Goosehead Insurance, Inc (NASDAQ:GSHD) Q4 2021 Results Earnings Conference Call February 24, 2022 4:30 PM ET
Daniel Farrell - Vice President of Capital Markets
Mark Jones - Chairman and Chief Executive Officer
Michael Colby - President and Chief Operating Officer
Mark Colby - Chief Financial Officer
Conference Call Participants
Matthew Carletti - JMP Securities LLC
Ryan Tunis - Autonomous Research
Mark Dwelle - RBC Capital Markets
Meyer Shields - Keefe, Bruyette & Woods
Pablo Singzon - J.P. Morgan
Thank you for standing by. This is the conference operator. Welcome to the Goosehead Insurance Fourth Quarter 2021 Earnings Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will an opportunity to ask questions. [Operator Instructions].
I would now like to turn the conference over to Dan Farrell, VP of Capital Markets. Please go ahead.
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 is 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 our 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. An 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 would like to turn the call over to our CEO, Mark Jones.
Thanks, Dan. And welcome to our fourth quarter and full-year 2021 results call. I will provide a summary of our key results in the fourth quarter and full year and highlight important investments we've been consistently making that give our business tremendous resiliency to drive strong, long-term and consistent growth.
President COO, Mike Colby, will then go into greater detail on some of our technology and operating platform enhancements. And then our CFO, Mark Colby, will go into greater detail on our quarter financials and outlook for 2022.
We had a solid fourth quarter which capped off another strong year of consistent and reliable growth, combined with substantial investments that position us exceptionally well for the future.
Our total written premiums, the key leading indicator of future revenue growth, increased 43% for the fourth quarter and 45% for the full year, bringing full-year 2021 premium to $1.56 billion. Policies in force for the full year were at 42%, and we reached an important milestone for our company by surpassing 1 million policies in force.
Our corporate sales headcount increased 39% for the year, while total franchises increased 47% and operating franchises grew 34% for 2021.
This tremendous growth was not a recent phenomenon, but has been achieved year after year, both as a private and public company. Over the last four years as a public company, we've increased our premiums placed at a compound annual growth rate of 45% and our policies in force at a compound annual growth rate of 44%. Our corporate headcount and operating franchise count have both increased at a 40% CAGR over that same period.
We believe strongly the best long term interests of our shareholders are served by our continuing to responsibly invest in growth to capture as much market share as possible, which will also serve to strengthen our strategic position and competitive moat.
We have no intention of dumping piles of advertising money down the drain. We haven't needed to do anything like that historically and we have still achieved extraordinary organic growth that delivers profits at the same time.
There is no question that there is a trade-off between growth and profitability for Goosehead. But I would like to remind everyone that we deliver a level of profitability which is more than sufficient to self-fund our growth investments.
Over the long term, we're confident that our business can deliver EBITDA margins in the 40s. The opportunity cost to chase those kinds of margins over the next several years, however, is just too high. We want to maximize total profit dollars over time and believe our strategy is the right way to do that.
Around the time of our annual meeting of employees and franchisees, I like to reflect on how far we've come. I'm pleased with the many substantial accomplishments that expanded our already significant competitive moat.
When we went public in early 2018, we were already a very strong company with a reliable track record. But with significant investments in people in technology we've made since then, our platform is more exceptional, nimble and resilient than ever before, and it is truly unmatched in the market.
From a talent perspective, the number and quality of people added to our organization has been profound. Our overall employee count is almost 1,300, up from 280 at the beginning of 2018. At the end of 2021, we had over 500 corporate sales agents across 15 offices compared to 100 across seven offices four years ago. And our operating franchise count stands at 1,200 compared to less than 300 at the start of 2018.
Additionally, our market reach is greatly enhanced, with a presence in almost all the lower 48 states and relationships with over 140 carriers compared to just 23 states and over 80 carriers at the time of our IPO.
In states that we were just entering a few years ago, we have now built the scale and track record to drive continued strong growth and attract increasingly high quality talents in those markets.
In early February, we held our annual meeting in Dallas after a two-year break due to the pandemic. It was fantastic to get over 2,000 corporate and franchise team members together in person as well as a number of our carrier partners. The energy and excitement towards the future from this group was palpable and further solidified my extremely positive view for our path forward.
Looking at our technology platform, in 2018, we launched our mortgage referral partner database to map out individual mortgage lender activity and more efficiently target this attractive area of the market to tactically support our rapid agent growth. We've continued to refine this database, adding real estate agent activity, bringing further value to agents and mortgage referral partners.
