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Mark Miller

Thanks Dan and good afternoon everyone. Thank you for joining our third quarter earnings call. Two years ago when I joined the executive team, we had some significant challenges in the business that required intense focus.
We had allowed our recruiting standards to slide and our organization had a rising level of unproductive corporate and franchise agents. This challenge was amplified by the fact that we were also facing the economic upheaval, triggered by the pandemic and the increase in intense weather related events.
Our team confronted these challenges head on. And as a result today, our franchises are healthier and our agents are more productive. We have achieved record profitability and for the first time in our company history, who said insurance has reached the milestone of $1 billion in premium within a single quarter.
For a point of reference, this is 10 times the size we were at our IPO in April 2018. This transformation is a testament to our unwavering commitment to our strategic operating plan, innovation and the resiliency of our team.
While the insurance industry dynamics seem to continuously change our value proposition for our clients and carrier partners remains constant for our clients. We deliver unrivaled choice, candid advice and concierge service for our carriers. We provide broad and efficient distribution with every policy we issue every connection we foster and every decision we make. We're building a legacy of trust and value.
We will continue to lead the way in personalized insurance distribution with our industry, leading technology and highly trained agents. We have taken many decisive actions the past couple of years designed to strengthen our business and we know we're healthier than ever. We have expanded our margins while investing in technology and service and to gain a competitive advantage.
This challenging product market has forced us to develop more operational discipline, allowing us to adapt to opportunities more quickly. Thanks to those investments, we are confidently beginning to re accelerate growth with more agents and broader geographic distribution. Growing. Our corporate agent base requires a strong recruiting engine at major universities.
Franchise agent growth takes a highly skilled franchise development team, sourcing entrepreneurs that want to build a business. Once the franchise is established, we help our owners find talented agents to grow their businesses. We have invested heavily in building a world class talent acquisition function that has the capability to recruit hundreds of corporate agents off college campuses each year.
This year's college recruiting class is the largest group we have ever recruited, and we believe the highest quality as a result, our corporate agent headcount grew from 276 in Q2 2023 to 458 at the end of Q3 2024 given confidence in our improved recruiting process and sales management. We've decided to open a new corporate office early next year in Phoenix with a goal of expanding and diversifying our footprint.
This office offers an exciting new career path for corporate agents and supports Western US franchise expansion. We still believe one of the best ways to grow a healthy franchise business is by placing some of our best corporate agents into franchise ownership and under penetrated geographies. Corporate agents that convert to franchises tend to stay longer, produce more and replicate themselves.
As an example. Last quarter, Tyler Silver, an ex corporate agent turned franchise owner sold over $100,000 in new business revenue. A remarkable first year accomplishment. Tyler joined Goosehead four years ago in our Fort Worth office, we recruited him from the University of Florida, but he's a native of North Carolina. He spent three years in Texas, perfecting his sales processes and acquiring leadership skills that would benefit his ability to build a large franchise in the future.
A year ago, this month, Tyler opened his franchise in Raleigh, North Carolina. Over the past year, Tyler is, has established a sizable referral partner network in his area, rebuilt a substantial book and more recently hired his first producer, Tyler represents the type of individual that could build a thriving multi agent, multi location franchise operation in the future.
Our recruiting engine has also been extremely successful in helping source new agents for our existing franchises. We call this our agency staffing program or ASP for short through the first nine months of this year, our scaling franchises have hired over 500 producers with ASP sourcing. About half of those and our producers recruited through the ASP have generated more than $1 million in incremental recurring revenue.
This program coupled with the franchisee's own recruiting efforts has increased our average Asians per franchise to 1.9 from 1.6 a year ago. We expect to continue to drive this number higher, creating the potential for exponential growth in new business production to recruit more qualified franchises across the country. We have more than doubled the size of our franchise development team in the past six months.
In Q3, we added 30 new franchises from 17 different states. We believe this is one of the most talented groups of owners we have ever launched and strongly supports our strategic initiative to diversify our agent force across the United States.
Our efforts to rationalize the franchise base over the past couple of years has proven to be successful and the financial health of the entire franchise community has materially improved during Q3, 36 operating franchises exited the system versus 89 a year ago using the same compliance standards.
The other part of the revenue equation is getting more productivity out of each agent. The insurance product market and housing market conditions can factor into how productive our agents are at any given time.
However, we continue to stay focused on what we can control, to mitigate any external forces to combat market headwinds. We have intensified our agent training programs and refined our referral partner marketing techniques to generate more leads per agent per day.
Our franchise productivity improved 52% year over year. Thanks in large part to increased referral partner activations, leading to higher leads per agent conversions of top performing corporate agents into franchise ownership and the growth of scaling franchises. These franchises tend to have higher productivity levels per agent. Due to more highly refined sales processes.
On the corporate side of the business, we are investing heavily in growing capacity which naturally decreases tenure and productivity. However, we believe the corporate sales team is now well positioned for the future expanding on the product market for just a moment. As you've likely seen, auto insurance is showing signs of improvement with carriers gradually opening capacity and rate increases starting to ease.
While we're seeing positive momentum on auto, the homeowners market remains challenged. However, we are seeing signs of market stabilization and potential for future product expansion as carriers reach rate adequacy and make changes to policy terms and conditions.
As of now, we do not know the financial impacts of the recent catastrophic hurricanes that hit Florida, Georgia and North Carolina. And more importantly, our hearts go out to the people affected by Helene and Milton. We still believe that homeowners insurance will be an increasingly attractive line for carriers. Given pricing updates, underwriting changes and the favorable client profile across all product lines.
We're uniquely positioned to bring high quality clients to our carriers. Given our go to market strategy that leads with the homeowners transaction first, regardless of market turbulence, we are pleased to report that we're beginning to see retention rates stabilize.
Client retention was flat at 84% for the second quarter to the third quarter of this year. This is after multiple quarters in a row of sequential declines due to historically high premium rate increases driving client shopping activity. Stability in our client retention is a huge factor in the reacceleration of our policy and force growth rate to 12% in the quarter compared to 11% in Q2.
And we have confidence that retention will return to historically high levels over time. As the product environment inevitably improves, we have strengthened our business expanded our margins and sharpened our operational discipline enabling us to adapt swiftly to accelerate growth.
Our recruiting efforts are thriving. We've doubled down on our franchise development capability. Our retention rates are stabilizing and margins are improving as we celebrate the remarkable achievement of hitting $1 billion in premium for the quarter. And look ahead. I want to extend my gratitude to our dedicated employees, franchise partners and carriers together. We're redefining how insurance is distributed with that.
I'll turn over the call to Mark Jones Junior, our CFO.

