full transcript - TWFG Inc (TWFG) Q4 2024:

Didi, Conference Operator: Good morning. My name is Didi, and I will be your conference operator today. At this time, I would like to welcome everyone to the TWFG Fourth Quarter twenty twenty four Conference Call. All lines have been placed on mute to prevent any background noise. This call is being recorded and will be available for replay on the company’s website.

Before we begin, let me remind you that today’s discussion may contain forward looking statements and actual results may differ materially from those discussed. For more information regarding forward looking statements, please refer to the company’s press releases and SEC filings. Also on today’s call, our speakers will reference certain non GAAP financial measures, which we believe will provide useful information for investors. The company has posted reconciliations of the non GAAP financial measures discussed during this call in the tables accompanying the company’s earnings press release located on the Investors section of the company’s website at www.twfg.com. It is now my pleasure to introduce Mr.

Gordy Bunch, Founder, Chairman and CEO of TWFG. Sir, the floor is yours.

Gordy Bunch, Founder, Chairman and CEO, TWFG: Thank you, operator, and good morning, everyone. I appreciate you taking time to join us today to discuss TWFG’s fourth quarter and full year twenty twenty four results. Joining me on the call is Janice Winnie, our Chief Financial Officer. After my remarks, Janice will review our financial results in detail, and then we’ll open up the call for your questions. I want to start by thanking our employees, agents, clients and business partners for their ongoing support.

TWG continues to establish itself as one of the fastest growing independent insurance distribution platforms with industry leading organic growth and margin expansion. Our model provides agents with cutting edge tools, technology and operational support ensuring they succeed in an evolving insurance landscape. Before we dive into our 2024 results, I want to briefly acknowledge the January 2025 wildfires that caused significant devastations in parts of Los Angeles. These events are a stark reminder of evolving catastrophic risk and its impact on reinsurance pricing. While TWG does not bear direct balance sheet exposure, we are closely monitoring reinsurance market trends and carrier responses.

We remain confident in our ability to adapt to changing conditions, ensuring our agents have access to stable and competitive capacity in key markets. Before diving into our fourth quarter results, I want to highlight TWFG’s strong performance in 2024. Total revenue for the year grew by 18.4% to $203,800,000 with organic revenue growth of 14.5%, reflecting both sustained momentum in new business production and strategic expansion efforts. Adjusted EBITDA increased 44.7% to $45,300,000 demonstrating the scalability of our platform and operational efficiencies. 2024 was a transformational year for TWFG.

We successfully completed our IPO in July raising $192,900,000 in net proceeds. This capital provides us with significant flexibility to accelerate growth through acquisitions, expanding geographically and investing in technology to enhance agent productivity and client experiences. We have been focused on growing our national footprint and in 2024, TWG expanded into 15 new states and added 144 new retail locations, bringing our total to five twenty retail locations across 34 states. In addition, our MGA now supports agents across 42 states at year end. Total written premium for 2024 reached $1,500,000,000 an 18.3% increase year over year, reinforcing our ability to drive growth in both our retail and wholesale channels.

As we continue to enhance agent productivity through technology and strategic acquisitions, we remain confident in our ability to sustain high levels of organic growth. It is important to note that locations take time to mature and contribute meaningfully to revenue and profitability. Historically, it takes two to three years for new agencies to reach profitability and longer to realize their full growth potential. We remain committed to supporting our new locations to ensure long term success. Our M and A strategy continues to be a core part of our growth plan.

As we evaluate M and A opportunities, our focus remains on acquiring high quality agencies that align with our culture and strategic vision. While acquisitions will be a key driver of long term growth, we are maintaining financial discipline, prioritizing organic expansion, technology investments and balance sheet flexibility. We remain committed to keeping leverage within a prudent range, ensuring financial strength as we scale. Technology is at the core of TWFG’s differentiated approach. Our constant investment in technology combined with our agency in a box model equip agents with enhanced client engagement tools and management tools.

