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Goosehead Insurance, Inc (NASDAQ:GSHD)
Q3 2021 Earnings Call
Oct 27, 2021, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for standing by. This is the conference operator. Welcome to the Goosehead Insurance Third Quarter 2021 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Dan Farrell, VP, Capital Markets. Please go ahead.

Daniel Farrell -- Vice President of 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; and Mark Colby, Chief Financial Officer. By now, everyone should have access to our earnings announcement, which was released prior to this call, which 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. 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 our 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 the 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 and archived version will be available shortly after the call ends on the Investor Relations portion of the Company's website at www.gooseheadinsurance.com. With that, I'd like to turn the call over to our CEO, Mark Jones.

Mark Jones -- Chairman and Chief Executive Officer

Thanks, Dan, and welcome to our third quarter 2021 results call. We had another outstanding quarter with continued strong growth, significant talent acquisition and notable enhancements to our technology platform. On the call, I will provide a summary of our key results in the quarter, and highlight some of the continued investments we're making today that will drive our growth for years to come. President and Chief Operating Officer, Mike Colby, will discuss the launch of our digital agent platform during the quarter and further improvements we've made to our products and technology. CFO, Mark Colby, will then go into greater detail on the quarter financials and our outlook for the remainder of the year.

During the third quarter, growth in all areas remained powerful against a very strong year ago comparison, further validating our dynamic and unmatched platform that puts the client at the center of our universe. Let me take a moment to highlight some of the substantial accomplishments during the quarter. Premium growth, the key leading indicator of future revenue growth continues to be very robust. In Q3, premiums grew 44% compared to the year ago quarter, policies in force were also up 44%. Our premiums in the franchise channel grew 50% for the quarter and this growth provides excellent visibility into strong, embedded and 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 41% over the prior year period.

Total franchise count at the end of the third quarter was up 55% compared to a year ago, operating franchises grew 38% during the quarter. Operating franchises outside of Texas grew 45% year-over-year, while Texas franchises increased 20%. And as we achieve more diversification in our book of business. Nearly 62% 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 in production ramp combined with our increasing retention rates should fuel significant growth over the next decade and beyond. Also, while our franchise unit count is growing rapidly, the unit productive capacity is also growing, as some of our more seasoned franchises are beginning to scale their business with new producer additions. This will be an important growth lever going forward.

Our corporate agent team is up 35% year-over-year, and this is particularly impressive against the extraordinary growth we experienced in 2020, where we benefited from COVID effects in the job market, and hired aggressively, when unemployment was nearly 15%. Continued investments in the corporate channel remain critical to our long-term success, as efforts in training, mentoring and beta testing of new technology and processes helps drive our extraordinary growth and improve productivity of the more leveraged franchise channel. As a reminder, our corporate agents produce an approximately 4x industry best practice, providing critical training, mentoring and research and development functions for the company.

Our data shows that franchises within close proximity to corporate offices gain benefits in their business ramp up and overall productivity. During the quarter, we expanded our offices in Westlake, Houston and the Woodlands Texas by year end, we plan to complete the office openings in Columbus, San Antonio, Austin, as well as the second office in Chicago. In addition to providing support to franchisees, these corporate offices help us scale nationally and enhance our college recruiting and career advancement opportunities in both the short and the long-term. We expect these new offices to support our near-term headcount growth, and they should scale very nicely through 2022.

I'm particularly proud of our continued strength in the areas of client retention and net promoter score, which were 89% and 92%, respectively. This is a similar strong level to last quarter and higher than the year ago level of 88% and 91%, respectively. These improvements have taken place in a challenging environment of active weather and increasing premiums. It is also noteworthy that we are driving retention improvement despite some level of drag from new business bias given our exceptional growth rates and strong new business production. Once a policy renews, the likelihood that it will renew again grow significantly. With new business accounting for so much of our total, overall retention rates are currently lower than we anticipate long-term.

Our industry-leading and improving performance on retention in NPS is a testament to our best-in-class service efforts, which continue to benefit from investments in product, people and technology and the client first approach we bring to all aspects of our business. Even small improvements in retention provide material economic benefits for our business over time, as the overwhelming majority of our profits are in renewal revenue. A significant highlight of the third quarter was the launch of our digital agent platform, and we are extremely excited with the favorable response we've received from our clients, agents and carrier partners. We are highly confident that this tool will allow powerful new revenue opportunities over time, and in the near-term, will enhance our existing go-to-market strategy and strengthen our agent's other referral business efforts.

