TWFG, Inc. (“TWFG”, the “Company” or “we”) (NASDAQ: TWFG), a
high-growth insurance distribution company, today announced results
for the third quarter ended September 30, 2024.
Third Quarter
2024 Highlights
- Total Written
Premium for the quarter increased 13.0% to $400.1 million, compared
to $354.1 million in the same period in the prior year
- Total revenues for
the quarter increased 14.5% to $54.6 million, compared to $47.7
million in the same period in the prior year
- Organic Revenue
Growth Rate* for the quarter was 7.6%
- Net income for the
quarter was $6.9 million, compared to $7.6 million in the same
period in the prior year
- Adjusted Net
Income* for the quarter decreased 4.0% from the prior year period
to $8.3 million, and Adjusted Net Income Margin* for the quarter
was 15.3%
- Adjusted EBITDA*
for the quarter increased 29.7% over the prior year period to $11.7
million, and Adjusted EBITDA Margin* for the quarter increased to
21.5% over the prior year period
- Cash flow from
operating activities for the quarter was $11.7 million, compared to
$7.4 million in the same period in the prior year
- Adjusted Free Cash
Flow* for the quarter was $11.5 million, compared to $4.6 million
in the same period in the prior year
*Organic Revenue Growth Rate, Adjusted Net Income,
Adjusted Net Income Margin, Adjusted EBITDA, Adjusted EBITDA
Margin, Adjusted Free Cash Flow and Adjusted Diluted Earnings Per
Share are non-GAAP measures. Reconciliations of Organic Revenue
Growth Rate to total revenue growth rate, Adjusted Net income and
Adjusted EBITDA to net income, Adjusted Diluted Earnings Per Share
to diluted earnings per share, and Adjusted Free Cash Flow to cash
flow from operating activities, the most directly comparable
financial measures presented in accordance with GAAP, are outlined
in the reconciliation table accompanying this release.
“Our thoughts and prayers go out to all those
impacted by Hurricanes Beryl, Francine, Helene and Milton. Our
agents, employees and carrier partners are working hard to help
those impacted recover and rebuild,” stated Gordy Bunch, Founder,
Chairman, and CEO.
“Our third quarter results illustrate the
resiliency of our agents, carriers, employees, and business model
with total revenues increasing by 14.5% over the prior year period
and Adjusted EBITDA increasing by 29.7%. We generated 7.6% organic
growth and increased our Adjusted EBITDA margin to 21.5%.
“In addition, our third quarter recruiting efforts
continued to outpace our historical growth trends with our
agency-in-a-box offering launching 86 new TWFG locations in the
quarter. The 86 new agencies opened 13 new states for TWFG Branches
in AL, CT, ID, IN, MO, NV, NM, OR, SC, SD, TN, WA and WY which we
believe will provide future growth for our business.
“Finally, I want to remind our fellow stockholders
that experienced agents typically take between two to three years
to become productive. We do not expect the 100-plus new branches we
launched in 2024 to have a significant impact on revenues this year
or next, but over the long term we expect the agents we are
onboarding in 2024 to contribute meaningfully to our longer-term
organic growth.
“I want to thank all our dedicated employees who
contributed to our positive results this quarter while navigating
multiple hurricanes and an IPO.”
Third Quarter
2024 Results
For the third quarter of 2024, Total Written
Premium was $400.1 million, a 13% increase compared to the same
period in the prior year. Revenues were $54.6 million, an increase
of 14.5% compared to the same period in the prior year. Organic
Revenues, a non-GAAP measure that excludes contingent income, fee
income, and other income, for the third quarter of 2024 were $47.3
million compared to $42.8 million in the same period in the prior
year. Organic Revenue Growth Rate in the third quarter was 7.6%,
driven by strong new business growth, offset by normalizing premium
retention and the impact of a change in one of our MGA programs
that switched from a commission based on written premium to a flat
fee starting in the first quarter of this year, with the greatest
impact being felt in the current quarter.
Total commission expense for the third quarter of
2024 was $30.8 million, a 5.2% decrease from $32.5 million in the
same period in the prior year. Commission expenses decreased
despite 9.7% growth in commission income due to the conversion of
nine branches to corporate branches, which transitioned our
non-employee commission-based colleagues to employees. Upon
conversion, these corporate branch employees received salaries,
employee benefits, and bonuses for services rendered instead of
commissions. Salaries and employee benefits for the third quarter
of 2024 were $8.3 million, up 146% from $3.4 million in the same
period in the prior year. Approximately $1.0 million of the
increase was due to equity compensation expense, while $3.9 million
of the increase was due to the branch conversions and 2023
corporate branch acquisitions, along with the growth in the
business. Other administrative expenses for the third quarter of
2024 were $4.8 million, a 71.2% increase compared to the same
period in the prior year. The increase was due to growth in the
business, increase in corporate branches and the absorption of
public company costs.
For the third quarter of 2024, net income was $6.9
million, and net income margin was 12.6%, compared to $7.6 million
of net income and net income margin of 15.9%, in the same period in
the prior year. Adjusted Net Income for the third quarter of 2024
was $8.3 million, compared to $8.7 million in the same period in
the prior year. Adjusted Net Income Margin for the third quarter
was 15.3%, compared to 18.2% in the same period in the prior
year.
Adjusted EBITDA for the third quarter was $11.7
million, an increase of 29.7% over the prior year period. Our
Adjusted EBITDA Margin was 21.5% in the third quarter of 2024
compared to 19.0% in the same period in the prior year.