From a market perspective, we are seeing stabilization in carrier appetites and improvement in loss ratios, which have opened up new opportunities for growth. Carriers are once again accepting new business at areas where capacity had been previously constrained. While this presents an opportunity for growth, we remain mindful of the importance of diversification and maintaining flexibility in our strategy. As Janice will discuss, TWFG delivered a strong financial result for the fourth quarter, highlighted by 30.8% total revenue growth compared to the prior period, 20.5% organic revenue growth driven by increased new business production and higher premium rates, and an adjusted EBITDA margin of 26.8%, reflecting margin expansion from the economies of scale and our efficient operating model. Our Q4 margin outperformance was primarily due to higher contingent commission income and a timing related delay in certain public company expenses.

We expect a normalized adjusted EBITDA margin in 2025, reflecting our long term operating efficiency targets. We continue to focus on scaling our platform while optimizing cost structures to drive sustainable margin expansion over time. Looking ahead, our priorities remain clear. We will continue integrating recent and future acquisitions and supporting the growth of our new locations. We will focus on expanding geographically while enhancing our technology and agent support systems.

We will be disciplined in capital allocation as we pursue both organic and acquisition driven growth. These efforts position TWFG for continued success in 2025 and beyond. Now I’ll turn it over to Janice to provide more detail in our financial performance.

Janice Winnie, Chief Financial Officer, TWFG: Thank you, Gordie, and good morning, everyone. We will start with the top line written premium, which increased by $60,000,000 or 20% over the prior year period to $361,400,000 Within our primary offerings, insurance services grew $51,300,000 or 20% and the MGA grew $8,600,000 or 19.2% over the prior year period. This growth was driven by a combination of new business acceleration and normalized retention levels. During the fourth quarter of twenty twenty four, we saw a healthy uptick in written premium new business growth of 45% or $27,000,000 over the prior year period, as well as renewal business growth of 14% or $33,000,000 over the prior year period within both of our product offerings. We have also maintained steady retention levels of 91% quarter over quarter.

Drivers of the growth was primarily due to higher premium rates, written premiums from our twenty twenty three acquisitions rolling into the current year and new business growth as carriers opened up for new business in regions where they had previously restricted for. Going to revenues, our total revenues increased $12,200,000 or 30.8% over the prior year period to $51,700,000 The increase of 30.8% was mainly due to commission income, representing 18.9% of the total growth contingent income, representing 10% of the growth and fee income representing 1.9% of the remaining total growth. Commission income increased 7,500,000 or 20.7% over the prior year period to $43,700,000 dollars driven by higher premium rates, accelerating new business activity, solid economic growth in our core states and the rollout of our twenty twenty three book of business acquisitions into the current period. The insurance services offering increased 19% over the prior year period and represented 16.1% of the total increase. The MGA offering saw growth of 29.5% over the prior year period and represented 4.6% of the total growth.

Contingent income increased $3,900,000 or 371% over the prior year period to $5,000,000 benefiting from loss ratio improvements late in the year and continued growth in total written premium. Fee income was up $800,000 or 39.8 percent to $2,800,000 primarily due to higher policy counts and increased new business through our marketing activities with $600,000 excuse me, coming from the TWICO program and our MGA offering. Organic revenues increased $8,800,000 reaching $43,600,000 for an organic growth rate of 20.5% driven by rate increases and strong new business growth. Turning to expenses, there are some key considerations here due to the acquisition of nine of our independent branches. These branches were previously part of our agency in a box model, but has now been converted into corporate branches, which shifted costs from commission expense to salary and benefits.

Commission expense increased $2,900,000 or 11.2% over the prior year period to $28,900,000 The increase represents one, a $5,100,000 increase related to the growth of business, offset by a $2,200,000 decrease related to the branch conversions, of which $2,100,000 shifted to salary and benefits. Total salary and employee benefits increased by 3,800,000 or 97.8% over the prior year period to $7,700,000 This was driven by a $2,100,000 increase from the branch conversion shift from commission expense, a $500,000 increase related to the twenty twenty three corporate store asset acquisitions and a $1,200,000 increase from the RSUs issued in conjunction with the IPO. Other administrative expenses increased $2,000,000 or 69.9% over the prior year period to $5,000,000 This increase was mainly due to public company costs, including professional fees and consulting services, representing $1,200,000 or 40% of the total increase and the remaining increase of $900,000 or 29.9% was driven by the continued growth of our business and branch conversions. Amortization and depreciation increased $1,500,000 or 101% to $3,100,000 driven by amortization of intangibles from branch conversions and the 2023 corporate store asset acquisition. Net income for the quarter was $8,200,000 a $2,900,000 or 56.3% increase over the prior year period.