This is absolutely a completely unique offering to clients in the marketplace that provides an effortless, seamless, fast and accurate shopping experience. I continue to encourage you to try as many other competitor offerings as you're willing to endure and then try our digital agent. You will be amazed. Mike will go into greater detail on the launch of the digital agent, as well as additional technology and product enhancements we are making to the platform. While the digital agent is a new powerful tool for us it is just one piece of the enormous total value proposition we bring to the entire marketplace, clients, agents and carriers. Our consistent and significant investments across product, people and technology, over nearly 2 decades is key to what makes us unique.

Investors frequently ask us, what's the most important thing that drives your business success? The answer is everything we do around the 3 pillars of our business, a choice product offering, the very best sales and service agents and unmatched technology. There are some companies with reasonable access to product, some with good technology, not as good as ours, and some which use agents. But no company in the market brings all 3 of these critical elements to bear for clients with the expertise that we have, and no company has come close to delivering results like Goosehead.

Building this incredible business require the benefit of time, which provides the advantages of vast and valuable accumulated experience that can only be achieved through hard work earned with clients for nearly 2 decades. This is the driver of our significant and expanding competitive moat. Our company has been built with laser focus on the need to the client, and I maintain that if our model could be replicated, it would have been by now. I couldn't be more excited for the future Goosehead. We are by far the best-positioned company in the marketplace, and we're only getting better. Our runway for growth is expansive and our ability to take sizable market share continues to improve.

We will remain consistently externally focused and maniacally driven toward our long-term goal of U.S. personal lines industry leadership. I would like to thank our amazing employees and franchisees for the tireless efforts and enthusiasm in our march toward our goals. With that, I'll turn it over to Mike.

Michael Colby -- President & Chief Operating Officer

Thanks, Mark, and hello to everyone on the call. We're very pleased with the launch of our digital agent platform, and as Mark indicated, feedback from all our key constituents has been overwhelmingly positive. This simple, seamless digital experience is highly differentiated considering that it's powered by agent-driven machine learning. Accumulated experience from nearly 2 decades serving the personal line space, the vast amount of data accumulated from over 30 million quotes designed by our expert agents across the U.S. and deep integrations with our insurance company partners and other data providers, allows us to deliver a digital client experience that is unmatched in the space. I can't overstate this advantage compared to the other competing offerings using artificial intelligence powered by uninformed and inexperienced consumer behavior.

Our clients make no trade-offs. They get the benefit of expert agent advice, a high-quality custom insurance solution and competitive transparent pricing delivered seamlessly and digitally. We're very pleased with, but not surprised by the excellent ratings received from clients that have engaged us on this new platform, evidenced by a 96 net promoter score on this business since launch. We are continuing to enhance the digital agent platform with additional product offerings and deeper carrier integrations. Along with home and auto insurance we're also offering flood, condos and renter's coverage options as part of the digital agent experience.

Additionally, we partnered with Ethos Life this past quarter, and will soon be offering life insurance coverage digitally. These product enhancements will continue to benefit the client and will also enhance cross-sell opportunities, improving the lifetime value of our clients. Specifically with flood insurance, we have seen significant improvements in retention when it's added to the client's insurance portfolios. With continued efforts around deeper carrier integrations we expect to be able to provide full quote-to-issue experience to clients across multiple carriers and products in 2022. Most importantly, however, these significant benefits and safeguards that an expert agent brings to the process will not be lost to the client and will remain active and present in the background.

For the release of this technology, as we've done with all new technology released previously, we look to get into the hands of our clients and agents, as quickly as possible and then focus on driving user adoption, optimization and best practice. We see immediate opportunity to leverage this technology through an enhance referral partner experience that will allow us to capture more share of their business, increased opportunities to drive referrals from our existing clients and increased opportunity for cross-selling, as we continue to expand product on the platform. Looking further out to 2022 and beyond, we see opportunities for additional growth through targeted marketing and other digital strategies to drive traffic to the site in ways that will be economically sound.

We've been able to build an amazing company with growth rates in excess of 40% a year with virtually no advertising spend. Importantly, as we look forward, we will always compete on our terms, and we'll define our field of competition to find the best ways to fully leverage our enormous competitive advantage and moat in the marketplace. With that, I'll turn the call over to Mark.

Mark Colby -- Chief Financial Officer

Thank you, Mike, and hello to everyone on the call. For the third quarter of 2021, total written premiums, the leading indicator of our future core and ancillary revenue growth increased 44% to $435 million. This included franchise premium growth of 50% to $318 million and Corporate segment premium growth of 32% to $117 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 toward 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 948,000 policies in force, a 44% increase from a year ago and another leading indicator of the momentum in our business. Revenues were $41.7 million for the quarter an increase of 30% from the year ago period, while core revenues grew 41% to $37.2 million for the quarter. Ancillary revenue, which includes contingent commissions was $2.5 million in the quarter compared to $4.2 million a year ago. While it is difficult to predict full year contingents even at this stage of the year, given auto loss trend and weather activity thus far we expect contingents in the fourth quarter would be in the $2 million to $4 million range. This would put full year contingence at $9 million to $11 million or roughly 60 to 70 basis points as a percentage of full year premium.

