TWFG Inc. Announces Third Quarter 2026 Results - TWFG INC

Good afternoon, my name is Howard and I will be your conference operator today. At this time, I would like to welcome everyone to the TWFG 3rd Quarter 2026 conference call. At this point, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question at this time you will need to press star 1 1 on your telephone keypad. This call is being recorded and will be available for replay on the company's website. Before we begin, let me remind you that today's discussion may contain forward-looking statements, and actual results may differ materially from those discussed. For more information regarding forward- looking statements, please refer to the company's press releases and SEC filings. Also on today's call, our speakers will reference certain non-GAAP financial measures, which we believe will provide useful information for investors. The company has posted the reconciliations of the non-GAP financial measures discussed during this call and the tables accompanying the earnings company's earnings press release located on the investor section of the company's website at www.twfg.com. It is now my pleasure to introduce Mr. Gordon Runch, founder, chairman, and CEO of TWFG. Sir, the floor is yours. Being live-cast into the world. Gotcha. Thank you, and good afternoon, everyone. We appreciate you joining us today to discuss TWG's third quarter 2026 results. Joining me on today's call is Janice Wingy, our Chief Financial Officer. After my remarks, Janice will walk through our financial performance in more detail and then we'll open the call for questions. I am pleased to report that TWG delivered another quarter of strong, profitable growth, underscoring the resilience of our diversified platform in a softening market. Total revenue grew 24.6% to $79.9 million. Organic revenue growth was 16.6%. Total written premiums grew 18.5% to 554.2 million. Adjusted EBITDA grew 15% to 19.5 million with an adjusted EBITDA margin of 24.4%. On profitability, our 24.5% adjusted EBITA margin was within our full-year guidance range. As we discussed last quarter, we expect the temporary benefit from MGA Florida takeout books to normalize as those policies renew at the full-term premiums with standard commission expenses. And that is what we are seeing. The year-over-year comparison also reflects lower interest income as we deployed cash into share repurchases and acquisitions, as well as planned investments and growth initiatives. Janice will cover the margin bridge in more detail shortly. The market environment continued to soften in the third quarter, with most carriers turning their focus toward growth initiatives, carrier demand for new business flow remained strong, and carriers continued to roll out incentives and broaden their underwriting appetite to win new business. This environment rewards distribution platforms with scale, and our results demonstrate the value we bring to our agents, policyholders, and carrier partners across market cycles. Every part of our platform contributed this quarter. In insurance services, written premium grew 12.5% to $444.7 million, led by our corporate branches, where written premiums grew 19.9%, and our commission income grew 20.4%. Our agency in a box channel grew written premiums 10.1%. Our MGA channel continued to scale with written premium's up 50.9% to 109.5 million, and MGA new business more than doubling. MGA revenue increased 78.1% to 24.8 million and now represents 31% of total revenue, up from 22% just a year ago. We also continue to diversify our mix, with commercial lines written premiums growing 32.2% to $107.1 million, or 19% of the total written premium. Our strategy remains consistent. We are executing our four core priorities, delivering strong double-digit organic growth, accretive M&A, investing in technology and platform enhancements that drive agent productivity, and deploying capital with discipline. This quarter we again made meaningful progress on all four. On the acquisition front, TWP Insurance Services completed the branch conversion acquisition of Select Insurance Solutions during the third quarter. Select joins a 2026 roster of corporate store and MGA acquisitions that include APIA, Lofton Wells, and Fortress Insurance Services. Branch conversions are accretive, margin-expanding opportunities. They move established T2G agency-in-a-box branches onto our corporate store platform, where commission expense is replaced by a lower salary cost, creating a higher-margin corporate store. These branches are led by seasoned agency owners with established books requiring minimal integration. Integration of our first half acquisitions remain on track, and these teams are positioned to contribute to TWFG's long-term growth strategy. On capital allocation, our balance sheet continues to give us flexibility. Our Class A share count stood at approximately 12.9 million shares at quarter end, down from approximately 15 million at the end of 2025, reflecting the share repurchase program we executed earlier this year we also expanded our revolving credit facility to 125 million which remains fully undrawn combined with our