On an adjusted basis, net income increased $3,800,000 or 57.2% over the prior year period to $10,500,000 including an increase in income of $2,900,000 increase in stock based compensation of $1,200,000 increase in amortization expense related to acquisitions and branch conversions of $2,900,000 offset by a $3,100,000 increase in tax expense on an adjusted net income. EBITDA and adjusted EBITDA were strong at $10,200,000 and $13,800,000 respectively, representing growth of 91.7% for adjusted EBITDA. Adjusted EBITDA margin was 26.8% compared to 18.3% in the prior year period. This expansion was driven by overall growth, but also benefited from outsized contingent commission and investment income, somewhat offset by the ongoing ramp up of public company costs, which we expect to normalize over the next few quarters. With that, I will turn it back to Gordy.

Gordy Bunch, Founder, Chairman and CEO, TWFG: Thank you, Janice. Before we open the call for questions, I want to reiterate how proud we are of the progress TWFG has made over the past year. Our strong fourth quarter performance capped off a transformational year in which we executed on our IPO, expanded into new states and strengthened our platform through both organic growth and strategic acquisitions. As we move into 2025, we remain focused on executing our strategy, expanding our national footprint, enhancing agent support and maintaining financial discipline while pursuing both organic and acquisition driven growth. The investments we are making today are building a strong foundation for long term success.

We began 2025 acquiring two new corporate locations in Ohio and Texas. The new locations are in line with our acquisition expectations for revenue and EBITDA. Our robust pipeline provides us many quality acquisition targets to achieve the remainder of our 2025 M and A goals. Our M and A models included beginning 2025 with acquiring $3,000,000 of revenue and $700,000 of EBITDA, with an additional $20,000,000 of revenue and $5,000,000 of EBITDA being acquired with a midyear convention. For the full year 2025, we expect total revenue to be between $235,000,000 and $250,000,000 with organic revenue growth in the range of 11% to 16%.

This growth will be driven by our expanding distribution network, deepening carrier relationships and favorable industry trends. We also anticipate an adjusted EBITDA margin in the range of 19% to 21%, reflecting our commitment to operational efficiency, while continuing to invest in future growth. We are confident in our ability to drive a strong performance in 2025 and beyond, leveraging our scale and deep industry expertise to create long term value. With that, we’d be happy to take your questions. Operator, please open the line.

Didi, Conference Operator: Thank And our first question comes from Tommy McJoy of KBW. Your line is open.

Dean/Charlie, Analyst, KBW/BMO: Hi, this is Dean on for Tommy. What kind of EBITDA multiples are you guys seeing in the acquisitions that you have in your pipeline? And how is that competition for those acquisitions trended compared to the prior quarter?

Gordy Bunch, Founder, Chairman and CEO, TWFG: So the prior quarter, we did not have any acquisitions. 2024 was a pencils down year for us. So not going to have a trend over prior quarter. But we’re seeing on the smaller revenue size transactions, you’re looking at nine times to 10 times EBITDA on larger revenue tractions and you’re going to see 10 times to 12 times EBITDA range. When you get into the micro sized producer portfolios, you’re now dealing in multiples of revenue rather than EBITDA and those range between 1.5 to three times revenue, which can be a five to seven to nine times EBITDA conversion.

Hope that’s helpful.

Dean/Charlie, Analyst, KBW/BMO: Yes, very helpful. Thank you. And then my follow-up, you obviously did a lot of like onboarding of new branches in the second half of last year. I was just hoping for an update about how the new business has sort of trended versus your expectations and then if there’s been any churn in that business as well?

Gordy Bunch, Founder, Chairman and CEO, TWFG: Yes. So I think we mentioned on previous calls it takes several years for newly onboarded scratch agencies to really hit any meaningful production. So they’re not really driving any of the results in 2024. They’ll have a modest contribution in ’twenty five and more so in 2026. There hasn’t been a lot of churn of the onboarded agents.