On a normalized go-forward basis, we believe it is reasonable to assume around 80 to 85 basis points of contingents as a percent of annual premium. However, any year can vary significantly from this level, as evidenced by 2020 and 2021 contingencies. The franchise channel generated core revenue of $17.2 million an increase of 54% from the year ago period. At the end of the third quarter, we had roughly 1,958 total franchises up 55% from the prior year and 1,139 operating franchises up 38% from a year ago. We also continue to invest heavily in corporate agent hiring and national expansion to facilitate the franchise channel growth and productivity.

Corporate sales headcount at the end of the third quarter was 502 an increase of 35% from the year ago quarter. Our corporate investments are critical to driving franchise productivity levels and the additions we have made over the past year are an appropriate level of investment to successfully support our expanding franchise footprint. Corporate channel core revenues were $20 million in the third quarter, an increase of 32% compared to the year ago period as new agents continue to ramp up productivity over their tenure. Total operating expenses for the third quarter of 2021 were $38.1 million, up 52% from $25 million in the prior year period. Compensation and benefits expense was $26.1 million for the quarter, up 46% from the year ago period on 41% headcount growth.

The 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 recent launch of the digital agent platform.

General and administrative expenses for the quarter were $10.1 million, an increase of 73% from a year ago, with the increase due to expanding real estate footprint, higher travel and entertainment expense as the U.S. economy continues to reopen and investments in our newly designed website and client-facing portal, as well as the number of carrier integration projects. Additionally, 2020 G&A expenses were artificially low due to COVID lockdowns. The hiring of employees and onboarding of franchisees combined with the opening of new offices has an immediate impact to G&A expense, while the revenue benefits scale over time as we onboard agents and they ramp up their production.

Total adjusted EBITDA in the quarter was $6.6 million compared to $9.3 million in the prior year period. We have been investing heavily for future growth in producer headcount, expanded office footprint and our digital agent platform. Heading into next year, we expect these investments to begin to scale nicely, as we do not expect to see the same step function increase in real estate expense. We also expect some new revenue benefit from the digital agent to ramp up and help offset initial and ongoing development cost. Although laying the foundation to drive growth is more strategically critical to the business than focusing on margin expansion at this time, we view the last 2 years as unusually high from an expense growth perspective. 2020, as it relates to compensation expense growth due in part to opportunities created by the pandemic and 2021 related to other G&A from strategic investments we have highlighted.

Looking ahead to 2022, we would expect overall expense growth and margins to look roughly similar to levels observed in 2019. Over the longer term, we expect to deliver high and sustained levels of both revenue and profit growth. As of September 30, 2021, the company had cash and cash equivalents of $25.2 million. During the third quarter of 2021, the company refinanced its $25 million revolving credit facility and $77 million term note payable to a $50 million facility and a $100 million term note payable agreement. We also unused line of credit of $24.8 million at quarter end.

Based on our experience to-date, the company is raising its full year 2021 outlook with respect to total written premiums and revenue. Total written premiums placed for 2021 are expected to be between 1.54 and $1.56 billion, representing organic growth of 43% on the low-end of the range to 45% from the high-end of the range. Prior guidance issued was for organic premium growth between 40% and 45%. Total revenues for 2021 are expected to be between 149 and $155 million, representing organic growth of 27% on the low-end of the range to 32% on the high-end of the range. This assumes continued strong growth in core revenues and $2 million to $4 million of contingent commissions for the fourth quarter of 2021. Prior guidance issued was for organic revenue growth between 25% and 33%.

Our strong growth through the first three quarters of 2021 and the important strategic investments we have been making over the last couple of years put us in a great position for a strong close to 2021 and continued momentum into 2022 and beyond. I want to thank everyone for their time. And with that, let's open up the lines for questions. Operator?

Questions and Answers:

Operator

Thank you. We will now begin the question and answer session. [Operator Instructions] Our first question comes from Matt Carletti of JMP. Please go ahead.

Matthew Carletti -- JMP -- Analyst

Hey, thanks. Good afternoon. Thanks for taking my questions. A couple of questions. Mike, you commented on the new direct portal rollout. I think you termed it overwhelmingly positive. I was hoping you could give maybe a little more color just on what you've seen either qualitatively or quantitatively in terms of quote activity, conversion rates? Just kind of how things have progressed over the quarter or so that has been live versus what your initial expectations might have been?