Mark Jones

Thanks Mark and good afternoon to everyone on the call.
We delivered exceptional results in the third quarter that further demonstrate our building growth momentum. Despite what is still a very challenging product and real estate environment, our continued execution exemplifies the strength and consistency of our business model. Our business is very naturally hedged, allowing us to deliver strong growth and improving margin in varying macro environments.
As product availability, constricts and premiums rise. It places some additional challenge on new business production but drives up the value of the entire renewal book as premium growth rates level off product becomes more available, allowing us to drive significant new business production growth, retain a higher percentage of our existing book and earn more favorable contingent commissions.
We have resisted the temptation to expand and venture into other areas or to vertically integrate across the insurance spectrum, potentially putting our core business at risk.
We believe we operate in the most favorable portion of the insurance value chain, and we will remain maniacally focused on what we do best personalized insurance brokerage. The growth opportunity that lies in front of us is massive as we still represent less than 1% of the market share of the $480 billion US personalized market. We possess a substantial competitive moat and will remain disciplined in our execution and commitment to our long-term goal of becoming the largest distributor of personalized insurance in our founder's lifetime.
At quarter end total franchise producers were 2,093 up from 1,995. As of the second quarter of 2024 our agency force continues to get stronger and continues to scale growing producers per franchise for the seventh consecutive quarter to 1.9 this is an important stat because as we've discussed in the past each time, a franchise onboards a producer, it improves the productivity of everyone in that agency creating exponential growth opportunity.
We believe our franchises are now healthier than ever. A same store sales were up 26% over the previous year and average gross pay per franchise was up 56% in the quarter. When compared to the prior year, we continue to believe investing to help our franchises build large scale agencies will be a significant growth lever. Over the long term, we are committed to helping our franchises reach their full potential and we will invest accordingly in training and technology to ensure our mutual success.
Corporate producers at quarter end were 458 up 45% from the year ago level of 316. While it is still early, the initial indications are this summer recruiting class is one of the strongest and highest quality we have recruited given the seasonality of our recruiting, which is largely in the second and third quarter. Coupled with normal attrition. We expect corporate agent headcount to end the year down slightly from the third quarter level.
We're already actively recruiting on 15 college campuses and look forward to driving further corporate agent growth in 2025 and beyond the growth of our corporate force is crucial to supporting the franchise network and having the ability to launch top performing corporate agents into franchises across the country.
Moving to our results total written premiums. The leading indicator of future revenues grew 28% over the prior year period to $1 billion. This represented a record level of quarterly premium for the company and the first time quarterly premium exceeded $1 billion. This includes franchise premium growth of 33% to $825 million. And corporate premium growth of 12% to $204 million.
Our improving productivity particularly in the franchise network along with stabilizing client retention, give us confidence in our ability to continue to drive high levels of premium growth in the near and medium term. Total revenues for the quarter grew to $78 million representing 10% growth over the prior year period. With core revenues of $73.5 million up 16% for the quarter as our crop of new corporate agents progress through their first few months of selling.
Our franchisees continue to reach new highs in productivity and we feel the benefit from stable client retention. We expect to drive faster core revenue growth in the fourth quarter when compared to the third quarter as a result of dramatically lower franchise turnover cost recovery revenue declined 40% during the quarter to $1.6 million.
Further underscoring the stability and strength of our franchisees during the quarter, we terminated or transferred 36 operating agencies compared to 89 in the previous year period, which resulted in lower accelerated franchise fee revenue.
As we discussed in the second quarter. The health of the franchise network is stronger than ever and we expect to deliver growth in the total operating franchises in 2025 which will result in a more normalized growth rate and cost recovery revenue, ancillary revenues, which includes contingent commissions were $2.9 million down 44% from the year ago period.
