Goosehead’s AI Investments May Dent Margins But Fuel Long-Term Growth

Date of Call: Feb 17, 2026

Financials Results

• Revenue: Q4: $105.3M, up 12% YOY. Full Year: $365.3M, up 16% YOY.
• Operating Margin: Adjusted EBITDA margin: 31% for full year 2025.

Guidance:

• Total revenues expected to grow organically between 10% and 19% in 2026.
• Total written premiums expected to grow organically between 12% and 20% in 2026.
• Core revenue growth expected to be low double-digit in first half, accelerating in second half.
• Margins expected to be modestly down in 2026 due to strategic investments in AI, Digital Agent 2.0, and partnerships.
• Contingent commissions expected to be between 60 and 85 basis points of total written premium in 2026.

Business Commentary:

Revenue and EBITDA Growth:

• Goosehead Insurance reported total revenue of $365.3 million for the full year 2025, up 16% from the previous year, and adjusted EBITDA of $113.6 million, up 14%.
• The growth was driven by disciplined execution of the company's strategy, structural improvements, and strong performance in key metrics like client retention and policies in force.

Client Retention and Productivity Improvements:

• The company's client retention improved from 84% in Q2 to 85% by year-end, with policies in force growing 14%.
• Retention improvements and productivity gains were attributed to the company's focus on quality over quantity in its franchise network, leading to stronger economics for franchise owners and a healthier overall system.

Digital Agent 2.0 and AI Integration:

• Goosehead launched its Digital Agent 2.0 platform in Texas, allowing for end-to-end binding with multiple carriers.
• The integration of AI was aimed at enhancing efficiency, improving outcomes for agents and clients, and leveraging the company's proprietary data for competitive advantage.

Franchise Network and Consolidation:

• The franchise network saw a 29% increase in gross payments to franchises year-over-year, with producer count rising from 1.9 to 2.1 per franchise.
• This was due to consolidation within the network, with stronger agencies acquiring smaller ones, leading to improved productivity and positioning for growth.

Partnerships and Enterprise Sales Expansion:

• Enterprise sales nearly doubled new business production, with partnerships addressing 2.3 million potential clients.
• The expansion into enterprise sales and partnerships was strategic, aimed at accessing new market segments and providing embedded lead flow for efficient client acquisition.

Sentiment Analysis:

Overall Tone: Positive

• "What excites me most is that we're entering the next phase with improving market conditions. When the product market is healthy, everything in our system works better." "I'm proud of the progress we've made this year, and I'm even more confident in the position we've built." "Strong financial performance is never the result of a single initiative... It is the result of consistent execution across the organization."

Q&A:

• Question from Andrew Andersen (Jefferies LLC): Just in terms of the guidance for next year, how are you thinking with regards to home closing transactions? And how are you thinking about the insurance pricing environment?
  Response: Not counting on housing improvements for guidance; pricing assumptions range from generally down to moderate increases.

• Question from Andrew Andersen (Jefferies LLC): And then as some states consider measures like profitability caps or just tighter constraints on insurance pricing... how would those... impact your business model?
  Response: Believes such regulations are unlikely and would favor the more nimble excess and surplus lines market.

• Question from Brian Meredith (UBS Investment Bank): ...why you don't think agents will be disintermediated through the use of AI?
  Response: Sees AI as augmenting agents, especially for complex home insurance, and highlights Goosehead's unique service function and end-to-end digital binding capability.

• Question from Brian Meredith (UBS Investment Bank): ...back to the digital agent, maybe you can dive in a little bit more on kind of what exactly that's doing... if it's going to actually cause customer retentions to actually start to decline...
  Response: Digital agent initially improves retention by helping existing clients add policies; focus is on integrating with partners, not driving mass consumer traffic.

• Question from Thomas Mcjoynt-Griffith (Keefe, Bruyette, & Woods): ...do you think Goosehead needs to go integrate with the LLM such as ChatGPT, if that's where consumer eyeballs are going?
  Response: Economics don't support a mass advertising campaign to drive eyeballs; focus is on delivering select client bases to partners and carriers.