Cash flow from operating activities for the third
quarter was $11.7 million, compared to $7.4 million in the same
period in the prior year.
Adjusted Free Cash Flow for the third quarter of
2024 was $11.5 million, compared to $4.6 million in the same period
in the prior year.
Liquidity and Capital
Resources
As of September 30, 2024, the Company had cash
and cash equivalents of $191.2 million. We had $50.0 million unused
capacity on our revolving credit facility of $50.0 million as of
September 30, 2024. The total outstanding term notes payable
balance was $6.4 million as of September 30, 2024.
Adjusted Net Income Calculation
Methodology
Since the second quarter of 2024, we have used the
revised calculation methodology for Adjusted Net Income, which
includes amortization expenses among the add-back adjustments to
our net income when calculating our Adjusted Net Income. Our legacy
calculation methodology reflected the impact of intangible asset
amortization as a reduction to our Adjusted Net Income. The revised
calculation methodology excludes the effect of intangible asset
amortization when calculating our Adjusted Net Income by reflecting
it among the add-back adjustments to our net income. We believe
that the revised calculation of Adjusted Net Income is more
consistent with the method and presentation used by most of our
peers and will allow management to better evaluate our performance
relative to our peer companies. We believe that the revised
calculation more effectively represents what our stakeholders
consider useful in assessing our performance.
Conference Call Information
TWFG will host a conference call and webcast
tomorrow at 9:00 AM ET to discuss these results.
To access the call by phone, participants should
register at this link, where they will be provided with the dial in
details. A live webcast of the conference call will also be
available on TWFG’s investor relations website at
investors.twfg.com. A webcast replay of the call will be available
at investors.twfg.com for one year following the call.
About TWFG
TWFG (NASDAQ: TWFG) is a high-growth, independent
distribution platform for personal and commercial insurance in the
United States and represents hundreds of insurance carriers that
underwrite personal lines and commercial lines risks. For more
information, please visit twfg.com.
Forward-Looking Statements
This press release contains “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 that involve substantial risks and
uncertainties. All statements, other than statements of historical
fact included in this report, are forward-looking statements.
Forward-looking statements give our current expectations relating
to our financial condition, results of operations, plans,
objectives, future performance, and business. You can identify
forward-looking statements by the fact that they do not relate
strictly to historical or current facts. In some cases, you can
identify these statements by forward-looking words such as “may,”
“might,” “will,” “should,” “expects,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” “potential” or “continue,” the
negative of these terms and other comparable terminology. These
forward-looking statements, which are subject to risks,
uncertainties and assumptions about us, may include projections of
our future financial performance, our anticipated growth strategies
and anticipated trends in our business. These statements are only
predictions based on our current expectations and projections about
future events. There are important factors that could cause our
actual results, level of activity, performance or achievements to
differ materially from the results, level of activity, performance
or achievements expressed or implied by the forward-looking
statements, including those factors discussed under the captions
entitled “Risk factors” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” in our prospectus
(the “IPO Prospectus”) relating to our Registration Statement on
Form S-1, as amended (Registration No. 333-280439), filed with the
U.S. Securities and Exchange Commission pursuant to Rule 424(b)
under the Securities Act of 1933, as amended, and in our other
filings with the SEC. You should specifically consider the numerous
risks outlined under “Risk factors” in the IPO Prospectus.
Although we believe the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee
future results, level of activity, performance or achievements.
Moreover, neither we nor any other person assumes responsibility
for the accuracy and completeness of any of these forward-looking
statements. We undertake no obligation to publicly update or revise
any forward-looking statement, whether as a result of new
information, future developments or otherwise, except as may be
required by law.
Non-GAAP Financial Measures and Key
Performance Indicators
Non-GAAP Financial Measures
Organic Revenue, Organic Revenue Growth, Adjusted
Net Income, Adjusted Net Income Margin, Adjusted Diluted Earnings
Per Share, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted
Free Cash Flow included in this release are not measures of
financial performance in accordance with generally accepted
accounting principles in the United States of America (“GAAP”) and
should not be considered substitutes for GAAP measures, including
revenues (for Organic Revenue and Organic Revenue Growth), net
income (for Adjusted Net Income, Adjusted Net Income Margin,
Adjusted Diluted Earnings Per Share, Adjusted EBITDA and Adjusted
EBITDA Margin), and cash flow from operating activities (for
Adjusted Free Cash Flow) which we consider to be the most directly
comparable GAAP measures. These non-GAAP financial measures have
limitations as analytical tools, and when assessing our operating
performance, you should not consider these non-GAAP financial
measures in isolation or as substitutes for revenues, net income,
operating cash flow or other consolidated financial statement data
prepared in accordance with GAAP. Other companies may calculate any
or all of these non-GAAP financial measures differently than we do,
limiting their usefulness as comparative measures.
Organic Revenue. Organic Revenue
is total revenue (the most directly comparable GAAP measure) for
the relevant period, excluding contingent income, fee income, other
income and those revenues generated from acquired businesses with
over $0.5 million in annualized revenue that have not reached the
twelve-month owned mark.
Organic Revenue Growth. Organic
Revenue Growth is the change in Organic Revenue period-to-period,
with prior period results adjusted to include revenues that were
excluded in the prior period because the relevant acquired
businesses had not reached the twelve-month-owned mark but have
reached the twelve-month owned mark in the current period. We
believe Organic Revenue Growth is an appropriate measure of
operating performance because it eliminates the impact of
acquisitions, which affects the comparability of results from
period to period.