Given the core loss ratio improvement of our carrier partners observed thus far in 2024 we believe there is potential upside to our previous expectation of 35 basis points for the full year of total written premium as contingent commissions. However, that information will not crystallize until the fourth quarter.
The overall health of the auto market and underwriters approaching premium adequacy in the home market give us confidence that we will see improvement in contingent commissions. In 2025 we strive to provide our carrier partners with the highest growth and most profitable business we can with the objective of becoming the lowest cost distributor for our underwriters.
Our technology and our broad agent force allow us to more precisely match carrier underwriting appetite with client demand in the market which should drive efficiency and product availability and compensation over time. Policies in force were 1.6 million an increase of 12% compared to 11% in the previous quarter.
This represented the first sequential improvement in the policies in force year over year growth rate in the last 13 quarters, we expect to drive gradual improvement in the policy in force growth rate through 2025. As our agents become more productive through advancement in the tenure curve, what we believe will be an improving macro environment and stable client retention rates.
We expect client retention to begin to improve as the home market improves and the rate of premium increase year over year begins to abate. We see no impediments to our client retention. Referring to our historical high of 89%, Adjusted EBITDA for the quarter was up 17% to $26.1 million from $22.4 million a year ago and adjusted EBITDA margin expanded 193 basis points to 34% for the quarter compared to 32% in the year ago period.
We remain very disciplined in our cost controls while still investing strategically in areas like human capital development and technology to secure our future growth. We are matching our level of investment into new business generating technology with the technical ability of our carrier partners. As they deploy more resources to growth facing technology, we will do the same.
We expect to deliver on our objective of margin improvement for the full year and anticipate continuing to do so in the future years to come, our business continues to demonstrate strong cash generation, increasing operating cash flow for the quarter to $59 million from $37.4 million, an increase of 58%.
At the end of the third quarter, we had $50.1 million of cash and cash equivalents. Our unused line of credit was $74.8 million and total outstanding notes payable was $95.6 million. This puts our debt to trailing four quarter EBITDA at 1.2 times and net debt to trailing four quarter, EBITDA at just 0.6 times.
Our strong cash generation and significant balance sheet flexibility provide us with ample optionality to drive shareholder value through capital return. As we have previously stated, we will look to maintain an efficient balance sheet with conservative debt leverage as our current debt facility matures in July of 2026 meaning it becomes current on our balance sheet in July of 2025 we have began reviewing options for a new term loan and revolving credit facility.
Consistent with our historical stance. We are comfortable with leverage levels of approximately 3 times to 4 times our trailing four quarter EBITA and given our strong cash generation and consistent earnings growth, we de lever very quickly in the past. We have elected for special dividends and you should expect that to remain a component of our capital return strategy. However, as we have shown this year, we will remain opportunistic with our share repurchase program and will likely include repurchases as a portion of the longer term capital management strategy.
We are raising our guidance for the full year 2024 as follows. Total written premiums placed are expected to be between $3.7 billion and $3.82 billion. Representing 25% growth on the low end of the range and 29% growth on the high end of the range.
Total revenues are expected to be between $295 million and $310 million representing 13% organic growth at the low end of the range and 19% organic growth at the high end of the range. Adjusted EBITDA margin is expected to expand for the full year 2024.
Thank you to our clients, our carrier partners, our service team, our franchisees and everyone like you said, for delivering a fantastic third quarter with that.
Let's open up the line for questions, operator.

Question and Answer Session

Operator

Thank you. (Operator Instructions) Matt Carletti, Citizens JMP.

Matt Carletti

Hey, thanks, good afternoon. Mark Miller, you made a, you commented a little bit about product availability. Sounds like I think you said market stabilization if I heard you right? Could you just go into that a little bit more in particular? Just obviously you guys have certain key geographies where, where your big Texas comes to mind. California and some others that have had some of the tougher product availability challenges. What are you seeing in those jurisdictions?