It takes a while for them to get their footing. There may be some consolidation of agents that are in proximity to each other for efficiencies. They may merge locations and end up being one location instead of three. We see that occurring. But as far as it goes right now, it’s too early to tell a real trend off of those newly onboarded agents.

Dean/Charlie, Analyst, KBW/BMO: Got it. Thank you.

Didi, Conference Operator: Thank you. And our next question comes from Mike Zaremski of BMO.

Dean/Charlie, Analyst, KBW/BMO: This is Charlie on for Mike. My first question is on the organic growth guidance of 11% to 16%. Healthy levels for sure. I guess, just a little bit of a wide range, especially since we’re almost through the first quarter. Can you kind of talk us through the one or two biggest variables that could cause organic growth to swing in either direction?

Thanks.

Gordy Bunch, Founder, Chairman and CEO, TWFG: Sure. I’ll point out a couple of variables. First, on private passenger auto, we’re seeing a moderation on rate in 2025. There’s also the potential that may shift upward given the concerns about the impacts of tariffs on materials and parts for the private passenger auto repair. So there could be if there’s any realization of increased loss costs that could put pressure on carriers to go back to a little more aggressive rate increase, which would swing the organic up.

If things stay where they’re at right now, we’re kind of in that midpoint of the range that we’ve provided. Conversely, if there’s a continuation of historically profitable business and carriers choose to lean into growth, that could end up with a rate decrease, which we’re not predicting that to occur, but we have to put that out there as it is a possibility that if carriers sustain their fourth quarter results and lean into growth, then that could create that circumstance. So that’s where you get that range. On the property side of the equation, you still have capacity constraints in some geographies. It is starting to soften across a broader part of The United States.

But out west, as we’re all acutely aware, California still doesn’t have stabilization in the property market that tends to drive more business into the California Fair Plan, which has less favorable economics. We have secured numerous secondary and tertiary property providers to give our agents access to stable capacity. But then that rating or pricing the California Fair Plan has could undermine the natural market. So looking for California Fair Plan to hopefully get some rate discipline and have some rate increases of their own and that could have another secondary impact. As we get into reinsurance renewal cycles, the six ones and seven ones, we’re hearing the moderation and not a great impact expected.

But as we all know, things happen. And so we’re always cautiously optimistic. And that’s why we give you the high and the low range of what could impact ultimately rates that then flow into our commission revenues.

Dean/Charlie, Analyst, KBW/BMO: Got it. Thank you. And then on the EBITDA margin guidance, you mentioned the public company costs being pushed out or I guess delayed. So was that a push out? Did you guys push out the cost?

Or is it just they didn’t I guess is there extra cost that in the ’25 guidance?

Gordy Bunch, Founder, Chairman and CEO, TWFG: So there’s if we think through the margin comparisons of 2024 versus 2025, first of all, we were only public for half of the year of 2024. So we did not have the full public DNO expense, the increased audit expenses that come post IPO and additional legal expenses that are public company related. So there’s a little bit of a blend. So if you look at the full year 2024 and if you were to add some of those expenses on an annualized basis that would have brought the 2024 margin down where it’s at today. We may be aggressively estimating forward cost in 2025 just to be conservative.

We want to make sure that we put out a very thoughtful guidance that’s achievable. And so there could be some margin upside if we overestimated those impacts, but that’s why there’s a variance. And that’s similar, you didn’t ask, but I’ll volunteer. Our EBITDA margin for ’24 was benefited by a outsized ’24 contingent revenue that came in largely due to the fourth quarter performance, which most of the public companies reported as their best fourth quarter in as far as anybody can remember. So we did benefit by that.

We’re not using the full repeated EBITDA for 2025. If loss ratios from our large trading partners stay where they ended the year and where they’re currently at. There could be EBITDA upside on the contingent revenue again in 2025. We felt it was a little bit too early in the year to try to bake that into guidance. As we get through the year, if we start seeing that the trend line continues, then we may update the guidance as it becomes clear to us and that could provide us EBITDA margin upside.