Adjusted Net Income. Adjusted Net
Income is a supplemental measure of our performance and is defined
as net income (the most directly comparable GAAP measure) before
amortization, non-recurring or non-operating income and expenses,
including equity-based compensation, adjusted to assume a single
class of stock (Class A) and assuming noncontrolling interests do
not exist. We believe Adjusted Net Income is a useful measure
because it adjusts for the after-tax impact of significant
one-time, non-recurring items and eliminates the impact of any
transactions that do not directly affect what management considers
to be our ongoing operating performance in the period. These
adjustments generally eliminate the effects of certain items that
may vary from company to company for reasons unrelated to overall
operating performance.
We are subject to U.S. federal income taxes, in
addition to state, and local taxes, with respect to our allocable
share of any net taxable income of TWFG Holding Company, LLC.
Adjusted Net Income pre-IPO did not reflect adjustments for income
taxes since TWFG Holding Company, LLC is a limited liability
company and is classified as a partnership for U.S. federal income
tax purposes. Post-IPO, the calculation will incorporate the impact
of federal and state statutory tax rates on 100% of our adjusted
pre-tax income as if the Company owned 100% of TWFG Holding
Company, LLC.
Adjusted Net Income Margin.
Adjusted Net Income Margin is Adjusted Net Income divided by total
revenues. We believe that Adjusted Net Income Margin is a useful
measurement of operating profitability for the same reasons we find
Adjusted Net Income useful and also because it provides a
period-to-period comparison of our after-tax operating
performance.
Adjusted Diluted Earnings Per
Share. Adjusted Diluted Earnings Per Share is Adjusted Net
Income divided by diluted shares outstanding after adjusting for
the effect of (i) the exchange of 100% of the outstanding Class B
common stock of the Company (the “Class B Common Stock”) and Class
C common stock of the Company (the “Class C Common Stock”)
(together with the related limited liability units in TWFG Holding
Company, LLC (the “LLC Units”)) into shares of Class A common stock
of the Company (“Class A Common Stock”) and (ii) the vesting of
100% of the unvested equity awards and exchange into shares of
Class A Common Stock. This measure does not deduct earnings related
to the noncontrolling interests in TWFG Holding Company, LLC for
the period prior to July 19, 2024, when we did not own 100% of the
business. The most directly comparable GAAP financial metric is
diluted earnings per share. We believe Adjusted Diluted Earnings
Per Share may be useful to an investor in evaluating our operating
performance and efficiency because this measure is widely used by
investors to measure a company’s operating performance without
regard to items excluded from the calculation of such measure,
which can vary substantially from company to company depending upon
acquisition activity and capital structure. This measure also
eliminates the impact of expenses that do not relate to core
business performance, among other factors.
Adjusted EBITDA. Adjusted EBITDA
is a supplemental measure of our performance and is defined as
EBITDA adjusted to exclude equity-based compensation and other
non-operating items, including, certain nonrecurring or
non-operating gains or losses, including equity-based compensation.
EBITDA is defined as net income (the most directly comparable GAAP
measure) before interest, income taxes, depreciation, and
amortization. We believe that Adjusted EBITDA is an appropriate
measure of operating performance because it adjusts for significant
one-time, non-recurring items and eliminates the ongoing accounting
effects of certain capital spending and acquisitions, such as
depreciation and amortization, that do not directly affect what
management considers to be our ongoing operating performance in the
period. These adjustments eliminate the effects of certain items
that may vary from company to company for reasons unrelated to
overall operating performance.
Adjusted EBITDA Margin. Adjusted
EBITDA Margin is Adjusted EBITDA divided by total revenue. We
believe that Adjusted EBITDA Margin is a useful measurement of
operating profitability for the same reasons we find Adjusted
EBITDA useful and also because it provides a period-to-period
comparison of our operating performance.
Adjusted Free Cash Flow. Adjusted
Free Cash Flow is a supplemental measure of our performance. We
define Adjusted Free Cash Flow as cash flow from operating
activities (the most directly comparable GAAP measure) less cash
payments for tax distributions, purchases of property, plant, and
equipment and acquisition-related costs. We believe Adjusted Free
Cash Flow is a useful measure of operating performance because it
represents the cash flow from the business that is within our
discretion to direct to activities including investments, debt
repayment, and returning capital to stockholders.
The reconciliation of the above non-GAAP measures
to their most comparable GAAP financial measure is outlined in the
reconciliation table accompanying this release.
Key Performance Indicators
Total Written Premium. Total
Written Premium represents, for any reported period, the total
amount of current premium (net of cancellation) placed with
insurance carriers. We utilize Total Written Premium as a key
performance indicator when planning, monitoring, and evaluating our
performance. We believe Total Written Premium is a useful metric
because it is the underlying driver of the majority of our
revenue.