Mark Miller

Yeah. Matt, how you doing?

Matt Carletti

Doing great. How are you.?

Mark Miller

Yeah, overall, like I said, in my prepared comments, the auto product is starting to return, carriers are beginning to change their home products, which gives me a lot of optimism that product will start to come into some of the more challenged markets like Texas. And when I say change their product, I mean, depreciable roofs, higher deductibles.
And we've talked to a lot of carriers, I believe product will start to flow back into the market pretty quickly. But I don't know exactly when, and I think we still deliver a huge benefit to our clients to find the product and to our carriers delivering them the right clients, but we still have product in every market. It's just thinner.

Matt Carletti

Okay. That's helpful. And then if I could just a numbers question quickly, G&A expenses took a pretty good step down in the quarter from, you know, about a million and a half lower than kind of where it ran the first couple of quarters of the year. Is there anything in particular going on in that number that we should carry forward or not carry forward?

Mark Jones

No, one offs or anything specific to call out. We've been really disciplined with what we're going to invest in, want to make sure we're making all the investments we need to, to secure future growth, but be really cautious and make sure if there's something that can wait to the future, we're going to wait to the future.

Operator

Brian Meredith, UBS.

Brian Meredith

Thank you a couple of them here for you. The first one going back to mats question a little bit. Maybe you can talk a little bit about how competitive your product is in some of those areas like Texas and California, you know, particularly relative to captives. Are you seeing any rate go up at some of the captives and why you've got products, like I said, is it competitive right now?

Mark Miller

Hi, Brian, this is Mark Miller. Yes, I think it's competitive in most, most places. I mean, it's not as competitive as it used to be in against some of the captives. But we are seeing the captive starting to raise their prices. And our carriers, you know, are on the front end of price increases. We're starting to see those prices stabilized. And so it's all starting to balance out. And I still think, you know, we've got decent lead flow coming in despite, you know, challenging housing market and we've got decent product to sell.

Brian Meredith

Got you, but you still, I understand. Got some carriers that have been on your platform that actually pulling back. That's correct.

Mark Miller

Yeah, I won't, names, but they're, I mean, you're obviously aware of what the market situation is out there with some carriers where they, you know, temporarily closed down markets and, you know, they're great carrier partners for us and we will back their play and they will inevitably return to the market.

Brian Meredith

Got you. And then the second question, I'm just curious, good outlook. It sounds like with respect to client retention. Do you think we've hit that bottom at this point at 84%? And kind of gradually start to work way up from here or is there potential for to tick down again?

Mark Jones

Yeah, I mean, this is Mark Jones. We've talked about a lot that our client retention decline is really largely based on pricing action. And so you could see in the third quarter, we had less price increase in the book, just the difference between the fifth growth and the premium growth rates. You can see the decline in the pricing which naturally results in a better client retention.
So assuming that you continue to get stable pricing, we would expect client retention to remain here and then eventually tick back up through 2025. That's probably a good assumption there could be puts and takes in any given quarter.

Operator

Tommy McJoynt, KBW.

Tommy McJoynt

Hey guys, thanks for taking our questions. When you, talk about some of the new referral partner activations, Are you diversifying away from, you know, sources in and around the home sale? And, along the same lines, can you talk about how your, your corporate class is performing? Just with that key referral source of home sale volumes remaining somewhat challenged?

Mark Miller

I mean, that will be our primary go to market strategy continuing to focus on the home closing transactions. Now, of course, once you get that first lead built up with referral partner, they continue to send you leads. If leads go down, we go back out and we get more referral partners. So that's how we keep the lead volume up and it kind of spring loads us for when market activity improves. That we've got those referral partners built up.

Mark Jones

Yeah, I think something that's important to remember is we just still represent such a small percentage of the market share nationally. It's, just over 5% in new home closings. So a significant amount of runway still to go in almost every single geography. And even in Texas, we still have plenty of room to grow. We just want to match our agent footprint with what really the carrier demand is.

Mark Miller

And I think your second part of the question was just about how are the new agents performing? It's, too early to tell. I mean, that class just started, they come with the summer graduation from college students. So it's, it's June to September, but early indications are very positive compared to prior classes. And I think it's the highest quality class we've ever recruited.

Mark Jones

Yeah, from a 10 year adjusted perspective, the productivity is just as high if not higher than the previous year's class, which was also a very good class. And honestly, these new agents don't know anything different. I mean, the housing data came out today. It's another bad month for housing and yet we still delivered more leads than we have in the previous month. So our agents are doing a good job with our proprietary technology being able to find the right lead sources.

Tommy McJoynt

Got it. Thanks for that. And then separately, did the hurricanes have any notable impact on, revenues in the quarter, either looking at the third quarter events and then as you think about Milton, perhaps the impact on the fourth quarter.