cash positions this gives us approximately 203 million to invest in growth pursue accretive m a and return capital to shareholders on technology we continue to invest and ai enabled capabilities that help make our agents more productive and available to the clients they serve. TWFG is positioned to benefit from AI's continued evolution because we own our technology stacks, have proprietary policy and client data, and are deploying AI to amplify what our people do best. We look forward to sharing more at our Investor Day on Thursday, November 12th, at our home office in the Woodlands, where we will provide more detailed overviews of agency-in-a-box, corporate stores, M&A opportunities, the MGA platform strategy, geographic expansion plans, and technology roadmap. Our goal for attendees is to leave with a deeper understanding of our diversified distribution platform and to meet the leaders driving our business. Before turning it over to Janice, I want to acknowledge the outstanding execution of our team this quarter. Our results are the product of thousands of individuals contributing every day from our agents, our carrier partners, and our corporate team. I could not be more proud of the entire TWFG family. With that, I will turn the call over to Janice for a closer look at our financial results. Thank you, Gordy. I am pleased to report the following third quarter results beginning with our top KPI written premium. Renewal written premium grew $86.5 million or 18.5% to $554.2 million driven by strong renewal and new business performance. Renewable premium grew 48.5 or 13.4% to 410.7 million and new businesses grew 37.9 million or 35.9% to 143.5. For the third quarter, consolidated written premium retention was 88 percent compared to 91 percent in the prior year period. Insurance services retention was 90 percent compared to 92 percent, and TWFG MTA retention was 78 percent compared 80 percent. On a year-to-date basis, consolidated retention was 91 percent, up from 89 percent in the prior-year period. Looking at the components of our written premium, insurance services grew $49.5 million or 12.5% to $444.7 million, driven primarily by renewal growth of $40.6 million or 13%, and new business growth of 8.9 million or 10.8%, supported by organic and inorganic growth across both agency-in-a-box and corporate stores. Our MGA channel grew $37 million or 50.9% to 109.5 million, with new business growth of 29.1 million or 122 percent driven by the ramp of our voluntary florida homeowners program the continued renewal cycle of our citizens takeout book and contributions from apia which we acquired in the first quarter of 2026. total revenues increased 15.8 million or 24.6 percent to 79.9 million commission income grew 15.1 million or 25.9 percent to 73.4 million which was driven by strong mga performance with growth of 10.7 million or 92.6 percent as a result of contributions from the acquisitions of mga florida and the apia programs which generate higher commission rates. Insurance services grew 4.4 million or 9.4 percent due to organic growth as well as contributions from acquisitions. Commission income growth outpaced written premium growth by 740 basis points as the MGA programs contribute higher commission rates than the insurance services business. Contingent income was 2.6 million compared to 2.1 million in the prior year period, and fee income was comparable to the prior year quarter at $3.6 million. Organic revenues reached $68.7 million, representing a $9.8 million increase over the $58.9 million reported in the prior-year quarter. This yielded an organic revenue growth rate of 16.6 percent and was at the top of our full-year guidance range and above industry averages importantly our growth this quarter was volume led rather than rate driven with rates moderating we grew by adding policies and clients as well as retaining our client base as indicated in our renewal growth across both offerings our insurance services business continues to generate sustainable and consistent organic growth independent of acquisition contributions Turning to operating expenses, commission expense increased $7.3 million or 20.9% to $41.9 million, growing 500 basis points slower than commission income. This operating leverage was primarily driven by higher commission income rates on MGA program business as well as an increased concentration of corporate store acquisitions carrying minimal commission expense. Salaries and employee benefits increased $1.9 million, or 19.3%, to $11.8 million, due mainly to added headcount from our recent acquisitions. Other administrative expenses increased $4.5 million, for 85.8%, to 9.7 million, primarily due to professional and legal fees associated with capital markets activity and the expansion of our credit facility, as well as continued investments to support our growth initiatives. Approximately $1.8 million of the costs in the quarter were non-recurring, primarily those legal and professional fees as previously mentioned are excluded from our adjusted results. Depreciation and amortization increased $2.2 million or 40.7% to $7.5 million, primarily from amortizations related to our recent