In 2018, we also launched our proprietary Rater for agents to significantly improve quoting time and efficiency. The ability for agents to quote across multiple carriers, while entering just a handful of data points did not exist in the market before we built this platform.
Our work on the internal facing client rater provided the foundation for our externally facing digital agent which we launched last year. With as little as three data points, clients can now access accurate quotes for home, auto, condo, renters, flood and life insurance products. And these quotes are highly accurate, powered by agent-informed machine learning, using our history of over 30 million quotes. There is nothing like it in the market today.
In the near term, this platform will continue to strengthen our existing go-to-market strategy, enhance other referral marketing and improve our cross selling efforts, driven by enhanced digital marketing efforts. Longer term, the potential of this platform is significant as we build out and continue to invest in digital marketing and explore possible partnership opportunities.
The next phase of our digital agent work is to provide a full online quote to buying experience for clients who prefer to shop in this way. We expect to have several carriers that can fully bind coverage through the digital agent by the end of this year.
All of these investments put us in an incredibly powerful position to deliver consistently high levels of profitable growth in any operating environment. And our runway for growth remains substantial, with our premiums accounting for less than half of 1% of US personal lines market and our go-to-market strategy accounting for roughly 3% of mortgage transactions nationally.
Our cash generation is significant and our balance sheet is rock solid, with few intangible assets and low debt leverage relative to our high rates of growth. This strong financial position gives additional leverage to add value to shareholders and be opportunistic in an evolving marketplace.
Having strong leadership and governance is an important aspect of our evolution as a public company. I'm pleased to highlight that we recently announced the expansion of our board of directors from five to seven individuals, adding Waded Cruzado, President of Montana State University, and Tom McConnon, Managing Director, Head of Public Equities and Chief Economist at Wildcat Capital Management. These individuals will bring significant and diverse experience to our already strong group of external board members. I look forward to the contributions they will bring going forward to our organization.
I'm also pleased to highlight that we will soon be publishing our first ESG sustainability report that you'll be able to find on our Investor Relations website. Our organization has always been driven by core values and operating principles, including integrity, unparalleled client experience, continuous investment in our people, innovation, excellence, meritocracy, and service leadership.
Issues around sustainability have always been an important focus of our organization even before garnering the attention of the investment community that it does today. We hope this report will give you a greater sense of our incredibly unique, energized and diverse corporate culture that is relentlessly focused on delivering for our clients and community.
I want to thank our employees and franchise agents for their tireless efforts in delivering another year of incredible growth in 2021, a year that presented numerous macro challenges that we overcame. I'm excited to prosecute our highly enviable resume for sustainable growth of both revenue and earnings that we have going forward.
With that, I'll turn the call over to Mike.
Thank you, Mark. And hello to everyone on the call. As Mark indicated, earlier this month, we held our national agent conference in Dallas, headline this year as Ascend 2022.
This important investment in our people hasn't occurred in over two years due to COVID. As we reflect on the unprecedented challenges presented with the pandemic, we're extremely proud of the incredible progress we've made, essentially doubling our premium base and agent force over that two-year period.
Our conference brought together over 2,000 corporate, franchise and service agents as well as over 100 attendees from our carrier partners to present and interact with our production force.
Given our substantial growth, nearly half of the individuals in attendance were there for the first time since joining Goosehead. We couldn't be more pleased with the energy and enthusiasm on display from our team of exceptionally talented insurance professionals. Their efforts will drive our exceptional growth for years to come.
A major technology accomplishment in 2021 was the launch of our digital agent platform, and the reception from both agents and carrier partners has been extremely positive. Business coming through the digital agent continues to generate high NPS scores in excess of 96 and initial quotes on the digital agent are proven to be highly accurate, with over 80% of the final issue prices being in line or lower than the initial digital agent quote.
Since the launch, we've continued important carrier integration work. And today, in addition to home and auto, we have an array of personal lines product quotes, including condo, renters, flood, jewelry, umbrella and life insurance.
In the near term, the digital agent will be an important tool in strengthening our existing go-to-market strategy, expanding our client referral business and increasing share of client wallet through cross selling opportunities.
Within the next several weeks, we expect to have our first carrier live with fully online quoting to buying experience for clients. Through the remainder of 2022, we expect to add several additional carriers with full digital quote to buying options. This is a critical next step in our goal to engage clients however they want to shop for insurance.