• Question from Thomas Mcjoynt-Griffith (Keefe, Bruyette, & Woods): ...switching over to buybacks. You saw the announcement of the sort of increased authorization here. Can you talk about your appetite and capacity for buybacks...
  Response: Believes stock is undervalued; has strong cash flow, balance sheet flexibility, and plans to be aggressive in opportunistic buybacks.

• Question from Mark Hughes (Truist Securities): ...the latest number... for elevated investment spending in 2026?
  Response: Investment spending remains $25M to $35M of total cash, with $8M to $11M hitting the P&L.

• Question from Mark Hughes (Truist Securities): ...you're still ramping up. How much of that potential is active as we sit here today?...
  Response: Only a small percentage of the 2.3 million potential mortgages is live currently; implementations are ongoing with strong potential.

• Question from Mark Hughes (Truist Securities): ...on the new business royalty fees... Anything else that you would highlight around the productivity in the franchise channel?
  Response: Franchise community is healthy with same-store sales up 19% and gross payments up 29%; expects acceleration in 2026.

• Question from Mark Hughes (Truist Securities): ...the corporate sales headcount, how do you think that will trend in 2026?
  Response: Expect headcount to trend up due to geographic expansion, partner onboarding, and improved agent retention.

• Question from Michael Zaremski (BMO Capital Markets): ...do you expect producers at the franchise to increase at a more meaningful rate as the market opens up?
  Response: Producer count is growing, with consolidation allowing larger agencies to hire more; medium-term target is 5 producers per franchise.

• Question from Michael Zaremski (BMO Capital Markets): ...will this consolidation dynamic kind of just work itself out of the system in '26?...
  Response: Consolidation may continue slightly into 2027, but the number of operating agencies should start to slow in 2026.

• Question from Michael Zaremski (BMO Capital Markets): ...talk about kind of what's embedded in the guidance range you gave in terms of are you assuming retention kind of continues glide pathing up...
  Response: Top end of guidance assumes continued acceleration in retention; bottom end implies less improvement or stalling.

• Question from Katie Sakys (Autonomous Research): ...circle back to the discussion of the impact of the rollout on the Digital Agent 2.0 platform... how that has sort of impacted your clients view...?
  Response: NPS score reflects past price increases; internal CSAT score and retention metrics are steady or improving, indicating service quality is holding up.

• Question from Katie Sakys (Autonomous Research): ...thinking about the year ahead and your expectations for productivity growth...
  Response: Hiring more experienced salespeople should improve retention and productivity, aided by investments in training and smoother hiring cadence.

• Question from Andrew Kligerman (TD Cowen): ...on the guidance... What's kind of your bias thinking? Do you think retention is...
  Response: Baseline assumption is retention will continue to go up, correlated with stabilizing pricing and service improvements.

• Question from Andrew Kligerman (TD Cowen): ...with respect to the AI questions earlier... does your thesis still hold 5 and 10 years from now...
  Response: Believes Goosehead is best positioned to leverage AI due to proprietary data and carrier trust built over 20 years.

• Question from Jon Paul Newsome (Piper Sandler): ...does that have any view on product availability changing over the time?
  Response: Product availability is wide open in all markets; guidance does not contemplate changes in the product environment for 2026.

• Question from Ryan Tunis (Cantor Fitzgerald): ...does your discussion of '26 objectives that you're assuming a slightly lower take rate on the contingents...?
  Response: Contingent commission assumption is 60-85 bps to account for volatility; margin guide reflects investments in Digital Agent and partnerships, expecting compression ex-contingents but accretion at scale.

• Question from Ryan Tunis (Cantor Fitzgerald): ...just trying to frame these investments... Are you guys confident that looking out in the '27, '28, this morphs into a real margin expansion story...
  Response: Confident long-term investments are thoughtful and defined, not an infinite money pit, and will drive significant growth and margin opportunity at scale.

• Question from Ryan Tunis (Cantor Fitzgerald): ...looking at the franchise commission rate that's come off over a point since 2023... how focused are you on trying to get those commission rates back up...
  Response: Focusing on getting commission rates back up as market conditions improve, especially in California and Florida, with E&S markets behaving more like admitted markets.

• Question from Pablo Singzon (JPMorgan Chase): ...should we take your comments about the first half core revenue growth being in low double digits as a representative of the midpoint?
  Response: Guidance is based on honest expectations; acceleration in second half is anticipated due to headcount growth, partnerships, and retention improvements.