acquisitions. Now moving to profitability, net income for the quarter was $9 million compared to $9.6 in the prior year quarter and net income margin was 11.3% compared to 15%. Diluted earnings per share were 9 cents compared to 11 cents. The quarter-over-quarter comparison reflects higher administrative and personnel expenses, lower interest income, and higher non-cash amortization related to acquisitions. Adjusted net income increased 16.3% to $15.1 million with an adjusted net income margin of 18.9% compared to 20.2% in the prior year quarter. Adjusted EBITDA grew 15% to 19.5 million with and adjusted EBITMA margin of 24.4% compared to 26.5% in prior year. The 210 basis points decrease was primarily due to interest income, which we include in adjusted EBITDA, declined to $0.5 million from $1.6 million in the prior year period as we deployed cash into share repurchases and acquisitions. This accounts for roughly 180 basis points of the decline. The remaining 30 basis point decline was primarily to corporate overhead costs for business growth including technology initiatives. Over today, adjusted EBITDA margin was 28% up 310 basis points from 24.9% and adjusted diluted earnings per share increased to 28 cents up 21.7% from 23 cents in the prior quarter. From a cash and capital perspective, cash flow from operating activities for the quarter was 10.6 million compared to 15 million in the priority period and adjusted free cash flow was 7.5 million compared to 12.3 million primarily reflecting working capital impacts including higher commissions receivables and lower commission payables and other liabilities these impacts were partially offset by amortization on a year-to-date basis operating cash flow was 43.1 million up 7.2 percent from 40.2 million and adjusted free cash flow is 31.2 million, up 8.2 percent from 28.8 million. Our balance sheet remains strong. As of September 30th, we had $77.8 billion in unrestricted cash and cash equivalents, plus $17.8 million in restricted cash. We have full unused capacity on our expanded $125 million revolving credit facility and only $2.5 million of term notes outstanding, giving us approximately $202.8 million of available liquidity from unrestricted cash and revolver capacity. And with that, I will now turn it back to Gordy for closing remarks. Thank you, Janice. Turning to our outlook, we are updating our 2026 guidance from the second quarter based on our strong year-to-date performance and our line of sight to the balance of the year. We expect total revenues of $300 to $320 million, organic revenue growth of 15% to 17%, and an adjusted EBITDA margin of 24% to 27%. Through the first nine months, organic growth of 21.5% and an adjust EBITTA margin of 28% are tracking above the high end of those ranges. and our outlook reflects a prudent review of the fourth quarter, including the continued normalization of the MGA Florida takeout book and the softening market conditions. In closing, I want to thank our employees, agents, carriers, executive team, and shareholders for their continued trust in TWFG. We see significant opportunities ahead and we look forward to hosting many of you at our Investor Day on Thursday, November 12th at our home office here in the woodlands texas with that operator please open the line for questions yes sir ladies and gentlemen if you have a question or comment at this time please press star 1 1 on your telephone keypad if your question has been answered or you wish to remove yourself from the queue simply press star 11 again again if you haven't a question a comment please press start 1 1 on your cell phone keypad please stand by while we compile the q a roster our first question or comment comes from the line of michael zaremski from bmo capital markets your line is open hi great um thanks um just looking uh question on the guidance um i recall last quarter the sticking points in the guidance were you know contingents uh which could be you know um choppy and M&A-related revenues, you know, organic growth, beat and raise, but total revs guide staying the same. So I guess just does that imply, is it contingents or M&R-related revenues that are kind of, you're falling a bit shy of the upside scenarios into the year-end? It's just, you now, it's a bit of a wide range. Hoping to get some color. Thanks. Yeah, sure. Great. Great question, Mike. So we chose not to up the contingent line coming out of the third quarter. We have locked in most of our major profit-sharing contingencies at the nine-month lock-in. And when you do that, you take a little bit of a haircut on the ultimate payable. So there's still potential upside to the contingente line, but those would be coming from more variable contingencies of which we won't know the outcome until uh you know after the calendar year so we chose not to increase the contingent revenue line at this time as far as for the m a m a has always been a there's always potential for additional m a at any time we didn't have any significant transactions that altered that potential upside in the quarter we did announce an internal branch conversion, which this also helps support margin expansion going into