Mark Jones

Yeah. So typically what happens when a hurricane is coming is carriers will put a moratorium on new business in the path of that hurricane. And so usually what happens is you'll see a slow down in production in that region for a week, maybe two weeks and then that builds back up and comes through. So with the timing of a lien right at the end of the quarter, you didn't get to see any of that that came in after the hurricane passed through.
So some of that got pushed to the fourth quarter with Milton. It's really just a timing in between where it was in the month. So it doesn't typically actually end up impacting new business in the long term but can cause it to shift from quarter to quarter if it happens right at the end of the quarter.

Tommy McJoynt

Okay. And are you -- is there any way to quantify how much that Helene impact could have been? Just given that it came in sort of the last week or two there.

Mark Jones

But if you just think about where our agents are, I think Florida is our second largest state. So without giving you any real numbers, just kind of a general indication that's where we have a lot of agents.

Operator

Thank you. Michael Zaremski, BMO.

Michael Zaremski

Hey, thanks. Good. Late afternoon. I have a couple of questions on on the revenue guidance, I guess revenue and premium guidance. But I guess first question the high versus low end for the year on revenues, I guess it's surprise. It's kind of a still a wide range even though we're pretty late in the year and a month in I get any help in terms of variables, we should be thinking about to get us towards the higher low end.

Mark Jones

Yeah, I mean, we still are operating in a relatively volatile environment. A from product availability perspective, carriers are coming in and out of markets and from a contingency perspective, which can have a pretty big impact on the total revenue number. We still won't have enough information to really make a call on that until probably late November when you get enough lost data.
So that can cause a pretty dramatic change in the revenue number that we feel like based on our core loss ratio of performance that we've seen some improvements in the contingency expectation. You can see how that would impact the bottom end of the revenue guidance. From a premium perspective, the franchise side of the business is performing very, very well and just remember that that doesn't really impact revenue in year one.
It impacts the premium immediately because that's 100% whereas the revenue is $0.20 on the dollar. And so if you look at the agencies that we've launched so far this year or less than one year, franchise productivity is up 133% year over year. So they're really doing a fantastic job and that impacts premium more than it impacts revenue.

Michael Zaremski

Okay? That's helpful and makes sense on the contingent. Okay, so sticking to revenue in the premium guide and so if I look at the 4Q guide, it improves, it implies a pretty material improvement in the ratio of revenues divided by premiums. I don't want to put answers in your, in your mouth, but I think it's because you're, you're growing corporate so much more than, than franchises, but I'm trying to understand what's driving that. is it a permanent step up in that ratio?

Mark Jones

So really, I would point you to some of the contingency commentary which that doesn't impact the premium number and that can move the revenue number pretty materially and those are largely end up being binary. So if you're right on the edge of a loss ratio, qualifier for a contingency, you could be getting millions of dollars or you could be getting $0 but that doesn't really impact the premium numbers at all. So that can change your ratio of revenue to premium in an a quarter.

Michael Zaremski

Okay. Got it. And lastly on franchise growth and also corporate agent growth. So clearly a great corporate hiring number much, much better than expected, I guess. You know what? I don't know how much you can say, but you know, would you say kind of this is the new algorithm and we should expect if things work out with this class, we should expect you know, a similar rate of growth. You know, summer, next year or for the full year, next year.
Again, I guess summer, right? Because you know that you, you were just still doing some calling and some, some corrective action earlier this year. And I guess also, can you remind us similarly about kind of how to think about the graduation rate? I think you've talked about it historically of corporates, potentially graduating, buying into the franchise model.

Mark Miller

Yeah, I'll take that first part of the question. So, you got it right? The majority of our corporate agent hires ha happened, June, July, August a little bit in September. And then we start on the next year's recruiting class and we're going to more campuses, more diversification is the thought there filling up. The Phoenix office is a big goal there.
So we have more physical capacity than what we had in the prior year with the opening of the new Phoenix office. We feel really, really good about this class we hired, we will see, how we got different economics for them to lock them in. I think they'll stay, but we stay better than they have in the past. But what we'll see is likely a decline in the corporate agent count from night now to the end of the year as some work out, some don't some leave the company.
And then the plan is to, you know, focus on agent recruiting for next year's summer class and we will just see how recruiting goes. I don't want to commit to any numbers yet. But, I feel good about what we're doing and the quality of the agents that we're bringing in is unbelievable right now. (multiple speakers)

Michael Zaremski

Sorry, go ahead.