Michael Colby -- President & Chief Operating Officer

I think there's very limited data to provide anything quantitatively to you. I mean, it's certainly something that we're paying close attention to. And over the course of time, we'll decide kind of what are those KPIs that we want to release. I can tell you qualitatively, our initial thesis of saying this is going to be a powerful tool to augment the efforts of our existing go-to-market strategy, which includes leveraging our agents efforts and drive productivity through referral partner penetration and capturing kind of full share of business through enhanced levels of client referrals, through enhanced cross-selling opportunities. And then also on the retention front, we look at that in the data and the feedback qualitatively has been very positive and encouraging that there is certainly opportunity there.

I just -- I want to just reiterate kind of what I said in the prepared remarks. This is consistent with every technology release that we've done historically. It's about speed to market, get the technology in the hands of the users, in this case, also the consumers and our clients and then start to focus on optimization, iterating the technology through feedback from the users and defining best practice and disseminating best practice. So we believe that it's much more valuable to have an aggressive release timeline and then focus on user adoption and optimization. And we're certainly very confident that, that approach will deliver results that we manifest in the financials in the near future.

Matthew Carletti -- JMP -- Analyst

Thank you for that color. It's very helpful. And then just the numbers question, I guess, for Mark. It was a little bigger tax benefit in the quarter than kind of what we've seen in a lot of the recent quarters. Just wonder if there's anything outlier there? How we should think about that? And then just how we should think about tax rate going forward?

Mark Colby -- Chief Financial Officer

Yeah. The primary thing that's driving that is employees exercising their stock options, which creates a taxable expense. That's different from the way we do it from a GAAP perspective. From -- as far as modeling that out, it's -- your guess is as good as mine, really, it's all about employee behavior, when these options vest and whether or not they choose to exercise them. I think it's important, absent any kind of information on options exercise activity. I think it's reasonable to assume a more normalized tax rate. And then throughout the quarter, just kind of monitor for further options that are exercised to see if there's any potential tax benefit that could be created.

Matthew Carletti -- JMP -- Analyst

Okay. Great. Thank you for the answers and and best luck going forward. Thanks.

Mark Jones -- Chairman and Chief Executive Officer

Thanks, Matt.

Operator

Our next question comes from Ryan Tunis of Autonomous Research. Please go ahead.

Ryan Tunis -- Autonomous Research -- Analyst

Hey, good evening. So first question on -- I'm thinking about expenses moving forward. I think you said that next year, you expect the growth rate of operating expenses to be more like '19, less like '20 and '21. These past couple of years, it's been high 40s since in terms of percent expense growth, but in 2019, it was low 30s. I just wanted to make sure I heard that correctly that you're thinking that your expense growth next year will be somewhere around 30% to 35%.

Mark Colby -- Chief Financial Officer

Absolutely. We're going to continue to make investments, but 2020 and 2021 were very unique. 2020, there was a spike in compensation expense, just given the labor market and our ability to onboard a bunch of employees. And then for 2021, there was some additional spend on G&A, getting out ahead of some of our rent expense and really a step function increase there. And again, we're going to continue to hire next year. We're going to continue to grow G&A, but it will be more in line with those kind of 2019 levels again.

Ryan Tunis -- Autonomous Research -- Analyst

Got it.

Michael Colby -- President & Chief Operating Officer

We did open several offices this year. And with the new kind of accounting standards around leases, when you start to swing a hammer, you have to start recognizing rent expense, even though we don't pay it until we're moved in generally. So you have some artificial inflation there as we've kind of build out the office network. We don't anticipate a lot of addition next year for new offices. You should expect in 2023, that there will be. But in 2022, we don't anticipate a lot.

Ryan Tunis -- Autonomous Research -- Analyst

Got it. And then you also mentioned that franchise agent productivity is up. It's tough for me to gauge that, but I was having a hard time getting there. I was just looking at the franchise -- the new business franchise royalty fees that -- and I know I grew 30% this quarter. That was a deceleration versus what we've seen in the past few. So I guess my conclusion was that new business productivity was actually slipping a bit. Could you just talk a little bit about what's going on there? What are the headwinds? Is mortgage origination, commission rates, lower premium per policy in new states? I mean, what are some things to think about in terms of why that number could be decelerating?

Mark Colby -- Chief Financial Officer

When we talk about agent productivity increases, it's really bifurcating between Texas and non-Texas. Texas is arguably the best insurance market in the U.S. with the highest premiums, and we've been here the longest and have the biggest proof-of-concept here. But that's why we bifurcated. We're seeing growth in both Texas and non-Texas productivity. However, we've launched 82% of the franchises, I believe, is the number this year outside of Texas. And so I think as that might be kind of on a blended basis where you're seeing that in the new business royalties.