ContactsInvestor Contact:Jeff
Arricale for TWFGEmail: jeff.arricale@twfg.com
PR Contact:Alex Bunch for TWFGEmail:
alex@twfg.com
Condensed Consolidated Statements of
Operations (Unaudited)(Amounts in thousands, except share
and per share data)
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Revenues |
|
|
|
|
|
|
|
|
Commission income (related party of $3,026 and $1,167 for the three
months ended and $6,047 and $3,064 for the nine months ended
September 30, 2024 and 2023, respectively) |
$ |
48,240 |
|
|
$ |
43,993 |
|
|
$ |
139,447 |
|
|
$ |
122,451 |
|
|
Contingent income |
|
1,383 |
|
|
|
1,035 |
|
|
|
3,717 |
|
|
|
3,023 |
|
|
Fee income (related party of $884 and $419 for the three months
ended and $1,799 and $1,258 for the nine months ended September 30,
2024 and 2023, respectively) |
|
2,890 |
|
|
|
2,107 |
|
|
|
7,811 |
|
|
|
6,343 |
|
|
Other income |
|
2,127 |
|
|
|
575 |
|
|
|
3,244 |
|
|
|
1,125 |
|
|
Total revenues |
|
54,640 |
|
|
|
47,710 |
|
|
|
154,219 |
|
|
|
132,942 |
|
|
Expenses |
|
|
|
|
|
|
|
|
Commission expense |
|
30,766 |
|
|
|
32,461 |
|
|
|
89,171 |
|
|
|
90,853 |
|
|
Salaries and employee benefits |
|
8,331 |
|
|
|
3,390 |
|
|
|
21,401 |
|
|
|
10,096 |
|
|
Other administrative expenses (related party of $339 and $178 for
the three months ended and $1,122 and $270 for the nine months
ended September 30, 2024 and 2023, respectively) |
|
4,813 |
|
|
|
2,812 |
|
|
|
11,687 |
|
|
|
8,043 |
|
|
Depreciation and amortization |
|
2,985 |
|
|
|
1,145 |
|
|
|
8,966 |
|
|
|
3,340 |
|
|
Total operating expenses |
|
46,895 |
|
|
|
39,808 |
|
|
|
131,225 |
|
|
|
112,332 |
|
|
Operating income |
|
7,745 |
|
|
|
7,902 |
|
|
|
22,994 |
|
|
|
20,610 |
|
|
Interest expense |
|
(411 |
) |
|
|
(295 |
) |
|
|
(2,125 |
) |
|
|
(553 |
) |
|
Other non-operating income (expense), net |
|
(4 |
) |
|
|
1 |
|
|
|
8 |
|
|
|
(10 |
) |
|
Income before tax |
|
7,330 |
|
|
|
7,608 |
|
|
|
20,877 |
|
|
|
20,047 |
|
|
Income tax expense |
|
437 |
|
|
|
— |
|
|
|
437 |
|
|
|
— |
|
|
Net income from continuing operations |
|
6,893 |
|
|
|
7,608 |
|
|
|
20,440 |
|
|
|
20,047 |
|
|
Net income from discontinued operation, net of tax |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
834 |
|
|
Net income |
|
6,893 |
|
|
|
7,608 |
|
|
|
20,440 |
|
|
|
20,881 |
|
|
Less: net income attributable to noncontrolling interests |
|
5,739 |
|
|
|
— |
|
|
|
19,286 |
|
|
|
— |
|
|
Net income attributable to TWFG, Inc. |
$ |
1,154 |
|
|
$ |
7,608 |
|
|
$ |
1,154 |
|
|
$ |
20,881 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding (see
Note 13): |
|
|
|
|
|
|
|
|
Basic |
|
14,722,685 |
|
|
|
|
|
14,722,685 |
|
|
|
|
Diluted |
|
14,890,382 |
|
|
|
|
|
14,890,382 |
|
|
|
|
Earnings per share (see Note 13): |
|
|
|
|
|
|
|
|
Basic |
$ |
0.08 |
|
|
|
|
$ |
0.08 |
|
|
|
|
Diluted |
$ |
0.08 |
|
|
|
|
$ |
0.08 |
|
|
|
The following table presents the disaggregation of
our revenues by offerings (in thousands):
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Insurance Services |
|
|
|
|
|
|
|
|
Agency-in-a-box |
$ |
34,000 |
|
$ |
35,895 |
|
$ |
100,418 |
|
$ |
102,539 |
|
Corporate Branches |
|
9,234 |
|
|
1,755 |
|
|
25,861 |
|
|
4,259 |
|
TWFG MGA |
|
9,490 |
|
|
9,538 |
|
|
25,213 |
|
|
24,417 |
|
Other |
|
1,916 |
|
|
522 |
|
|
2,727 |
|
|
1,727 |
|
Total revenues |
$ |
54,640 |
|
$ |
47,710 |
|
$ |
154,219 |
|
$ |
132,942 |
|
|
|
|
|
|
|
|
|
The following table presents the disaggregation of
our commission income by offerings (in thousands):
|
|
Three Months Ended September 30, |
| |
2024 |
|
2023 |
| |
Amount |
|
% of Total |
|
Amount |
|
% of Total |
|
Insurance Services |
|
|
|
|
|
|
|
|
Agency-in-a-Box |
$ |
31,543 |
|
65 |
% |
|
$ |
34,255 |
|
78 |
% |
|
Corporate Branches |
|
9,300 |
|
19 |
|
|
|
1,770 |
|
4 |
|
|
Total Insurance Services |
|
40,843 |
|
84 |
|
|
|
36,025 |
|
82 |
|
|
TWFG MGA |
|
7,397 |
|
16 |
|
|
|
7,968 |
|
18 |
|
|
Total commission income |
$ |
48,240 |
|
100 |
% |
|
$ |
43,993 |
|
100 |
% |
|
|
|
|
|
|
|
|
|
The following table presents the disaggregation of
our fee income by major sources (in thousands):
|
|
Three Months Ended September 30, |
| |
2024 |
|
2023 |
| |
Amount |
|
% of Total |
|
Amount |
|
% of Total |
|
Policy fees |
$ |
1,064 |
|
37 |
% |
|
$ |
580 |
|
28 |
% |
|
Branch fees |
|
1,172 |
|
40 |
|
|
|
824 |
|
39 |
|
|
License fees |
|
495 |