While the majority of clients in the homeowners marketplace want to engage with an agent in some way during the process, we recognize there's a segment of the market that will look to complete a purchase digitally. Importantly, for this segment of the market, they will be able to shop as they choose, while still benefiting from our agent-driven machine learning as well as agents and quality control working in the background to ensure appropriate coverage for our clients.
This quarter, we're launching a new analytics platform to leverage our expanding referral partner data to help agents grow their business. Our referral partner database began in 2018 with mortgage loan originators. We then added realtor activity and have expanded the database to include home builders and title company activity. Our new platform will provide an enhanced and streamlined interface, allowing our agents to more easily access our data set to build the referral partner networks and add additional value across the expanding view of the homebuying value chain.
We're extremely pleased with the incredible results our team delivers to provide the best experience imaginable for our clients. Our platform has never been in a stronger position, and our runway for growth in the market remains enormous.
With that, let me turn the call over to our CFO2, Mark Colby.
Thank you, Mike. And hello to everyone on the call. For the fourth quarter of 2021, total written premiums, the leading indicator of our future core and ancillary revenue growth, increased 43% to $407 million. This included franchise premium growth of 50% to $304 million and corporate segment premium growth of 25% to $104 million.
For the full-year 2021, premiums increased 45% to $1.6 billion. This included franchise premium growth of 51% to $1.1 billion and corporate premium growth of 32% to $422 million for the full year of 2021. This growth is being driven by strong new business generation, new corporate and franchise agent growth and increased retention. Importantly, our full-year premium growth matched our 2020 growth level and exceeded the high end of our initial guidance expectations, despite what was a more challenging macroenvironment in several areas.
The continued shift in our mix of business towards the faster growing franchise channel implies significant embedded future revenue growth as the new business premiums consistently and predictably 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 over 1 million policies in force, a 42% increase from one year ago.
Revenues were $40.2 million for the quarter, an increase of 16% from the year-ago period, while core revenues grew 35% to $34.8 million for the quarter. Full-year revenues were $151 million, an increase of 29%, while full-year core revenues were $133 million, an increase of 40% in 2020.
Ancillary revenue, which includes contingent commissions, was $3.2 million in the quarter compared to $7.5 million a year ago. Full-year ancillary revenue was $10.2 million compared to $16.9 million in 2020 due to a challenging comparison of loss ratio trends from increased driving activity and weather events.
On a normalized go-forward basis, we believe it is reasonable to assume around 80 to 85 basis points for contingents as a percent of annual premium. However, any given year can vary significantly from this level, as evidenced by 2020 and 2021 contingencies, which were 155 and 65 basis points as a percentage of premium, respectively.
The franchise channel generated core revenue of $16.2 million during the quarter, an increase of 50% from the year-ago period. For the full year, franchise channel core revenue was $60.7 million, an increase of 52% compared to 2020. At the end of the fourth quarter, we had 2,151 total franchises, up 47% from the prior year, and 1,198 operating franchises, up 34% from a year ago.
Franchise channel core revenue growth is driven by strong new business production from franchisees and increased retention to 89% from our already industry-leading levels. We also continue to invest heavily in corporate agent hiring in national expansion to facilitate the franchise channel growth and productivity.
Corporate sales agent headcount at the end of the quarter was 506, an increase of 39% 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 $18.5 million in the fourth quarter, an increase of 24% compared to the year-ago period. Full-year corporate channel core revenues were $72.7 million, up 32% from 2020.
Total operating expenses for the fourth quarter of 2021 were $37.7 million, up 29% from a year ago. For the full year 2021, operating expenses of $142 million increased 47% compared to 2020. Compensation and benefits expense was $23.2 million for the quarter, up 19% from the year-ago period and $93 million for the full year of 2021, an increase of 39% compared to 2020. 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 our franchise channel growth, service agents to manage our largest revenue stream, our 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.
General and administrative expenses for the quarter were $12.4 million, an increase of 53% from a year ago, and $41.9 million for the full year of 2021, up 64% compared to 2020. Growth in G&A expenses in 2021 was due to an expanding real estate footprint, higher travel and entertainment expense as the US economy continues to reopen, and investments in our newly designed website to support our digital agent as well as a number of carrier integration projects. Additionally, 2020 G&A expenses were artificially low due to COVID lockdowns creating a challenging comparison.
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.