The other piece of our equation and I know it’s not a question yet, but I’ll preempt it. On the M and A guidance or the M and A we put out in the earnings release, When we talk about the early years, so we did close the two transactions at the January ’1. We have LOIs that are signed and are looking for some second quarter closings that would get us ahead of the actual model. But the base model of $20,000,000 of additional revenue acquired and $5,000,000 additional EBITDA acquired, the midyear convention meant that we were closing those transactions on June 30. So in twenty twenty five’s guidance, that’s only showing $10,000,000 of revenue and $2,500,000 of required EBITDA addition to the current forward forecast.

I know we’re going to get a lot of questions about M and A, but I just wanted to put it out there that the forward guidance did not include the full annualized $20,000,000 of acquired revenue and $5,000,000 of EBITDA, it was half of that in the $25,000,000 guidance. We do have a robust pipeline that gives us confidence in what we put out in guidance being achieved. There are several potential transactions in our pipeline that would put us into significantly exceeding that guidance. Our culture is to provide guidance and what we believe is achievable and in line of sight. We didn’t want to give you the burden of bush versus the burden of hand view.

We will update as things materialize, but there is additional margin upside on the M and A coming in at a faster pace or in larger sizes than what we currently put into the model.

Dean/Charlie, Analyst, KBW/BMO: Thank you. That was super helpful. If I could just sneak in one more on the contingent outlook, or contingent commission outlook. Are those all based on all in loss ratios or underlying loss ratios? I guess as we think about that for 2025?

Gordy Bunch, Founder, Chairman and CEO, TWFG: So with the number of markets we deal with, there’s no one answer on how contingencies are calculated. Many of them are on a portfolio wide basis. Some of those are isolated to, I’ll just say, one particular national market is the entire country with the exclusion of California. It has its own separate calculation from the rest of the country. Some carriers have down to the actual location level incentives and bonuses, which is then isolate their portfolio and then the result comes from now that individual portfolio achieved for the full calendar year.

We do have some fixed base bonus opportunities where it’s more driven by revenue growth or PIS count growth, retention metrics that can give you kickers and being in certain bands within their organization of size. I know that’s not the clearest answer, but when it comes to variable comp contingencies, they really run the gamut of metrics, which makes it very hard to estimate with any accuracy. We do get a much clearer line of sight to what we expect when you get through the third quarter. Usually the larger markets in October provide us with lock in options if we are what we consider to be in the money. That means that our loss ratio and growth metrics are achieving a bonus through the first nine months.

We then have the optionality of locking in that bonus metric for a discounted contingency. So we do take a haircut on the ultimate payout for that guaranteeing the outcome. But that doesn’t become clear until we get into October and sometimes early November before the carriers provide us that information.

Dean/Charlie, Analyst, KBW/BMO: Excellent.

Gordy Bunch, Founder, Chairman and CEO, TWFG: To give you a little bit more flavor, 2024 came in at 0.59% of premium as far as the contingent received. And right now on our forecast, we’re using 0.45%. So if we were just to use the same metric from 2024 that would drop down to our bottom line and our EBITDA margin projections would be higher. Again, we prefer to be conservative until we have more definitive information that shows that as the future outcome.

Dean/Charlie, Analyst, KBW/BMO: Thank you.

Didi, Conference Operator: Thank you. And our next question comes from Brian Meredith of UBS. Your line is open.

Brian Meredith, Analyst, UBS: Yes, thanks. A couple of ones here for you, Gordy. First one, is it possible to give us what agency in box kind of written premium growth would have looked like maybe fourth quarter twenty twenty four if we adjust for the ones that became corporate branches, just to kind of get a kind of decent organic written premium growth run rate there?

Gordy Bunch, Founder, Chairman and CEO, TWFG: I believe Janus might be able to parse that out for you.

Brian Meredith, Analyst, UBS: Maybe I can wait on that, that’s fine.

Janice Winnie, Chief Financial Officer, TWFG: Yes. So for the quarter, 18.4% growth. Support without branch, that’s excluding branch conversions.

Brian Meredith, Analyst, UBS: Perfect. That’s what I look for. Thank you. And then the second one, Gordy, you talked a little bit about California. What about Florida?

We’re hearing that business is being transferred out of citizens. Is that going to be a potential tailwind for you all in 2025 as this stuff goes from Citizens into the regular market?