|
17 |
|
|
|
555 |
|
26 |
|
|
TPA fees |
|
159 |
|
6 |
|
|
|
148 |
|
7 |
|
|
Total fee income |
$ |
2,890 |
|
100 |
% |
|
$ |
2,107 |
|
100 |
% |
|
|
|
|
|
|
|
|
|
The following table presents the disaggregation of
our commission expense by offerings (in thousands):
|
|
Three Months Ended September 30, |
| |
2024 |
|
2023 |
| |
Amount |
|
% of Total |
|
Amount |
|
% of Total |
|
Insurance Services |
|
|
|
|
|
|
|
|
Agency-in-a-Box |
$ |
25,092 |
|
82 |
% |
|
$ |
27,297 |
|
84 |
% |
|
Corporate Branches |
|
1,304 |
|
4 |
|
|
|
209 |
|
1 |
|
|
Total Insurance Services |
|
26,396 |
|
86 |
|
|
|
27,506 |
|
85 |
|
|
TWFG MGA |
|
4,346 |
|
14 |
|
|
|
4,937 |
|
15 |
|
|
Other |
|
24 |
|
— |
|
|
|
18 |
|
— |
|
|
Total commission expense |
$ |
30,766 |
|
100 |
% |
|
$ |
32,461 |
|
100 |
% |
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statements of
Financial Position (Unaudited)(Amounts in thousands,
except share/unit data)
|
|
September 30,2024 |
|
December 31,2023 |
|
Assets |
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
$ |
191,196 |
|
$ |
39,297 |
|
Restricted cash |
|
9,709 |
|
|
7,171 |
|
Commissions receivable, net |
|
22,901 |
|
|
19,082 |
|
Accounts receivable |
|
8,782 |
|
|
5,982 |
|
Deferred offering costs |
|
— |
|
|
2,025 |
|
Other current assets, net |
|
1,539 |
|
|
1,551 |
|
Total current assets |
|
234,127 |
|
|
75,108 |
|
Non-current assets |
|
|
|
|
Intangible assets - net |
|
75,024 |
|
|
36,436 |
|
Property and equipment - net |
|
682 |
|
|
597 |
|
Lease right-of-use assets - net |
|
2,625 |
|
|
2,459 |
|
Other non-current assets |
|
635 |
|
|
837 |
|
Total assets |
$ |
313,093 |
|
$ |
115,437 |
|
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
Current liabilities |
|
|
|
|
Commissions payable |
$ |
14,438 |
|
$ |
12,487 |
|
Carrier liabilities |
|
13,278 |
|
|
8,731 |
|
Operating lease liabilities, current |
|
1,070 |
|
|
882 |
|
Short-term bank debt |
|
1,897 |
|
|
2,437 |
|
Deferred acquisition payable, current |
|
506 |
|
|
5,369 |
|
Other current liabilities |
|
6,908 |
|
|
5,006 |
|
Total current liabilities |
|
38,097 |
|
|
34,912 |
|
Non-current liabilities |
|
|
|
|
Operating lease liabilities, net of current portion |
|
1,448 |
|
|
1,518 |
|
Long-term bank debt |
|
4,490 |
|
|
46,919 |
|
Deferred acquisition payable, non-current |
|
924 |
|
|
1,037 |
|
Total liabilities |
|
44,959 |
|
|
84,386 |
|
Commitment and contingencies (see Note 15) |
|
|
|
|
Stockholders'/Members' Equity |
|
|
|
|
Members’ Equity (631,750 common units issued and outstanding at
December 31, 2023) |
|
— |
|
|
632 |
|
Class A common stock ($0.01 par value per share - 300,000,000
authorized, 14,811,874 shares issued and outstanding at
September 30, 2024) |
|
148 |
|
|
— |
|
Class B common stock ($0.00001 par value per share - 100,000,000
authorized, 7,277,651 shares issued and outstanding at
September 30, 2024) |
|
— |
|
|
— |
|
Class C common stock ($0.00001 par value per share - 100,000,000
authorized, 33,893,810 shares issued and outstanding at
September 30, 2024) |
|
— |
|
|
— |
|
Additional paid-in capital |
|
57,159 |
|
|
25,114 |
|
Retained earnings |
|
13,697 |
|
|
4,805 |
|
Accumulated other comprehensive income |
|
82 |
|
|
500 |
|
Total stockholders' equity attributable to TWFG, Inc. /members’
equity |
|
71,086 |
|
|
31,051 |
|
Noncontrolling interests |
|
197,048 |
|
|
— |
|
Total stockholders'/members' equity |
|
268,134 |
|
|
31,051 |
|
Total liabilities and equity |
$ |
313,093 |
|
$ |
115,437 |
|
|
|
|
|
Non-GAAP Financial Measures
A reconciliation of Organic Revenue and Organic
Revenue Growth Rate to Total Revenue and Total Revenue Growth Rate,
the most directly comparable GAAP measures, is as follows (in
thousands):
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
| |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Total revenues |
$ |
54,640 |
|
|
$ |
47,710 |
|
|
$ |
154,219 |
|
|
$ |
132,942 |
|
|
Acquisition adjustments(1) |
|
(898 |
) |
|
|
(1,153 |
) |
|
|
(3,582 |
) |
|
|
(2,648 |
) |
|
Contingent income |
|
(1,383 |
) |
|
|
(1,035 |
) |
|
|
(3,717 |
) |
|
|
(3,023 |
) |
|
Fee income |
|
(2,890 |
) |
|
|
(2,107 |
) |
|
|
(7,811 |
) |
|
|
(6,343 |
) |
|
Other income |
|
(2,127 |
) |
|
|
(575 |
) |
|
|
(3,244 |
) |
|
|
(1,125 |
) |
|
Organic Revenue |
$ |
47,342 |
|
|
$ |
42,840 |
|
|
$ |
135,865 |
|
|
$ |
119,803 |
|
|