Looking ahead to 2022, G&A will continue to see further growth versus 2021 due to over $2 million of planned marketing expense versus a de minimis amount historically, a full year of office expense from our expanded office footprint, some expansion of existing offices and significant expense from our annual agent conference in February, which did not occur in 2021 due to safety precautions surrounding the pandemic. That said, we would still expect the growth rate of other G&A expense in 2022 to slow compared to 2021.
Total adjusted EBITDA in the quarter was $5.3 million compared to $7.9 million in the year-ago period. For the full year, adjusted EBITDA was $20.8 million compared to $27.8 million in 2020. The decrease in both periods primarily driven by challenging contingent commissions and investments for future growth.
We expect the many investments we made in 2021 to begin to scale nicely through 2022 as the new offices add producers and new opportunities from the digital agent, particularly in the area of cross selling and client referrals begin to ramp up and help offset initial and ongoing development costs.
As we have said previously, we believe it is strategically more important to focus on investing for growth now, which we believe will drive long-term margin improvement. At our high growth rates, most expenses are largely variable. However, in 2022, we do anticipate significant growth in EBITDA and strong EBITDA margin expansion.
As a reminder, the first quarter is seasonally our weakest earnings quarter of the year. Given this, as well as a more challenging G&A comparison earlier in 2022 from our annual meeting, we expect the majority of our earnings and margin growth to take place after the first quarter of 2022.
As of December 31, 2021, the company had cash and cash equivalents of $28.5 million. We had an unused line of credit of $24.8 million at year-end.
Total outstanding term note payable balance was $98.9 million as of December 31, 2021.
For the full-year 2022, the company's outlook on premium and revenue is as follows. Total written premiums placed for 2022 are expected to be between $2.086 billion and $2.215 billion, representing organic growth of 34% on the low end of the range to 42% on the high end of the range.
Total revenues for 2022 are expected to be between $197 million and $212 million, representing organic growth of 30% on the low end of the range to 40% on the high end of the range, driven by high levels of core revenue growth and historically average contingent commissions.
2021 was a strong year with important investments that set the foundation for significant levels of growth and continued momentum in 2022 and beyond.
I want to thank everyone for their time. And with that, let's open up the lines for questions. Operator?
[Operator Instructions]. Our first question comes from Matt Carletti of JMP.
I was hoping you might be able to comment a little bit on what you're seeing with new business productivity. Growth clearly remained very strong. But there has been some nuances kind of back part of the year versus front half of the year. Just hoping you can give us a little peel back the onion on what you might be seeing there as we step into 2022.
So, there was some slowdown in productivity for agents and franchisees less than one year. Importantly, we saw productivity increases in the franchise channel for our greater than one year agents across all geographies. And this is against a very challenging comparison in 2020. And this is important because this is where we make most of the investments from the corporate channel into those tenure franchisees.
Additionally, we had some – the surges of Delta and Omicron created some additional challenges for us in the back half of the year. For example, in the corporate channel in December, we estimate that our absenteeism was 5x that what we would normally see.
And then, overall, the last few years, we have seen some kind of steady tenure declines as we continue to ramp up our hiring and kind of move some of our more experienced agents into the support function for the franchisees. But I think it's important to note that we expect all these agents to get to the same place, eventually. It might just take them a little longer, given some of the factors that I just mentioned.
I wanted to hit on the EBITDA margin guidance. Caught the commentary about it expanding from 2021 levels. Can you give us some color on maybe where should we think about it, maybe in terms of, like, back to 2019, which is a more normalized year, obviously, pandemic kind of full force in 2020 and you've talked a lot about kind of some of the catchup items that you've had to deal with in 2021. How should we think about that kind of compared to more of a, I guess, "normal or smooth year"?
Contingencies are always the wildcard there. But even assuming some normalized level of contingencies, we expect margin expansion coming from continued scaling of our G&A expenses, primarily. The first quarter of this year, we're going to have continued increased cost in G&A from the annual agent conference that we mentioned, from continuing to grow into our space that we took down the last two years. And I think we'll start to see a lot of that scale and margin expansion after the first quarter of this year.
One last one. Mike, you talked a little bit about the DTC portal. Can you give us any more color on kind of feedback amongst the agents and so forth, now that it's been out there for a bit longer than the last time we spoke, just kind of what the receptions been and kind of how you guys have been pleased or displeased, what you've liked or positive/negative surprises so far?