Mark Miller

And I was going to say on the franchise side, if you were asking about that, you notice that we eliminated or cold as we used to call it. A much smaller number of franchises from the system this quarter. And we added about 30 but they were very high-quality franchises that we added.
So I feel good about what we're doing on the franchise side that we've gotten to quality over quantity. Now it's time to crank the quality up and we've really invested in the franchise development team. So just adding more franchises will obviously increase the number of agency producers.
But the ASP program that we mentioned is doing extremely well and because of all the coaching and the health of the franchise network, they're starting to add their own producers. So we talked about 500 producers being added in the, in the franchise community, half of which came through the ASP program. That whole thing is working very well right now.
And, I think one key number that Mark Jones Junior just mentioned was first year franchise productivity up 133%. I just wanted to reinforce that number. That is really speaks to the quality of the franchises that we're adding now.

Michael Zaremski

Okay, all that's helpful and just one quick follow up. So when we look at the corporate sales agents growth, 3Q sequentially from 2Q, is there something one time in nature there that we should be keeping in mind as we think about 3Q '25 or as you know, was, you know, this is a, it's a great recruiting year and, you know, base case weeks, you know, you'll be doing the same processes next year if all works out.

Mark Jones

Yeah, I would say nothing one time. I think the amount of growth. You saw 2Q to 3Q, you will likely see somewhere around that similar size next year. It's about developing the right amount of managers to absorb all those people. We've talked a lot in our past about absorptive capacity. We don't want to overload our management bench and we want to make sure our agents are as successful as possible. So we want to keep growing the corporate team to provide new new leadership opportunities and also launch franchises across the country. So we got to continue to invest there.

Mark Miller

What you're seeing is what we talked about last year with building up the capability of the talent acquisition team. And it would take a while to recruit off of college campuses and they graduate and come in. You're seeing that first class of really having a really world class development team, talent acquisition team to bring in new candidates so that capability will exist next year.

Michael Zaremski

Okay. And maybe I'll just, if you don't mind, do one more follow up in terms of the pace of growth, which is agent growth, which has been much better than expected. Will that have any? It clearly hasn't have any negative impact in the near term on margins. It clearly hasn't this quarter.

Mark Jones

So they've done a good job getting productive very quickly, which makes them pretty accretive to the P&L I mean, you will see some increased compensation and benefits expense in the fourth quarter just related to having those agents on the books for the full quarter because obviously they didn't all start on July 1. They started throughout the quarter. So you'll see a little bit of that, but they should also be producing enough to get pretty close to offsetting their costs.

Operator

Mark Hughes, Truist Securities.

Mark Hughes

Yeah, thank you. Good afternoon. I think you might have touched on this. But the 35 basis point guidance for contingent this year, that would assume a pretty nice step up in absolute dollars in contingent commissions is that you, it sounds like you've got good visibility for that.

Mark Jones

Yeah. So what we talked about in our prepared remarks is, you know, that's been our expectation all year thus far was 35 basis points of total written premium as contingents for the full year at this point. Given the way our core loss ratios have been with some of our biggest underwriters. We think that there's some upside to that, it remains to be seen exactly what that is.
And like I mentioned, that won't crystallize until the fourth quarter. So there's still some uncertainty there. But I think the way that the book has performed and what we've been able to do in terms of driving carrier profitability should result in a higher contingency outlook for this year and most likely next year as well.

Mark Hughes

Very good. And then the question on core revenue relative to written premium, I think you addressed that in an earlier question. Is there anything on mix of say, homeowners versus auto or geography that's influencing that's boosting the written premium relative to the core revenue.

Mark Jones

No, that's really a function of franchise performance. So franchise driving and accelerating new business production makes your premium grow faster than your core revenue because you're only getting '20 cents on the dollar on the revenue side, but the premium is all gross.
So in when you've got consistent year over year acceleration on the franchise side of the business, those things can level out. But when you have a year, like we had this year, we really started in the fourth quarter of last year, franchise picked up a lot of momentum and has had a phenomenal year so far this year that drives that GAAP.

Operator

Andrew Kligerman, TD Cowen.

Andrew Kligerman

So looking at your EBITDA margin of a really strong 34% 190 BPS up year over year and as I look at the various components, the expenses, the interest expense, the depreciation, the tax you talked about being tight on G&A. It was all lower than we had anticipated. Now, in other quarters, it kind of bumps around year over year, like last quarter, EBITDA was down versus the year ago quarter.
So my question for you is, could you talk about each of the expense line items and how they're likely to play out going forward? And, and whether 190 basis points year over year is something sustainable because your guidance is only that EBITDA margins will be up year over year.