Organic Revenue Growth(2) |
$ |
3,349 |
|
|
$ |
5,048 |
|
|
$ |
14,206 |
|
|
$ |
12,986 |
|
|
Total Revenue Growth Rate(3) |
|
14.5 |
% |
|
|
16.5 |
% |
|
|
16.0 |
% |
|
|
13.6 |
% |
|
Organic Revenue Growth Rate(2) |
|
7.6 |
% |
|
|
13.4 |
% |
|
|
11.7 |
% |
|
|
12.2 |
% |
|
|
|
|
|
|
|
|
|
(1) Represents revenues generated from the
acquired businesses during the first 12 months following an
acquisition.(2) Organic Revenue for the three months ended
September 30, 2023 and 2022, and for the nine months ended
September 30, 2023 and 2022, used to calculate Organic Revenue
Growth for the three months ended September 30, 2024 and 2023, and
for the nine months ended September 30, 2024 and 2023, was $44.0
million, $37.8 million, $121.7 million and $106.8 million,
respectively, which is adjusted to reflect revenues from acquired
businesses with over $0.5 million in annualized revenue that
reached the twelve-month owned mark during the year ended December
31, 2023 and 2022, respectively. Organic Revenue Growth Rate
represents the period-to-period change in Organic Revenue divided
by the total adjusted Organic Revenue in the prior period.(3)
Represents the period-to-period change in total revenues divided by
the total revenues in the prior period.
A reconciliation of Adjusted Net Income and
Adjusted Net Income Margin to Net income and Net income Margin, the
most directly comparable GAAP measures, for each of the periods
indicated is as follows (in thousands):
|
Revised Calculation Methodology Applied to Current
Period |
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
| |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Total revenues |
$ |
54,640 |
|
|
$ |
47,710 |
|
|
$ |
154,219 |
|
|
$ |
132,942 |
|
|
Net income |
$ |
6,893 |
|
|
$ |
7,608 |
|
|
$ |
20,440 |
|
|
$ |
20,881 |
|
|
Acquisition-related expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
168 |
|
|
Restructuring and related expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
17 |
|
|
Discontinued operation income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(834 |
) |
|
Equity-based compensation |
|
1,012 |
|
|
|
— |
|
|
|
1,012 |
|
|
|
— |
|
|
Other non-recurring items(1) |
|
— |
|
|
|
— |
|
|
|
(1,477 |
) |
|
|
— |
|
|
Amortization expense |
|
2,920 |
|
|
|
1,078 |
|
|
|
8,771 |
|
|
|
3,143 |
|
|
Adjusted income before income taxes |
|
10,825 |
|
|
|
8,686 |
|
|
|
28,746 |
|
|
|
23,375 |
|
|
Adjusted income tax expense(2) |
|
(2,482 |
) |
|
|
— |
|
|
|
(6,591 |
) |
|
|
— |
|
|
Adjusted Net Income |
$ |
8,343 |
|
|
$ |
8,686 |
|
|
$ |
22,155 |
|
|
$ |
23,375 |
|
|
Net Income Margin |
|
12.6 |
% |
|
|
15.9 |
% |
|
|
13.3 |
% |
|
|
15.7 |
% |
|
Adjusted Net Income Margin |
|
15.3 |
% |
|
|
18.2 |
% |
|
|
14.4 |
% |
|
|
17.6 |
% |
|
|
|
|
|
|
|
|
|
|
Legacy Calculation Methodology Applied to Current
Period |
| |
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
| |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Total revenues |
$ |
54,640 |
|
|
$ |
47,710 |
|
|
$ |
154,219 |
|
|
$ |
132,942 |
|
|
Net income |
$ |
6,893 |
|
|
$ |
7,608 |
|
|
$ |
20,440 |
|
|
$ |
20,881 |
|
|
Acquisition-related expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
168 |
|
|
Restructuring and related expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
17 |
|
|
Discontinued operation income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(834 |
) |
|
Equity-based compensation |
|
1,012 |
|
|
|
— |
|
|
|
1,012 |
|
|
|
— |
|
|
Other non-recurring items(1) |
|
— |
|
|
|
— |
|
|
|
(1,477 |
) |
|
|
— |
|
|
Adjusted income before income taxes |
|
7,905 |
|
|
|
7,608 |
|
|
|
19,975 |
|
|
|
20,232 |
|
|
Adjusted income tax expense(2) |
|
(1,813 |
) |
|
|
— |
|
|
|
(4,580 |
) |
|
|
— |
|
|
Adjusted Net Income |
$ |
6,092 |
|
|
$ |
7,608 |
|
|
$ |
15,395 |
|
|
$ |
20,232 |
|
|
Net Income Margin |
|
12.6 |
% |
|
|
15.9 |
% |
|
|
13.3 |
% |
|
|
15.7 |
% |
|
Adjusted Net Income Margin |
|
11.2 |
% |
|
|
15.9 |
% |
|
|
10.0 |
% |
|
|
15.2 |
% |
|
|
|
|
|
|
|
|
|
(1) Represents a one-time adjustment
reducing commission expense, which resulted from the branch
conversions. In January 2024, nine of our Branches converted to
Corporate Branches. Upon conversion, agents of the newly converted
Corporate Branches became employees and received salaries, employee
benefits, and bonuses for services rendered instead of commissions.
