TWFG, Inc.(TWFG) - 2024 Q4 - Annual Results

Financial Performance - Preliminary unaudited financial highlights for FY 2024 indicate a total written premium of approximately $1,476 million, reflecting a growth of 16.5% to 18.2% compared to the previous year[33] - Adjusted EBITDA for Q3 2024 is projected to be$ 31.5 million, with an adjusted EBITDA margin of 20.4%, showing consistent margin expansion[35] - The company has achieved a total revenue growth of 21.5% in Q3 2024, with adjusted free cash flow reaching $11.7 million[33] - Organic revenue growth for the three months ended September 30, 2024, was reported at 20.2%, with total revenue growth rate at 23.8%[67] - Total written premium for the nine months ended September 30, 2024, reached$ 1,115 million, compared to $946.6 million for the same period in 2023, reflecting a significant increase[66] - Total revenues for Q3 2024 reached$ 54.640 billion, a 14.0% increase from $47.710 billion in Q3 2023[69] - Net income for Q3 2024 was$ 6.893 billion, down 9.4% from $7.608 billion in Q3 2023, resulting in a net income margin of 12.6%[69] - Adjusted EBITDA for Q3 2024 was$ 11.738 billion, compared to $9.048 billion in Q3 2023, reflecting a margin increase to 21.5% from 19.0%[69] - Commission income for Q3 2024 was$ 48.240 billion, up from $43.993 billion in Q3 2023, contributing significantly to total revenues[72] - Operating income for Q3 2024 was$ 7.745 billion, slightly down from $7.902 billion in Q3 2023[72] - Adjusted free cash flow for Q3 2024 was$ 13.440 billion, indicating strong cash generation capabilities[70] - Interest expense increased to $411 million in Q3 2024 from$ 295 million in Q3 2023, reflecting higher borrowing costs[72] - Total operating expenses for Q3 2024 were $46.895 billion, compared to$ 39.808 billion in Q3 2023, primarily driven by increased commission and salary expenses[72] - The company reported a basic earnings per share of $0.08 for Q3 2024, consistent with Q3 2023[72] - The weighted average shares of common stock outstanding were 14,722,685 for Q3 2024, unchanged from the previous year[72] Business Model and Strategy - The business model is designed to capture a significant shift towards independent distribution channels, with independent agencies increasing their market share from 26% to 38% over the past decade[10] - The product mix comprises approximately 78% personal lines and 22% commercial lines as of December 31, 2023, indicating a strong focus on personal insurance products[24] - TWFG serves over 2,000 agencies across 40+ states, providing access to more than 300 national, regional, and local insurance carriers, MGAs, and programs[21] - TWFG's diversified revenue model includes approximately 80% of total revenue coming from insurance services, highlighting the importance of this segment[29] - The company addresses key pain points for agencies by offering a comprehensive suite of products and services, enhancing agency autonomy and operational efficiency[13] - TWFG's strategic focus on technology and M&A opportunities aims to further strengthen its market position and drive future growth[8] - The business model is designed to capture a secular shift from captive distribution, with a focus on independent agencies and differentiated solutions[57] Acquisition and Growth Opportunities - The company deployed$ 40.8 million in acquisitions year-to-date in 2024, following $19.4 million in 2023 and$ 7.9 million in 2022, indicating a robust acquisition strategy[46] - Approximately 35% of the 40,000 independent U.S. agencies are expected to be sold in the next five years, creating significant acquisition opportunities[42] - The company maintains a strong balance sheet and a disciplined approach to acquisitions, focusing on cultural compatibility and attractive loss ratios[45] - The company has a proven track record of successful acquisitions across various specialties and geographies, enhancing its capabilities and geographic diversification[46] Revenue Sources - The agency-in-a-box model generated $261.6 million in revenue for the three months ended September 30, 2024, accounting for 65% of total insurance services revenue[66] - The total revenue from TWFG MGA for the nine months ended September 30, 2024, was$ 164.6 million, up from $150.2 million in 2023[66] Market Trends - The P&C insurance market has exhibited a consistent growth rate, with a CAGR of 5.8% from 2013 to 2023[16] - The retention rate for insurance services was reported at 89% for the three months ended September 30, 2024, compared to 98% for the same period in 2023[66]