Gordy Bunch, Founder, Chairman and CEO, TWFG: So Florida is an opportunity for expansion for us. We have been intentionally small in Florida. Pre AOB litigation legislation reform, Florida was a very volatile state who was dealing with repetitive and numerous insolvencies. The stability there just didn’t exist. Post AOB legislation, the frequency of claims and litigated filing on homeowners losses substantially shrunk.

So we are starting to see to your point, citizen takeout, startup markets, and we are looking out East for opportunities in Florida now where in the past we have been avoiding the state. So I do think that’s an opportunity on the downsize. I saw legislation filed in Florida, I think earlier this week, where they’re trying to put back in some litigation rights for consumers, which I’m not sure how if that will go through given that they’ve only been living underneath the new rules that is softening the market, benefiting consumers for the last really year and a half, two years. But we are looking out at Florida. There’s a number of different opportunities for us in that space.

Our MGA side could look at programs, could look at partnering with some of these new reciprocal takeouts or even stock company takeouts for distribution and underwriting. And so I do think Florida does have potential upside for TWFG in 2025. Nothing that’s materialized yet, but we are certainly open now to Florida where in the past we’ve been avoiding them.

Brian Meredith, Analyst, UBS: Got you. That’s great. And I think you briefly mentioned your comments, maybe you can talk a little bit about the MGA opportunity in California post the fires, kind of how you’re thinking about that?

Gordy Bunch, Founder, Chairman and CEO, TWFG: That’s a evolution. I think it really is coming down to the wildfire exposures, confidence in wildfire models, reinsurance support around the new modeling that’s being created. We’ve been fortunate to partner with others that have already created surplus lines homeowners capacity. So I don’t know that we’re going to be looking at rolling out a program in California, given that we’ve had a number of strategic partners initiate their own. They’ve already gotten the paper, they’ve already gotten the reinsurance and they’re already underway writing.

If we feel like capacity is going to get constrained, then we might look at creating a product that wraps around the California Fair Plan. I mentioned earlier, California Fair Plan is becoming like Florida citizens and Louisiana citizens and their hardest markets where they’re riding a disproportionate amount of the business. I don’t know if California plans to initiate rate changes within the California Fair Plan, but that undermines the natural marketplace, which makes it harder to create a viable program if your competition is the state. So we do have good viable national markets that are still taking in new business. And then we do have secondary and tertiary markets that are supporting the peripheral of those risk in high hazard places, low hazard places and across a broad spectrum of coverage A sizes.

So at this point, we’re okay, but we do have that muscle to flex if necessary to come in with a market. But we do need to have more confident wildfire modeling tools to entice in the reinsurers and the paper to enter that marketplace.

Brian Meredith, Analyst, UBS: Great. Thank you.

Didi, Conference Operator: Thank you. And our next question comes from Pablo Cenzan of JPMorgan. Your line is open.

Judson, Analyst, JPMorgan: Hey, guys. This is Judson on for Pablo. I thought maybe just we could first drill back down on the agency growth. I know you guys mentioned that the new agencies weren’t exactly driving any results in 2024. So I guess first maybe could you clarify if you mean from a premium perspective or profitability?

And if it’s the latter, what the contribution may be from first year agencies is in 2024 to premiums? Thanks.

Gordy Bunch, Founder, Chairman and CEO, TWFG: Good question. I don’t have contributions of premium from the newly onboarded agents on hand. I can provide that to you and Pablo on our subsequent one on one. I would put it back to not significant. When you onboard a new agency that has no existing premium, they’re starting from scratch, they’re going through an onboarding process.

In 2024, if you recall, a disproportionate number of these agencies came from a singular carrier that had been prior captive that allowed them to contract with us. They had a foot in two camps. So part of their portfolio was being non renewed and the other part of their portfolio was being retained by their incumbent market. The timing of those non renewals was not equal across all the geography we expanded into. So some of those states that we onboarded have not yet started their non renewal process.

So for the most part, those newly onboarded agencies have not contributed much yet. Those earlier states that had already started a non renewal process have made more progress in being productive if that’s beneficial.

