TWFG's Q3 2025: Contradictions Emerge on M&A Strategy, Technology Investment, and Agent Productivity

Date of Call: November 13, 2025

Financials Results

• Revenue: $64.1M, up 21.3% year-over-year
• Operating Margin: Adjusted EBITDA margin 26.5%, up ~430 basis points year-over-year

Guidance:

• Full-year 2025 revenue expected $240M–$245M
• Organic revenue growth expected 11%–13%
• Adjusted EBITDA margin expected 24%–25%

Business Commentary:

• Revenue and Profitability Growth:
• TWFG delivered a 21% increase in total revenues to $64.1 million in Q3 2025, supported by 10.2% organic revenue growth.
• Adjusted EBITDA grew by 45% to $17 million, expanding margins by 430 basis points to 26.5%.

• The growth in revenue and profitability was driven by the resilience of the distribution platform, scalability of the operating model, leveraging scale, and financial discipline in executing accretive M&A.

• Personal Lines Normalization:

• The company observed encouraging signs of personal lines normalization, with carrier appetite returning, rate increases moderating, and underwriting discipline remaining strong.
• This led to improved retention and new business growth across the platform.
• 

• The normalization was due to the market transitioning from hard to soft, with increased carrier availability and capacity, allowing for more clients to be onboarded despite lower average premiums.

• M&A and Expansion:

• TWFG's third quarter saw the addition of 8 new retail locations, 1 new corporate location, and 370 independent agents to its MGA platform.
• Post-quarter, the company completed the acquisition of Alabama Insurance Agency, expanding its national footprint.

• The expansion was part of the company's strategic priorities to invest in technology, accretive M&A, and expand distribution channels for long-term growth.

• Premium Finance Operations:

• TWFG deployed $10 million of its own capital into premium finance operations, resulting in a higher yield of well above 7% on the same deposits.
• This move was highly accretive, as it provided a 4% plus interest yield on the same investments previously funded by credit facilities.

• The decision was driven by the availability of capital within the company, allowing for more efficient use of funds by deploying them internally rather than relying on external financing.

• MGA Performance:

• The MGA segment contributed significantly with a 19.2% growth in written premiums, while commission income grew by 56%, outpacing commission expenses, which grew by 27%.
• This led to margin expansion and enhanced profitability for the segment.
• The strong performance was attributed to an exclusive TPA, MGA agreement for Florida Property Program and the launch of a voluntary organic program in Florida, which contributed to higher net commission margins.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • CEO: "TWFG delivered another strong quarter" and highlighted momentum; management: "adjusted EBITDA grew 45% to $17 million, expanding margins by 430 basis points to 26.5%." CFO: "Total revenues increased $11 million or 21.3% over the prior year period to $64.1 million."

Q&A:

• Question from Thomas Mcjoynt-Griffith (Keefe, Bruyette, & Woods): Can you clarify the $10M 'other investments' on the statement of cash flows—was that related to M&A?
  Response: Deployed company cash into its premium finance operations (replacing external credit funding), using idle capital to generate higher yields from that operating business.

• Question from Thomas Mcjoynt-Griffith (Keefe, Bruyette, & Woods): Is that accretive/needle-moving?
  Response: Yes—management said it's highly accretive, swapping external funding for internal capital increased yields to above ~7% versus ~4% on interest-bearing alternatives.

• Question from Thomas Mcjoynt-Griffith (Keefe, Bruyette, & Woods): For 2026, do you expect to deploy more capital to M&A or do more deals versus this year?
  Response: Plan to execute earlier in the cycle and be more active in 2026, expecting to exceed the pace from 2025 depending on opportunity availability.

• Question from Jon Paul Newsome (Piper Sandler): How should we think about the market transition and the components that will drive double-digit organic growth into 2026?
  Response: Softening market reduces rates but increases capacity; impact should abate by Q2 2026, and organic growth will be driven by exposure growth, same‑store sales velocity and MGA/program expansion.

• Question from Jon Paul Newsome (Piper Sandler): How will the recently added agents' contributions waterfall into growth—when will they meaningfully impact results?
  Response: New agents are baked into forecasts and typically contribute over a multiyear ramp; they will incrementally support 2026 organic growth rather than immediately moving the needle.

• Question from Pablo Singzon (JPMorgan): MGA premium grew 19% but commission income rose faster—what drove the strong MGA margins this quarter?
  Response: A Florida program takeout created TPA-style revenue without corresponding commission expense this quarter, boosting MGA margins; ratios should normalize as those policies renew.

• Question from Pablo Singzon (JPMorgan): Will TWFG pursue cost-reduction/investment programs similar to other public brokers?
  Response: They will invest in 2026 but likely not at peers' scale; many tech investments are housed outside the public entity, and full 2026 plans will be disclosed with the 10‑K.

• Question from Brian Meredith (UBS): As capacity returns to the admitted market (e.g., Texas), will that pressure MGA growth?
  Response: No—most of TWFG's MGA programs are admitted, so shifting capacity into admitted markets benefits their programs (except Dover Bay, which is ENS).