Mark Jones -- Chairman and Chief Executive Officer

I think there's some natural seasonality in the business that is built in. It's not, I think, accurate to look at things quarter-over-quarter, but you do see natural seasonality there. I mean the internal metrics that we look at on a cohort basis suggests that we're seeing very nice levels of the metric we look at internally, but don't disclose that new business, same-store sales. So we're very, very happy with the productivity results there.

Ryan Tunis -- Autonomous Research -- Analyst

And I guess another kind of productivity or renewal premium type question is just we're talking about a hard market and personal lines, both home and auto. I get that there's some issues with retention. But for those you do retain, I would think there's a 1:1 kind of relationship between rate increases and renewal commissions, the economics that flow through to you. I just want to make sure I'm thinking about that right.

Mark Jones -- Chairman and Chief Executive Officer

Certainly a small tail end. I mean, it's -- but when you're growing organically at total written premiums at 40-plus percent, it doesn't really make a material difference. As it relates to retention, we've been through hard markets and soft markets and the value of an independent agent with a choice product portfolio allows us to keep the client relationship intact while we move them into different insurance solutions. So we don't anticipate that being a negative impact on our retention rates.

Mark Colby -- Chief Financial Officer

Now in fact, our client retention has gone up from 88% to 89% recently. And because of the harder market, the premium retention has also gone up from like 89% a couple of quarters ago to 92% now. And that's why we really focus on that client retention numbers because it negates all of the premium fluctuations that can happen are outside of our control.

Ryan Tunis -- Autonomous Research -- Analyst

Thank you.

Operator

Our next question comes from Mark Hughes of Truist. Please go ahead.

Mark Hughes -- Truist -- Analyst

Yeah. Thank you. Good afternoon. Could you maybe expand a little bit on the marketing strategies you're considering or executing on now to drive traffic for the digital agent platform? I think you said that you wanted to make sure that economically sound. I'm sort of curious what your options are in terms of what you're looking at?

Mark Colby -- Chief Financial Officer

Well, I can tell you what's not an option, and that's competing with the very crowded space of personal lines, P&C advertising.

Michael Colby -- President & Chief Operating Officer

At $100 a click.

Mark Colby -- Chief Financial Officer

Yeah. I mean, the customer acquisition costs in the space is absurdly high, over $1,000 per customer. It's not where we're going to compete. I think GEICO spent close to $2 billion on advertising last year. So that's not where we're going to compete. It's crowded. We believe it's created a lot of noise. And quite frankly, has really been a misinformation campaign by a lot of folks in the space. What we can do and what we've done for close to 2 decades now is focus on bringing the best product and the best client experience to market, and leveraging kind of our referral network. We think there's digital marketing capabilities that we're building and we'll be utilizing that will allow us to amplify that effort, but it's certainly not going to be competing in that crowded space and blowing up our margins to do so.

Mark Jones -- Chairman and Chief Executive Officer

Mark, this is Mark Jones. We've sort of taken, as Mike said, the sort of the reverse order of what a lot of these competitors that call themselves lead generators do or quote generators. And that they sort of came to the market with a lot of height. They're spending a lot on marketing, but the underlying product is garbage. It's -- they are -- where they are using AI, it's based on consumer data, so you have people making mistakes that get amplified over and over. What we did, as Mike said, we've sort of developed the product we're bringing it to market. And if we're going to be completely honest, we don't have all the answers yet as to how we're going to sort of drive market penetration in the direct channel. We're doing a lot of things that will drive organic search results in terms of sort of getting content out on the web, and we have our Chief Marketing Officer, working on sort of a bunch of strategies for that.

But it's a little bit like with our sort of traditional channels of distribution, no one has ever figured out how to grow at 45% a year, spending virtually nothing on advertising, except us. And that gives me a lot of confidence that we're going to figure out how to drive growth there, but in a way that doesn't just destroy economic value, like literally, all of the other guys in this space are doing.

Mark Hughes -- Truist -- Analyst

Understood. In terms of the expense growth for next year, you were pretty clear, similar to 2019 levels. Did you say that you would look for EBITDA margins to be similar to 2021 next year?

Mark Colby -- Chief Financial Officer

I think it's -- we're not giving EBITDA guidance or EBITDA margin guidance. But given some of our comments, I don't think it's unreasonable to model out similar margin profiles to 2019.

Mark Hughes -- Truist -- Analyst

Understood. And then...

Mark Colby -- Chief Financial Officer

Again, we're growing at 45-plus percent, it's hard to nail it down in any given year, what you're going to spend definitely any given quarter, but I think that would be a fair.

Michael Colby -- President & Chief Operating Officer

One of the key reasons that we don't give earnings guidance is because almost all of our investment runs through the P&L. And we want to be nimble. We want to take advantage of opportunities that's what's helped drive our success for almost 2 decades, and we're going to continue to do that.