Mark Jones

Yeah, Andrew. What I would say is that's going to continue to be what our guidance is that the just the margin will be up year over year, especially if you exclude contingencies. So not going to get more specific than that in terms of the margin numbers.
But from a cost growth perspective, you can match really your compensation growth rates when we on board, the significant amount of people which in the sales function is largely in the summer, which that's typically when the seasonality of the book runs the hottest, which would mean that's when you need to have the most service heads as well.
So you on board service people a few months earlier than you on board sales people. And then your sales people mostly come in the summer time frame. So you see increases in comp and benefits in the second and third quarter relative to the first. And then from a G&A expense perspective, it depends on what actually happens in that year when you see the step up.
So it's a little bit less consistent from a timing perspective than it is employee comp and benefits because, you know, we're launching the Phoenix office here in the fourth quarter of this year, that's going to cause a slight increase in G&A expense related to that build out some travel expenses to getting agents out of our Texas geographies into the Phoenix geography.
So there will be things like that happen on a year to year basis, but we're, what we're committed to is continuing to drive margin expansion, excluding contingencies on an annual basis. And you should see again, nice margin expansion in the fourth quarter of this year.

Andrew Kligerman

Margin year over year in the fourth quarter?

Mark Jones

Correct.

Andrew Kligerman

Nice. Okay. That was very helpful and back to the corporate agents. So, I mean, pretty amazing, the new agents with less than a year tenure were at 277 in the quarter versus 132. And then you talk about adding this Phoenix office.
So I'm not sure, I kind of got the answer to the question and, and earlier questions. But, but my sense is that that 277 could be meaningfully bigger next year. And the question for you is why do you, you've mentioned several times on the call that these, this class of corporate agents is better than you've ever had. Why is it so high quality?

Mark Miller

I'll start with just -- I mentioned a moment ago that the quality of the corporate agents is a function of how we recruit, where we recruit the scrutiny with which we put on those agents. And we mentioned several quarters ago, during the COVID period, our recruiting criteria was not as stringent as it is today. So we have put more recruiters out there recruiting at more college campuses recruiting to higher standards and putting them through a very rigorous interview process.

Mark Jones

Yeah, and we've revamped our training and onboarding programs as well to make that process more efficient and more effective. So you can get them down the learning curve better. And if you think about the environment that these new agents are coming into the fact that they're performing as well as they are in such a constricted product environment with housing transactions, well, down, you should expect that they perform better than what we have historically as product becomes more available.
Housing starts to pick back up more QTI functionality becomes online. You know, it's a lot easier for us to ramp up agents in a, in a good environment that isn't a challenging one. So I'm really pleased with how we're doing this so far.

Andrew Kligerman

That's awesome. And maybe just to sneak in one last one. You talked about the captives raising prices. Just curious, what about the big dog Captive State Farm? Are they finally kind of leveled out or are they still flat to down in pricing as you see the competition there?

Mark Jones

I mean, what I would tell you is we have a market for pretty much everybody that's out there. And so where we are competitive will depend on what the pricing of other players that aren't on our platform look like in that market. So I can't speak to somebody's specific pricing models, but we're doing a good job using our technology and our carrier relationships to provide our agents with the product they need.

Andrew Kligerman

Do you feel like your carriers are kind of gaining steam versus the captives in general?

Mark Jones

It depends on the geography, there's puts and tags everywhere. Some markets are better than others.

Operator

Pablo Singzon, JPM.

Pablo Singzon

Hi. Thanks for squeezing me in. So first one, I was curious to hear what's your sense of how long the pricing deal went from homeowners insurance will last and you know, once the market normalizes what, how do you think about the benefit you get from pricing and exposure.

Mark Jones

Yeah. Pablo. I think every time I've tried to guess on this, I've been wrong. But I would tell you the business is really naturally hedged, like I talked about in my prepared remarks. So when you see the pricing of homeowners level off, you get better, client retention, which just means you retain a significant amount of your earnings from one year to the next because that's where all the profitability is.
We don't really make much money on new business production. It's all on the renewal book and then you get a higher amount of a payoff from a contingent commission program, and you get a good value proposition to your referral partners because you're winning a higher percentage of the deals, you get happier agents because they're winning a higher percentage of the deal.
So I don't necessarily love it when prices are up, 15% year over year. I'd be much happier at a high single digit rate where you're still getting nice kind of inflation protection raise on your book, but your agents are winning consistently. Client retention is consistently high. So I can't give you a perfect timeline on what that looks like, but we're starting to see early indications of good loss ratios from underwriters.

Pablo Singzon

Thank you. And then my second question, sort of follow up to other questions that have been asked on the call. Right? But I think once found out aspect of this quarter is just your expense control. And you know, as has been mentioned, G&A was to stand out, is there any way to quantitative frame how you think about the trajectory there? Right?
Because you know, if you take a simple metric, like your, your growth, I think was up 2% which is probably the lowest you know you've ever experienced. So, you know, as you think about the line like G&A, how are you guys managing that? Right? So obviously it's going to be lower than revenue growth, but you know, any help and how to think about that more.