I think the response has been overwhelmingly enthusiastic. We continue to get feedback and refine the tool and have invested, as I mentioned, on adding additional lines of business, which both agents and our carriers really appreciate.
Where that manifests in the numbers, I think what you want to first understand is, in no uncertain terms, we are not going to blow up our advertising budget, trying to take that direct to consumer and compete with the bloated advertising budgets in the space. We just do not feel that it's prudent. We don't feel like it's a place where we can compete and win. Rather, we're leveraging the tool to augment our existing approach to driving revenue. It's about expanding our share within the referral partner channel. It's about increasing our cross selling activities. And it's about removing obstacles that get in the way of our clients actually taking action on sending referrals to us. And we have a 92 Net Promoter Score. So our clients are overwhelmingly saying that they're willing to send a friend or family member, and we've made it easier than ever now. And we're going to capitalize on that. And we can do that using our existing infrastructure and having Ann Challis onboard, highly focused in those areas. We're very excited about the way we can leverage the tool.
Our next question comes from Ryan Tunis of Autonomous Research.
Following up on that first question, it sounds like there's a decline in first year agent productivity. Obviously, you guys have been hiring like a banshee, I guess, the past year. I guess what I'm trying to understand is how much of that decline in first year productivity do you think has to do with, I guess, diminishing marginal returns of talent or something along those lines? Because, clearly, you guys have grown quite a bit in terms of your agent count?
I think it's a couple things that I mentioned is it's just a tough comparison to 2020, where everything was firing on all cylinders, including the housing market, and then some challenges we saw at the end of the second half of last year with the resurgence of COVID through Omicron and Delta.
As far as the quality of our agents, that has not changed at all. We still have a very strict recruiting process there. And I think, again, they can get to the same point, just might take them a little longer.
Another key point of just going back to the tenure point, last year, we started – continued to ramp up our hiring, especially in the second half of the year. So anytime you do that in the back half of the year, you're going to miss a pretty sizable ramp up for those agents compared to if you were to hire them in January of that year. So, there is some tenure decline there that I think explains a large portion of that.
Yeah, there's also just the issue of the COVID impact on our training. And we had to do a lot of training in 2021 remotely, so that we didn't have – it's always better to have people here in person for training. And I think what we saw in 2021 is a temporary setback based on the challenges that Mark talked about, but also being a little bit handcuffed in trying to manage around sort of COVID restrictions on travel and being here in person. But I haven't seen anything that would suggest that there's any kind of permanent or structural issues that should drive sort of continued productivity challenges. We're just not seeing anything that would suggest that.
I think what you see in the greater than one year tenure band and the increase in productivity, it just underscores that point. You think about recruiting agents virtually, onboarding them virtually, and training them virtually, putting them on virtual teams, that's going to be a more challenging environment. To Mark Colby's point, you're seeing the productivity get there, even if in the first year, you're seeing a little bit less productivity. After one year tenure bands, you're seeing nice productivity improvements.
So we think it's a temporary phenomenon.
I guess my follow up would just be pushing back and saying that, 2020 would have seemingly been more difficult to train first year agents than 2021. So could you help us understand, I don't know, like, why is it that that actually got harder in 2021 versus 2020 when everything was completely remote?
It's really kind of the timing of when COVID hit us in 2020 versus kind of the resurgence hitting us in 2021. The first half of 2020, we did see kind of surge and had some big challenges there. I think the as the economy started opening back up, especially in our core markets in Texas, again, continue to see some very, very, very strong growth in the second half of the year. Fast forward to 2021, that trend continued through the first half of the year and then here comes Delta, here comes Omicron, and those areas kind of hit a lot of our key markets.
Our next question comes from Mark Dwelle of RBC Capital Markets.
A couple of questions. First, on contingent commissions, I was noticing that there's a pretty divergent split between the portion of those that come from franchise agents as compared to corporate agents. Is that just a function of geography that the weather in Texas was bad or something like that?
I think it's more of a function of where we're writing the premium. As we continue to write more and more premium in the franchise channel, that number is going to continue to grow.
And remember, Mark, there's a real mismatch between premium and revenue in the franchise channel in that first year because we're only seeing 20% of it. So, the contingencies are earned on the full 100% of premium, even though our revenue is only 20%.
And to put it into context, we wrote 73% of our premium last year in the franchise channel, and that's continued to grow.