Mark Hughes -- Truist -- Analyst

Thank you. And then one other question. The noncontrolling interest, if you just look at it simplistically, relative to net income was lower this quarter. Is that the part of that tax phenomenon?

Mark Colby -- Chief Financial Officer

Yeah, that's part of it, too. And then again, as we've said over time, as the historical owners trickle out some of their stock sales, then that's going to continue to increase the controlling interest and decrease the noncontrolling interest.

Mark Hughes -- Truist -- Analyst

Thank you very much.

Mark Jones -- Chairman and Chief Executive Officer

Thanks, Mark.

Operator

Our next question comes from Mark Dwelle of RBC Capital Markets. Please go ahead.

Mark Dwelle -- RBC Capital Markets -- Analyst

Hey, good afternoon. Most of my questions have already been answered. But one thing I wanted to ask about, just with the difficulties so many companies are having and hiring people. I was wondering how you were seeing just franchise applications and follow through to kind of fill the ranks as it were relative to what you were seeing maybe earlier in the year last year?

Mark Colby -- Chief Financial Officer

I think we're outperforming our internal expectations on the franchise sales side in a very encouraging way. We offer a value proposition that is truly unmatched to entrepreneurs to build wealth, to have a fulfilling career with a very modest initial investment, and that value proposition continues to resonate in our franchise efforts. There's not a business in America that could say there's a tailwind in the labor market right now. But nonetheless, we have a very equipped recruiting team to manage through that, and it has not slowed down kind of our growth, what you can see from the guidance that we provided on that core kind of predictive metric of revenue growth being total written premium. We're still very, very confident in that. And we feel like we're well prepared to continue to sustain and accelerate that growth going into 2022. It's not to say we're not met with challenges it's just, I think, a testament to our team's ability to navigate through those challenges. And I think it's a testament to our culture, and it's a testament to the value proposition that we provide to both employees and franchise candidates.

Mark Dwelle -- RBC Capital Markets -- Analyst

Thanks for the color on that. And then one other just fairly brief question. I guess, you refinanced or retermed out some of your debt in the quarter. Are the terms on that any significantly different than the old, it looks like it's primarily just an expansion of term note?

Mark Colby -- Chief Financial Officer

Yeah. Terms are relatively the same. With the additional leverage, we bumped up a couple of tiers on the interest rate. But again, as quickly as we delever as we grow our EBITDA, I expect that to come down over time.

Mark Dwelle -- RBC Capital Markets -- Analyst

Thanks for taking all my questions.

Mark Jones -- Chairman and Chief Executive Officer

Thanks, Mark.

Operator

Our next question comes from Chris Martin of KBW. Please go ahead.

Christopher Martin -- KBW -- Analyst

Hey, guys. Thanks for having me on today in place of Mayor as it's is pretty busy afternoon. And so the one question I want to ask is really about what the aging part but also just the engagement you guys are getting, and you really talked a lot about your NPS looks awesome. The agent experience. But what are you guys kind of seen from the insurance side? And I think, insurers one appetite to get involved with your agent portal, but also the other on the technological side, how easily are they able to connect into your portal? And what types of insurers have you kind of seen be able to get up and running?

Mark Jones -- Chairman and Chief Executive Officer

I think to your first question, our insurance company partners are enthusiastically supportive of our technology endeavors and particularly the digital agent platform that we've developed and that we continue to invest in. What they see is -- and because that the technology is powered by expert agent insights, it allows us the ability to very precisely match risk with risk appetite and drive profitable underwriting results and growth for our insurance company partners. Not to mention the fact that we have almost 30 quality analysts on staff that are reviewing every single policy that we write to make sure that it's within their guidelines, and within their appetite.

So I'd say we've demoed this for all of our partners. And again, it's been met with enthusiastic support. The second part of your -- can you repeat the second part of your question?

Christopher Martin -- KBW -- Analyst

Sure. If there are any -- if you say, hurdles on the technological side for insurers to be able to actually connect into the portal? And just a little briefly chat about how that works? And which types of a regional and national?

Mark Jones -- Chairman and Chief Executive Officer

Right. There is a massive disparity between the least capable insurance company partner of ours and the most capable. And there's partners of ours that would reside everywhere in between that continuum. If we were up to us, we'd have our technology goals accomplished 5 years ago. So because of our buying power and because of our scale and the long history of our relationship with these partners, they are willing to make differentiated levels of investment on their technology side to accomplish our shared goals, ultimately, they're very -- they're shared goals. We want to provide a great client experience. We want to drive profitable growth. We want to be the lowest cost distribution partner for these insurance companies. So what you'll see over time is are more advanced, like I mentioned, in 2022, having multiple carriers launched through quote-to-issue in our digital agent platform. That will -- those carriers will roll out with those capabilities, as we complete kind of the projects with them. I can say that it's very rare that any of our partners are waiting on us. It's typically the other the way around.