As a result, we released a portion of the unpaid commissions
related to the converted branches that we no longer are required to
settle.(2) Post-IPO, we are subject to United States
federal income taxes, in addition to state, local, and foreign
taxes, with respect to our allocable share of any net taxable
income of TWFG Holding Company, LLC. For the three and nine months
ended September 30, 2024, the calculation of adjusted income tax
expense is based on a federal statutory rate of 21% and a blended
state income tax rate of 1.93% on 100% of our adjusted income
before income taxes as if we owned 100% of the TWFG Holding
Company, LLC.
A reconciliation of Adjusted EBITDA and Adjusted
EBITDA Margin to Net income and Net income margin, the most
directly comparable GAAP measures, for each of the periods
indicated is as follows (in thousands):
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
| |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Total revenues |
$ |
54,640 |
|
|
$ |
47,710 |
|
|
$ |
154,219 |
|
|
$ |
132,942 |
|
|
Net income |
$ |
6,893 |
|
|
$ |
7,608 |
|
|
$ |
20,440 |
|
|
$ |
20,881 |
|
|
Interest expense |
|
411 |
|
|
|
295 |
|
|
|
2,125 |
|
|
|
553 |
|
|
Depreciation and amortization |
|
2,985 |
|
|
|
1,145 |
|
|
|
8,966 |
|
|
|
3,340 |
|
|
Income tax expense |
|
437 |
|
|
|
— |
|
|
|
437 |
|
|
|
— |
|
|
EBITDA |
|
10,726 |
|
|
|
9,048 |
|
|
|
31,968 |
|
|
|
24,774 |
|
|
Acquisition-related expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
168 |
|
|
Restructuring and related expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
17 |
|
|
Equity-based compensation |
|
1,012 |
|
|
|
— |
|
|
|
1,012 |
|
|
|
— |
|
|
Discontinued operation income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(834 |
) |
|
Other non-recurring items(1) |
|
— |
|
|
|
— |
|
|
|
(1,477 |
) |
|
|
— |
|
|
Adjusted EBITDA |
$ |
11,738 |
|
|
$ |
9,048 |
|
|
$ |
31,503 |
|
|
$ |
24,125 |
|
|
Net Income Margin |
|
12.6 |
% |
|
|
15.9 |
% |
|
|
13.3 |
% |
|
|
15.7 |
% |
|
Adjusted EBITDA Margin |
|
21.5 |
% |
|
|
19.0 |
% |
|
|
20.4 |
% |
|
|
18.1 |
% |
|
|
|
|
|
|
|
|
|
(1) Represents a one-time adjustment
reducing commission expense, which resulted from the branch
conversions. In January 2024, nine of our Branches converted to
Corporate Branches. Upon conversion, agents of the newly converted
Corporate Branches became employees and received salaries, employee
benefits, and bonuses for services rendered instead of commissions.
As a result, we released a portion of the unpaid commissions
related to the converted branches that we no longer are required to
settle.
A reconciliation of Adjusted Free Cash Flow to Cash
Flow from Operating Activities, the most directly comparable GAAP
measure, for each of the periods indicated is as follows (in
thousands):
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
| |
2024 |
|
2023 |
|
2024 |
|
2023 |
|
Cash Flow from Operating Activities |
$ |
11,725 |
|
|
$ |
7,394 |
|
|
$ |
28,879 |
|
|
$ |
24,103 |
|
|
Purchase of property and equipment |
|
(233 |
) |
|
|
(163 |
) |
|
|
(280 |
) |
|
|
(217 |
) |
|
Tax distribution to members(1) |
|
— |
|
|
|
(2,599 |
) |
|
|
(6,104 |
) |
|
|
(9,526 |
) |
|
Acquisition-related expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
168 |
|
|
Net cash flow provided by operating activities from discontinued
operation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(839 |
) |
|
Adjusted Free Cash Flow |
$ |
11,492 |
|
|
$ |
4,632 |
|
|
$ |
22,495 |
|
|
$ |
13,689 |
|
|
|
|
|
|
|
|
|
|
(1) Tax distributions to members
represents the amount distributed to the members of TWFG Holding
Company, LLC in respect of their income tax liability related to
the net income of TWFG Holding Company, LLC allocated to its
members.