Staying on contingent commissions, I just want to make sure I heard this correct. You suggested the baseline for thinking about contingents was sort of 80 to 85 basis points of annual premium. So, based on the guidance, that's suggesting something in the neighborhood of $17 million of contingent commissions, as should be sort of our baseline thinking or something you wanted to clarify related to that.
Again, anything can happen in any given year, like we saw last year, but that's a safe assumption that we'll continue to update throughout the year as we get data from our carriers.
[Operator Instructions]. Our next question comes from Meyer Shields of KBW. Please go ahead.
I guess, first question, I think Mark mentioned $2 million of marketing spend. And obviously, I completely understand the comments about not wasting much money on advertising. Where's that $2 million going to be directed?
The first kind of priorities for our new Chief Marketing Officer this year are using digital advertising to drive – digital marketing, I should say, to drive cross selling and client referrals in our business. That's two areas, I think, we can continue to get better at, especially in the client referrals area. We have a 92 Net Promoter Score. People are overwhelmingly telling us they want to send us their business. We haven't made it easy for them. Only one-third of our new business comes from client referrals and we feel like that can grow. I'm not implying Super Bowl ads or Google ad clicks, but just figuring out unique ways to leverage our existing books and the business we're writing every day to drive additional revenue opportunities.
Certainly wasn't expecting you guys to show up in Super Bowl from that perspective. I was hoping you could take us through the factors that could impact premium growth, whether it's at the lower end or upper end of the guidance, what do you see as the main points of current uncertainty?
If you look at our three pillars of growth, it's continuing to add high volume of agents and franchisees, continuing to ramp up their production, and then retaining that business at high levels. Those are the three pillars of growth. And I would say, the one I worry least about is retention. Not that I worry about the other two. I think we're making great headway and continuing to add new agents and ramp up their productivity. But if I had to risk weighted, those are the larger variables, given some of the macro factors that we're seeing.
I guess final question on the newer agents where productivity didn't ramp up maybe as expected, have you kept the same rough percentage of those agents as you have in past years?
I think that's, again, continued to grow. If you look at our average tenure and how it's crept down over the last few years, it's a combination of ramping up with additional new hires and then transferring out a lot of our more experienced high producing agents to support the franchise channel to help grow that productivity for those greater than one year franchisees.
Our next question comes from Pablo Singzon of J.P. Morgan.
Just wanted to follow up on the questions on new business productivity for first year agents. So, Goosehead discloses productivity on an annual basis when you file your K. It seems like the numbers this year will be lower versus 2020. And I just want to sort of gets specifics right. Do you think from a productivity standpoint, 2021 will be better than 2020? Have you reached the bottom or is it more flattish? And I guess, over time, you think that will go up? I guess more concrete context and where you think that productivity number goes?
Again, we're making all the investments to continue to drive that number higher, with continued focus on the greater than one year agents in the franchise channel. Those are where we can – the longest lever for our productivity increases are agents in those channels. They've been here a year, they've figured out what their pain points are, where they really need to work. And that's when we go in from the corporate side and really given them that increased sales coaching.
And yeah, on the corporate side, we want to see productivity increases everywhere. And so, we'll continue to make sure we're doing the right things from a referral partner marketing, supplementing that with some digital advertising and…
Marketing, not advertising.
Thanks, Mark. Marketing, not advertising. Continuing to implement best practices for a lot of these new technologies that we're rolling out. We feel like a combination of those things can continue to drive productivity.
We expect productivity increases in the future.
I just want to get perspective on the franchising side, you disclosed about 1,200 operating franchises total. I guess signed, but not necessarily operating about 2,150. So that's like a balance of 950. So, I guess, if you could give perspective on how much of that number – maybe talk about your track record the past couple of years, right? Like, how much of that falls through, how much of that actually gets signed and operating, just as a start to give us a sense of how your hiring pipeline in the franchising side might shape up this year.
That's something we monitor very closely and that we're focused on getting those franchises launched. And, again, we had some tough comparisons to 2020 where the labor market was very favorable. That's tightened back up in 2021 and we feel like kind of further elongated some of those launches, as well as some of the COVID impacts that we talked about and having to pivot from virtual training to in-person back to virtual/hybrid. It's created some additional challenges. But I can tell you, that's a big focus of ours in 2022, is in that pipeline, continuing to recruit them, continuing to get them to come to training or completely restart the recruiting process with them.
This concludes the question-and-answer session. I would like to from the conference back over to Mr. Jones for any closing remarks.
Thanks everyone for your participation and you have our commitment to work as hard as we can to drive value for you.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.