Mark Jones

Yeah, if you remember after the first quarter, when we lowered our revenue guidance immediately, what we did was try and reevaluate everything that we were investing in 2024 and make sure that it was strategically exactly what we needed to do is to secure growth for '24 and for '25.
So we're going to keep making all those investments that we need to and you shouldn't expect to see 2% growth in G&A looking at 2025 but I'm not going to give you specific guidance on that, but I will tell you is you should expect to see G&A and compensation and benefits growing slower than total revenue on an annual basis because we're committed to driving margin expansion.

Pablo Singzon

Okay? Makes sense. And then last for me, just a numbers question and apologies if I missed this. Can we have the written premiums for the corporate and Franchising channels, please?

Mark Jones

I believe that was in the prepared remarks. But if it wasn't, you should be able to find that in the 10Q which should be out.

Operator

Scott Heleniak, RBC Capital Markets.

Scott Heleniak

Yeah, thanks. Just wondering if you could expand on the, the opening of the corporate office in Phoenix. Just talk about your market presence that you have there. And the opportunity you feel like is out there out west compared to where you are now and kind of what drove that, you know, the new corporate office out there.

Mark Miller

Yeah, when we look at where we want to open a new corporate office and we haven't done one in several years, at least since I've been here. We, we look at what coverage we have with existing franchises, which when we look at Arizona, we don't have a big, we have some good franchises out there, but we don't have a big presence. We don't have anybody that many that extend into California and some of the other western states. We look at the schools that are around it could into it.
And so Tempe happens to have a good feeder program for what we need to do there. And when we look at the carrier environment, and is it a good carrier market for us? And it is Arizona is very good for us and there's parts of California that look pretty good too at this point, but we don't plan to open a California office. But we look at every, every market the same way, which is on the same criteria.

Scott Heleniak

Okay. Got it. That makes sense. And then just my other question to follow up. I just wonder if you can talk about just kind of the shopping activity you're seeing out there in the last few months versus the previous few quarters. Is that settled down at all? Do you feel like that's peaking or just any observations that you can share on, on kind of what your agents are seeing out there?

Mark Jones

Yeah, I wish I could tell you it settled down, but it really hasn't. Pricing has slowed down just barely a little bit in the third quarter compared to the second quarter. But as those clients still get their renewals, like I know personally, for me, my insurance is up 30% and my deductible doubled.
So that doesn't feel great for me. I had to reach out personally on my account So there's still a lot of shopping activity going on in the market and that makes, I think the productivity numbers look all the more impressive because they're doing a lot more work in the day to generate the level of productivity they're doing.

Operator

(Operator Instructions) Katie Sakys, Autonomous Research.

Katie Sakys

Hi, thank you. Good evening. First question for you guys, we've talked about, you know, the cadence of margin expansion being a little bit more weighted to the back half of this year. And you've noted that, you know, it should be the most robust in the fourth quarter. Can we expect a similar cadence to margin improvement in 2025?

Mark Jones

So typically, as you think about the seasonality of the earnings, a lot contingencies can swing that pretty dramatically from quarter to quarter. And so usually you get more information on your contingencies in the third and fourth quarter than you would have in the first and second quarter. So that can drive a lot margin in the back half of the year.
But also as you onboard, new producers, really beginning in kind of late may early June and they start to become productive and then seasonality of housing transactions happens consistently really in the second and third quarter. So that drives a lot of new business production, which just means you get more renewals coming in the second and third quarter.
So you should typically expect EBITDA growth to follow the similar cadence as new business production and then contingencies waited in the second half of the year will drive typically strong expansion of year-over-year.

Katie Sakys

Okay, helpful. Thank you. And then as a follow up, I think, you know, a couple of questions ago, you guys mentioned that this class of corporate recruits has slightly different economics compared to previous classes. You know, thinking in terms of those differences. (multiple speakers)

Mark Miller

Be clear, I probably didn't state that properly earlier. I'm talking about like how you retain agents not versus how their commission flows work or anything like that. So it shouldn't be any kind of change to your model.

Katie Sakys

Okay. I think still in terms of, you know, the impact that this most recent class of corporate recruits should have on margins at the end of their first year of work, you know, how does that net impact differ for this class in light of improved productivity versus previous classes?

Mark Jones

Typically, if you've got better productivity, you should expect to receive better margin on the same number of agents. And just from an economics perspective, really, what we're doing is is trying to shift some of the economics more weighted to the retention of the employees we want to make sure people get through their first year, they can see the full benefits of working in our systems and the differentiation that we have compared to the other jobs that are out there. That's really all it is. It shouldn't impact your modeling of the economics of a corporate agent.

Operator

And thank you. And I would now like to turn the call back over to CEO, Mark Miller.

Mark Miller

Wanted to thank everyone for taking the time to join us today. Appreciate the continued investment and support. We look forward to talking to you again in February.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.