• Question from Brian Meredith (UBS): How do EBITDA margins compare between corporate locations and Agency‑in‑a‑Box?
  Response: Corporate locations generate more than 2x the EBITDA margin of Agency‑in‑a‑Box because corporate retains 100% of renewals while AIB passes through ~80% of revenue.

• Question from Charles Lederer (BMO): Can you break out the geographic product environment and near‑term P&L impacts?
  Response: Market is broadly soft outside California (which remains hard); commercial is relatively soft and cat/hurricane‑exposed areas are soft—this increases capacity and onboarding but tends to lower average premiums.

• Question from Charles Lederer (BMO): In your M&A pipeline, is there a commercial or personal tilt and how might mix evolve?
  Response: Pipeline is mixed across commercial, multiline and personal targets; acquisitions prioritized for cultural fit and accretiveness—management focuses on revenue and EBITDA accretion rather than premium volume.

• Question from Charles Lederer (BMO): What should we expect for contingent income in 4Q?
  Response: They have Q3 lock‑in opportunities for contingents and express high confidence in achieving current full‑year projections including contingencies.

Contradiction Point 1

M&A Strategy and Timing

It involves the company's strategic approach towards M&A and the timing of when they plan to execute these transactions, which could impact future growth and financial performance.

Looking ahead to 2026, do you plan to allocate more capital to M&A and how does this compare to this year's pace? - Thomas McJoynt-Griffith (Keefe, Bruyette, & Woods, Inc., Research Division)

2025Q3: I think we'll be executing a little bit earlier in the cycle in '26 than we did in '25. And depending on how we view M&A throughout the calendar year, we should exceed '26. - Richard Bunch(CEO)

What EBITDA multiples are in your acquisition pipeline? How has acquisition competition trended compared to the prior quarter? - Dean Criscitiello (KBW)

2024Q4: We are accelerating our M&A pipeline as we focus on growth opportunities in all regions. - Richard Bunch(CEO)

Contradiction Point 2

Investment in Technology

It relates to the company's investment strategy, particularly in technology, which can influence operational efficiency and competitive positioning.

Do you expect cost reductions or investment programs similar to other brokers? - Pablo Singzon (JPMorgan Chase & Co, Research Division)

2025Q3: We plan to continue investing in technology and expanding the management team. Investments are made within our tech company, outside of the public company, benefiting the public company operations. - Richard Bunch(CEO)

Will EBITDA margins continue to expand year-over-year? Can margins reach 25% annually within the next couple of years? - Thomas Mcjoynt-Griffith (Keefe, Bruyette, & Woods, Inc., Research Division)

2025Q2: We are not changing our 2025 technology spend. We expect 2025 technology investment to be up $8 million compared to 2024, driven by additional spend in our technology company, which is outside the public company. - Janice Zwinggi(CFO)

Contradiction Point 3

Agent Retention and Productivity

It highlights differences in the company's expectations and timeline for newly acquired agents to become productive, which can affect revenue projections and operational efficiency.

How is the impact of the newly hired agents progressing? - Jon Paul Newsome (Piper Sandler & Co., Research Division)

2025Q3: Their impact is baked into our forecasting. The immediate year they come in, there's not much of an immediate contribution. As they grow their agency over a multiyear process, they start becoming more meaningfully contributed. - Richard Bunch(CEO)

Why do TWFG agents take longer to become productive compared to other systems like Goosehead? - Jon Paul Newsome (Piper Sandler)

2025Q1: Our agent model is a little bit different than Goosehead's. Our agents come from captive relationships, so they're subject to non-competes, starting from 0 on force portfolios. - Richard Bunch(CEO)

Contradiction Point 4

Commission Rates and Market Conditions

It reflects differences in the company's understanding and interpretation of market conditions and their impact on commission rates, which are important for financial forecasting and competitive positioning.

What are the key factors driving your market environment and path to double-digit organic growth by 2026? - Jon Paul Newsome (Piper Sandler & Co., Research Division)

2025Q3: Commission rates are stabilizing, influenced by market conditions like E&S marketplaces and state-backed insurers. Some new business incentives skew commission rates upward. Homeowner rates remain stable. - Richard Bunch(CEO)

How would you characterize Q1 commission rates? Are they sustainable for future guidance? - Thomas McJoynt-Griffith (KBW)

2025Q1: Commission rates are stabilizing, influenced by market conditions like E&S marketplaces and state-backed insurers. Some new business incentives skew commission rates upward. Homeowner rates remain stable. - Richard Bunch(CEO)

Contradiction Point 5

Impact of Newly Onboarded Agents

It pertains to the expected impact of newly onboarded agents on the company's performance, which could affect growth projections and financial expectations.

How is the impact from the newly added agents progressing in the past year? - Jon Paul Newsome (Piper Sandler & Co., Research Division)

2025Q3: Their impact is baked into our forecasting. The immediate year they come in, there's not much of an immediate contribution. As they grow their agency over a multiyear process, they start becoming more meaningfully contributed. - Richard Bunch(CEO)

How has the new business from branches onboarded in the second half of last year performed compared to expectations, and has there been any churn in that business? - Dean Criscitiello (KBW)

2024Q4: It takes several years for newly onboarded scratch agencies to really hit any meaningful production. So they're not driving significant results in 2024. - Richard Bunch(CEO)