A reconciliation of Adjusted Diluted Earnings Per
Share to diluted earnings per share, the most directly comparable
GAAP measure, is as follows:
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
| |
2024 |
|
2024 |
|
Earnings per share of common stock – diluted |
$ |
0.08 |
|
$ |
0.08 |
|
Plus: Impact of all LLC Units exchanged for Class A Common
Stock(1) |
|
0.04 |
|
|
0.29 |
|
Plus: Adjustments to Adjusted net income(2) |
|
0.03 |
|
|
0.03 |
|
Adjusted Diluted Earnings Per Share |
$ |
0.15 |
|
$ |
0.40 |
|
|
|
|
|
|
Weighted average common stock outstanding – diluted |
|
14,890,382 |
|
|
14,890,382 |
|
Plus: Impact of all LLC Units exchanged for Class A Common
Stock(1) |
|
41,171,461 |
|
|
41,171,461 |
|
Adjusted Diluted Earnings Per Share diluted share
count |
|
56,061,843 |
|
|
56,061,843 |
|
|
|
|
|
(1) For comparability purposes, this
calculation incorporates the net income that would be distributable
if all shares of Class B Common Stock and Class C Common Stock,
together with the related LLC Units, were exchanged for shares of
Class A Common Stock. For the three and nine months ended
September 30, 2024, this includes $5.7 million and $19.3
million of net income, respectively, on 56,061,843 weighted-average
shares of common stock outstanding - diluted, for both the three
and nine months ended September 30, 2024. For both the three
and nine months ended September 30, 2024, 41,171,461 weighted
average outstanding Class B Common Stock and Class C Common Stock
were considered dilutive and included in the 56,061,843
weighted-average shares of common stock outstanding - diluted
within diluted earnings per share calculation.(2)
Adjustments to Adjusted Net Income are described in the footnotes
of the reconciliation of Adjusted Net Income to Net Income in
“Adjusted Net Income and Adjusted Net Income Margin”, which
represent the difference between Net Income of $6.9 million and
$20.4 million and Adjusted Net Income of $8.3 million and $22.1
million for the three and nine months ended September 30,
2024, respectively. For the three and nine months ended
September 30, 2024, Adjusted Diluted Earnings Per Share
include adjustments of $1.4 million and $1.7 million to Adjusted
Net Income, respectively, on 56,061,843 weighted-average shares of
common stock outstanding - diluted for both periods presented.
Key Performance Indicators
The following presents the disaggregation of Total
Written Premium by offerings, business mix and line of business (in
thousands):
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| |
2024 |
|
2023 |
|
2024 |
|
2023 |
| |
Amount |
|
% of Total |
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
|
Amount |
|
% of Total |
|
Offerings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency-in-a-Box |
$ |
261,560 |
|
65 |
% |
|
$ |
284,442 |
|
80 |
% |
|
$ |
736,699 |
|
66 |
% |
|
$ |
761,260 |
|
80 |
% |
|
Corporate Branches |
|
77,636 |
|
20 |
|
|
|
14,286 |
|
4 |
|
|
|
213,689 |
|
19 |
|
|
|
35,156 |
|
4 |
|
|
Total Insurance Services |
|
339,196 |
|
85 |
|
|
|
298,728 |
|
84 |
|
|
|
950,388 |
|
85 |
|
|
|
796,416 |
|
84 |
|
|
TWFG MGA |
|
60,903 |
|
15 |
|
|
|
55,361 |
|
16 |
|
|
|
164,612 |
|
15 |
|
|
|
150,233 |
|
16 |
|
|
Total written premium |
$ |
400,099 |
|
100 |
% |
|
$ |
354,089 |
|
100 |
% |
|
$ |
1,115,000 |
|
100 |
% |
|
$ |
946,649 |
|
100 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Mix: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Renewal business |
$ |
265,026 |
|
66 |
% |
|
$ |
242,258 |
|
68 |
% |
|
$ |
739,624 |
|
66 |
% |
|
$ |
623,773 |
|
66 |
% |
|
New business |
|
74,170 |
|
19 |
|
|
|
56,470 |
|
16 |
|
|
|
210,764 |
|
19 |
|
|
|
172,643 |
|
18 |
|
|
Total Insurance Services |
|
339,196 |
|
85 |
|
|
|
298,728 |
|
84 |
|
|
|
950,388 |
|
85 |
|
|
|
796,416 |
|
84 |
|
|
TWFG MGA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Renewal business |
|
46,075 |
|
11 |
|
|
|
47,818 |
|
14 |
|
|
|
125,364 |
|
11 |
|
|
|
127,552 |
|
14 |
|
|
New business |
|
14,828 |
|
4 |
|
|
|
7,543 |
|
2 |
|
|
|
39,248 |
|
4 |
|
|
|
22,681 |
|
2 |
|
|
Total TWFG MGA |
|
60,903 |
|
15 |
|
|
|
55,361 |
|
16 |
|
|
|
164,612 |
|
15 |
|
|
|
150,233 |
|
16 |
|
|
Total written premium |
$ |
400,099 |
|
100 |
% |
|
$ |
354,089 |
|
100 |
% |
|
$ |
1,115,000 |
|
100 |
% |
|
$ |
946,649 |
|
100 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Written Premium Retention: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance Services |
|
|
89 |
% |
|
|
|
98 |
% |
|
|
|
93 |
% |
|
|
|
96 |
% |
|
TWFG MGA |
|
|
83 |
|
|
|
|
88 |
|
|
|
|
83 |
|
|
|
|
90 |
|
|
Consolidated |
|
|
88 |
|
|
|
|
97 |
|
|
|
|
91 |
|
|
|
|
95 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of Business: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal lines |
$ |
327,159 |
|
82 |
% |
|
$ |
289,032 |
|
82 |
% |
|
$ |
904,372 |
|
81 |
% |
|
$ |
758,297 |
|
80 |
% |
|
Commercial lines |
|
72,940 |
|
18 |
|
|
|
65,057 |
|
18 |
|
|
|
210,628 |
|
19 |
|
|
|
188,352 |
|
20 |
|
|
Total written premium |
$ |
400,099 |
|
100 |
% |
|
$ |
354,089 |
|
100 |
% |
|
$ |
1,115,000 |
|
100 |
% |
|
$ |
946,649 |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TWFG (NASDAQ:TWFG)
Historical Stock Chart
From Nov 2024 to Dec 2024
TWFG (NASDAQ:TWFG)
Historical Stock Chart
From Dec 2023 to Dec 2024