• Question from Pablo Singzon (JPMorgan Chase): ...just on the Digital Agent 2.0. I guess is the plan to roll it out nationally ex partnerships...?
  Response: Will roll out more broadly across geographies after Texas pilot, prioritizing markets with carrier demand and partner overlap.

• Question from Michael Zaremski (BMO Capital Markets): ...On premiums coming out of Texas... do you expect that to stabilize and go back up?...
  Response: Expect Texas proportion of total written premium to continue declining as the company diversifies and grows in other geographies.

Contradiction Point 1

Outlook on Housing Market Impact

Contradiction on housing market's role in near-term growth guidance.

Andrew Andersen (Jefferies LLC) asks? - Andrew Andersen (Jefferies LLC)

2025Q4: The company is not counting on housing market improvements for 2026 guidance, as its business has decoupled from housing cycles through partnerships. - Mark Jones Jr.(CEO)

How do you plan to approach home closing transactions and the insurance pricing environment in your guidance for next year? - Andrew Kligerman (TD Cowen)

2025Q3: When housing picks up, it will be a significant tailwind. - Mark Jones Jr.(CEO) & Mark Miller(COO)

Contradiction Point 2

Margin Profile of Digital Agent Channel

Contradiction on whether digital agent investment will expand or contract margins in the near term.

What are your thoughts on the recent earnings report, Ryan Tunis of Cantor Fitzgerald & Co.? - Ryan Tunis (Cantor Fitzgerald & Co.)

2025Q4: Margin guidance is modestly down due to strategic investments in Digital Agent and partnerships. - Mark Jones Jr.(CEO)

With a slightly lower take rate on contingents in 2026, can margins expand? - Brian Meredith (UBS Investment Bank)

2025Q3: The enterprise sales business is structured to have a more impactful margin profile over the long term than franchise or corporate business... Over time, the mix is expected to favor higher-margin enterprise and digital agent channels. - Mark Jones Jr.(CEO)

Contradiction Point 3

Growth Expectations for Corporate Sales Headcount

Contradiction on the scale and timing of corporate sales team expansion.

What are your thoughts on the recent market trends affecting the sector? - Mark Hughes (Truist Securities, Inc.)

2025Q4: Headcount is expected to grow, driven by enterprise sales onboarding... and geographic expansion (3 new offices in 2026). - Mark Jones Jr.(CEO) & Mark Miller(COO)

How will corporate sales headcount trend in 2026? - Andrew Kligerman (TD Cowen)

2025Q3: The company will launch 10 franchises from corporate in 2025 (at least 20 in 2026), with a medium-term goal of 50/year. - Mark Jones Jr.(CEO)

Contradiction Point 4

Strategy and Timing for Direct-to-Consumer Digital Agent Rollout

Contradiction on rollout scope and target market between a controlled partnership-based approach and a broader, direct consumer campaign.

What is UBS Investment Bank's earnings outlook? - Brian Meredith (UBS Investment Bank)

2025Q4: The platform is currently rolled out through the partnership network, not as a direct-to-consumer campaign. - Mark Jones Jr.(CEO)

How does the digital agent work, and could its ease of use lead to declining customer retention? - Jon Paul Newsome (Piper Sandler & Co.)

2025Q2: The direct channel allows cross-selling into the existing book and targeting enterprise clients with a more automated, carrier-friendly interface. - Mark K. Miller(CFO)

Contradiction Point 5

Outlook on Commission Rate Recovery

Contradiction on the timeline and certainty for commission rate improvement, shifting from a clear recovery pattern to a focus on future potential.

What are your thoughts on the recent market trends? - Ryan Tunis (Cantor Fitzgerald & Co.)

2025Q4: As the market stabilizes (less reliance on FAIR plans/Citizens in CA/FL) and E&S markets behave more like admitted markets, there is potential for commission rates to improve. - Mark Jones Jr.(CEO)

How focused are you on increasing franchise commission rates that have dropped over a point since 2023 by 2026? - Thomas Patrick McJoynt-Griffith (Keefe, Bruyette, & Woods, Inc.)

2025Q2: The recovery should follow a similar pattern to the decline over the last two years. The majority of the rate shift was due to mix, not quality. - Mark E. Jones(CEO)