So as new carriers finalize these deeper integration processes and are equipped to go quote-to-issue, you'll see those buy now type options within the results on our digital agent platform. We'll never get to a point where all of our partners will be able to do that or will be able to provide that for every segment of the market. Like, for instance, our Private Client segment is so complicated that it wouldn't be a great client experience to ask them to do that on their own. It's too complicated. There's too much at risk. But it will be a specific approach to different segments of the market based on kind of where they're located geographically, and what the capabilities of the carriers that are addressing those kind of local kind of market needs, the capabilities that those companies provide.

So I would expect, and I think it will be very exciting for you all to see over the course of 2022, these folks developing these capabilities to go quote-to-issue. I think we'll have a critical mass of companies that allow us to provide a legitimate choice offering to all of our major markets quote-to-issue by the end of next year. So we're very excited about that, excited about the progress that we're seeing. And not to mention ancillary products. Like I mentioned, the Ethos Life, which is going to be a great, seamless cross-sell opportunity for us to flood insurance, landlord insurance policies, all of this that's not available anywhere today in a single platform with a choice product offering.

Christopher Martin -- KBW -- Analyst

That's awesome. That sounds great. I guess just as a kind of a follow-up but really related question is. So as you're describing all of that, you're proving it out in the market. What does the business development look like from a kind of inbound versus outbound type of relationship there?

Mark Jones -- Chairman and Chief Executive Officer

Right. I mean we believe in the role of the agent. We believe the role of the agent is critical today, remains so definitely. So it's a technology and routing effort. And we're very -- we're experiencing that from past endeavors and believe we have a very solid plan to make sure that inbound traffic is routed and served expediently. And I think it's important to note and most important for our consumers to note that when they are requesting an insurance quote from an agents, we never sell the data. We protect their privacy, and we assign them with a specific agent that is equipped to meet their specific local needs, and they have that one-to-one relationship. We're not trying to monetize the data in any way. So we are seeing some -- on a small base, some enhanced levels of inbound traffic and have very effectively been able to route that and respond to that and deliver an excellent client experience as evidenced by a 96 net promoter score for those consumers that are engaging us on the digital agent platform.

Christopher Martin -- KBW -- Analyst

Excellent. Thank you very much. That's all I have for now.

Mark Jones -- Chairman and Chief Executive Officer

Thanks, Chris.

Operator

Our next question comes from Pablo Singzon of JP Morgan. Please go ahead.

Pablo Augusto Singzon -- JP Morgan -- Analyst

Thanks and good afternoon. I think you outlined about maybe 3 or 4 incremental revenue opportunities that you see with the digital agent platform. And recognizing that it's early days. I was wondering if you could rank those opportunities based on the relative size. And I guess if we focus on one that you mentioned, increasing share with referral partners. Could you provide context on where that stands today, just in order of magnitude? And I guess, the kind of opportunity you see there? Thanks.

Mark Jones -- Chairman and Chief Executive Officer

I don't think that there would -- we look at those as mutually exclusive priorities. We're attacking those from every angle. There's a lot of value to be created across all of those efforts. Integrating into the loan origination process earlier and capturing more share of a referral partners business is going to help anchor that account and drive agent productivity. Driving increased levels of cross-selling is going to obviously enhance our new business per new account, but also increase the lifetime value of the client through enhanced levels of retention. Putting tools into our existing clients' hands where they can shop their insurance policies when they see rate increases proactively or when they incur different life events will not only remove work from our agents place and increase productivity, but will drive retention.

So I wouldn't say that any one of those is the #1 priority. I think we can attack all of those areas with vigor and not with our existing resources, and not have to make any specific trade-off there.

Pablo Augusto Singzon -- JP Morgan -- Analyst

Got it. That makes sense. And then my second question is...

Mark Jones -- Chairman and Chief Executive Officer

One other area, Pablo.

Pablo Augusto Singzon -- JP Morgan -- Analyst

Sorry.

Mark Jones -- Chairman and Chief Executive Officer

One thing that I didn't hit on is the recruiting benefit of this tool. That is going to be a lever for growth. And that's another area that anecdotally is providing us with a lot of momentum in the recruiting effort is seeing kind of this tool, this tangible tool that agents can work with kind of during the recruiting process and then understanding that there's nothing else like this on the market. I do think that's going to provide some win in our sales as it relates to recruiting.