Judson, Analyst, JPMorgan: Yes. Thank you very much. And then I guess just second, CapEx was a little bit elevated. So I guess maybe you could just talk about what exactly you all were investing into in the fourth quarter and how twenty twenty four’s results in that line item might compare to what you think of as like run rate capital investment into the business going forward?

Gordy Bunch, Founder, Chairman and CEO, TWFG: Sure. The largest part of the CapEx for 2024 was relocation into our new facilities. We had been located in the same office for twenty years. And if you go back and look at our prior CapEx, we didn’t have a lot because we had been in the same aged facility for so long. So we moved our home office in the fourth quarter.

That CapEx was tied to that, the new facilities, new technology, new infrastructure to support us as a public company going forward. We have some CapEx in 2025, that’s the expansion of our facilities in The Philippines, allowing us to onboard additional virtual assistance to help our retail agencies control labor costs within their environment and provide overflow support, also back office support in The Philippines. Our current facility in The Philippines is at capacity, which is great. That means we have strong demand for those services. So we will have a little bit of CapEx for The Philippines expansion.

We will have some CapEx in 2025 going into technology. We do know there are several initiatives we have around automation. And so there will be some CapEx looking at developing in those tools, the integration with several different workflow optimizations that we can achieve through some technology investment. But I would put it at probably less than what you saw in the fourth quarter for the full year 2025.

Judson, Analyst, JPMorgan: Great. Thank you.

Didi, Conference Operator: Thank you. We have a follow-up from Mike Zaremski of BMO. Your line is open.

Dean/Charlie, Analyst, KBW/BMO: This is Charlie on for Mike again. I just have one quick question. As far as the new agents kind of consolidating a little bit, how long do you see that taking to get resolved over time? Thanks.

Gordy Bunch, Founder, Chairman and CEO, TWFG: I think we’ll have that pretty well ironed out through 2025. What occurs is with the mass onboarding we had last year, these producers and agents from that one carrier all endeavored to try to own their own separate location or operate their own separate location. The ones that were smaller in scale are now realizing that it’s more efficient for them to partner with one of their peers and consolidate. So we saw a little bit of that in 2024. I would anticipate seeing more of that in 2025.

But beyond that calendar year, I don’t think that that would be a continuation. Most of the folks that are starting to hit a stride and getting their foundation or their feet on solid foundation, they’ll stay their own individual locations. And just as a reminder, the number of locations is not something that we look at as a metric. If you go back multiple calendar years, our double digit organic growth was achieved with the same store account we had for almost three years straight. So we’re going to continually have out of our existing agency in a box stores, agents retire, those portfolios consolidate into other existing agency in a box stores.

So you may see some fluctuation in total store count, but the portfolios are all remaining with the company and it doesn’t change our outlook on the organic growth going forward.

Didi, Conference Operator: Thank you. I’m showing no further questions at this time. I’d like to turn it back to Gordy Bunch for closing remarks.

Gordy Bunch, Founder, Chairman and CEO, TWFG: Thank you, Didi, and thank you all for participating in today’s call. I just want to recap, we had a inflection point in our business last year. Really can’t say enough about the team that helped us not just get through the IPO, which is a task into itself, but also to sustain our trajectory of growth in a historic period of time for this organization. So appreciate all of my executive team, all of our managers, all of our agents, all of our producers that work within our agencies, all of our CSRs, all the admins that are answering the phones and all of our carriers that have come alongside us to partner to allow us to have this opportunity to help in insurance distribution in a way that didn’t exist a quarter of a century ago when we created the company and extremely proud of the results. Look forward to following up with those that had follow-up questions and invite you to our we have our annual meeting.

Remind me of the date for the annual meeting or we haven’t put that out yet. May 20.

Janice Winnie, Chief Financial Officer, TWFG: ’20 eighth.

Gordy Bunch, Founder, Chairman and CEO, TWFG: ’20 eighth. I apologize. May 28 is our annual meeting. It’s going to be virtual this year. We’ll provide details in the future, but for anybody who wanted to mark their calendars, that’s when you intend to have our annual meeting.

So appreciate everybody’s interest and look forward to a great 2025. That’s all I have.

Didi, Conference Operator: This concludes today’s conference call. Thank you for participating and you may now disconnect.

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