Pablo Augusto Singzon -- JP Morgan -- Analyst

Understood. And then my second question is, if you measure franchise productivity in terms of premium per franchise, that metric has been going up for you the past couple of years. I think maybe 2019 is about $900 million, and now it's about $1,100 -- so $1.1 million. I guess the question is, what kind of upside do you see in that metric is more of your franchises mature? And I guess, conversely, it seems like the opposite has been happening in the corporate channel. And I think in the past, you had said it sort of due to efforts of corporate agency support franchisees, also, I think, a change in business mix, as you move out of Texas. So I guess, if you could speak to those productivity metrics, high-level and where you see them trending over time? Thanks.

Mark Jones -- Chairman and Chief Executive Officer

I think the productivity -- it's interesting. We're seeing strong levels of productivity from our more seasoned franchisees, both from hiring producers and scaling their sales efforts, but also as they leverage technology as they continue to become more proficient and efficient in the sales and marketing process, we're seeing kind of individual productivity levels improve as well. And that's a big area of investment for us. That is the strategic rationale of our corporate channel. And we're very happy with what our corporate agents are doing, both by defining best practice, but by also working very effectively to disseminate that information and drive productivity in the franchise channel. That doesn't happen by accident.

Even on the recruiting side, a big part of our value proposition to those more senior and tenured franchisees is teaching them the people process that has worked for us for nearly 2 decades and has allowed us to scale our corporate channel very effectively.

Pablo Augusto Singzon -- JP Morgan -- Analyst

Great. Thanks for the answers.

Mark Jones -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Josh Shanker of Bank of America. Please go ahead.

Joshua Shanker -- Bank of America Merrill Lynch -- Analyst

Yeah. Thank you for taking my questions late. I may have missed it, but I don't think I did. What's the operating franchise under contract number for the quarter?

Mark Jones -- Chairman and Chief Executive Officer

Sorry, I have to pull that up a little bit. It was 1,801 total franchises and then operating was 1,070. With the 1,958 total and 1,139.

Joshua Shanker -- Bank of America Merrill Lynch -- Analyst

1958 would be total. Okay. Great. Thank you. And in terms of the sort of where we're looking at different states outside of Texas, where are the fastest growing states that you guys are recruiting in right now?

Mark Jones -- Chairman and Chief Executive Officer

I think it would correlate with the population centers, but also in some of our fastest growing housing markets like you're seeing in kind of the South and southeast and kind of getting into the Mountain West. Certainly, we're seeing the the narrative that you hear in the media of those fast growing markets and folks kind of leading some of the 2 coasts into those markets we're certainly -- we're seeing that both from a recruiting demand but also, as it relates to our corporate agents and where they want to locate, but also franchise growth efforts.

Joshua Shanker -- Bank of America Merrill Lynch -- Analyst

Okay. And one other unrelated question. Given where...

Mark Jones -- Chairman and Chief Executive Officer

Josh, to be specific on that is it's Texas, North Carolina, it's Colorado, Arizona, Florida. Nevada's are in particular fast growing.

Joshua Shanker -- Bank of America Merrill Lynch -- Analyst

And one also unrelated question, where pricing is right now in the auto and home markets a lot of companies are going to take rate here. Are you seeing any changes in commission rates in order to sort of close the funnel to some extent to new business, given where margins are for the underwriters?

Mark Jones -- Chairman and Chief Executive Officer

Not for scale distributors like Goosehead. I mean, I think if you're subscale, you're certainly feeling pressure and have been for a long time, but we have very stable compensation arrangements. And in fact, as we continue to scale and deliver on our value proposition to the insurance company of high-levels of growth, high-levels of profitable growth most importantly, we're seeing enhanced compensation opportunities. I mean, it doesn't -- there's not a step function increase in any 1 year. But if you look at trends over the long-term, we feel very confident that our compensation levels will remain stable and grow to be more favorable.

Joshua Shanker -- Bank of America Merrill Lynch -- Analyst

Okay. Well, thank you for all the answers and given me in late hour. Thank you.

Mark Jones -- Chairman and Chief Executive Officer

Thanks, Josh.

Operator

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Jones for any closing remarks.

Mark Jones -- Chairman and Chief Executive Officer

I'd just like to thank everyone for listening and for your participation today, and wish you all a good evening.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Daniel Farrell -- Vice President of Capital Markets.

Mark Jones -- Chairman and Chief Executive Officer

Michael Colby -- President & Chief Operating Officer

Mark Colby -- Chief Financial Officer

Matthew Carletti -- JMP -- Analyst

Ryan Tunis -- Autonomous Research -- Analyst

Mark Hughes -- Truist -- Analyst

Mark Dwelle -- RBC Capital Markets -- Analyst

Christopher Martin -- KBW -- Analyst

Pablo Augusto Singzon -- JP Morgan -- Analyst

Joshua Shanker -- Bank of America Merrill Lynch -- Analyst

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