the fourth quarter. Got it. That's helpful. Maybe you can just – you mentioned the pricing environment and just the backdrop a number of times. Can you just kind of further elaborate on specifically, maybe quantitatively, what you're seeing with with pricing and how it's impacting our revenues maybe MGA you know versus non MGA or personalized versus commercial or whatever you feel would be the best way you guys think about it sure so on personal lines it's really geographically different and the more cat exposed geography you're seeing high single digits to low teen property decreases in pricing. And the auto, personalized auto, more countrywide, you're seeing less rate coming down than perhaps we saw earlier in the year. So I'd call that more rate moderation. And on commercial lines, you know, we're primarily in small business, lower in the middle market, less volatile areas of commercial lines where we don't have wild swings up or down. On the commercial property side, I think you read through all the other brokers out there, there's still a little pressure on the property side but not as acute as it was in the prior years. So overall, we see a moderating rate environment, geographical local, more significant and cat-prone geography, less so, and less cat-exposed, less cat reinsurance-oriented lines. That's helpful. Okay. I'll get back in the queue. Thanks. Thank you. Thank you, sir. Thank you very much. Our next question or comment comes from the line of Tommy McJoy from KBW. Your line is now open. Hey, everyone. This is Molly Nolan for Tommie. Thank you for taking our questions. My first question is on written premium retention. I saw it fell five points from last quarter and three points year over year to 88 percent. Does this primarily reflect normalization given Florida takeout renewals in prior prior periods or are you seeing any underlying changes in retention and is 88 percent a reasonable starting point as we think about 2027? Thanks. Yeah, I think if you look at, when you're looking at quarter over quarter, it is, the renewals are taken into account. However, what I noticed in Q3 compared to Q3 of 26 compared to Qu3 of 25, the denominator where you take new business and renewals from the prior year, the new business uptick was due to Florida. So it wasn't always just based on renewals, but it was for new business and renewals 25 to 26. And then renewals in 26, the numerator did increase. We've previously put out that our long-term average retention is in the 88, 89 percentile range. Consolidated. Yeah, on a consolidated basis. We've been in the 90, 91 percent the last several quarters. if you isolate out, and we're not allowed to tell you specifically, but we would be in that same range about some of the impacts regarding the Florida book. Thank you. That's helpful. And then shifting gears here a little, does the expanded credit facility of $125 million signal a more actionable acquisition pipeline, and how would you weigh M&A against authorizing additional share repurchases? Yeah, I think we have had the credit facility in place for multiple years. Given our size and growth initiatives and our constructive pipeline, it made sense for us to upsize the facility in advance of all the opportunities that we have that we're looking at. I think in our prepared comments between the base credit facility and cash on hand, that That implies $203 million of capital available for us to invest across M&A, across internal investment for infrastructure improvements and initial growth initiatives. That's without using equity in transactions. So if we use equity in combination with cash, that significantly raises the size of transactions we can entertain. Last year, we mentioned we had quite a few larger transactions in the pipe. Most of those cooled off as the spring market volatility took hold. Some of those are coming back out and giving us visibility to additional opportunities. We've been very disciplined in our M&A. We've got a very healthy pipeline going into 27, and we thought it was prudent for us to be in a position to execute without having to go through credit and other workflows in order to get a deal done. Thank you. Appreciate it. I should supplement with the facility also has a $75 million built-in accordion, so that takes the facility up to $200 million. so that even broadens even further the size of deals we can entertain. Thank you. Our next question or comment comes from the line of Brian Meredith from UBS. Mr. Meredith, your line is now open. Yeah, thanks. Hey, Gordy, I guess the first question is, and obviously a lot of people have been asking this, these personal agents, AI-enabled, maybe some thoughts and comments on that one as far as what the potential impact your business is. And then as an add-on to that, I'm just curious, has that helped at all with respect to your pipeline for potential acquisitions? Is it lowering valuations? Are you seeing more agencies looking to maybe potentially sell? Good question, Brian. I think on, you know, just the whole AI narrative, I think there's going to be really multiple camps on how they interpret the future. So I would say there are probably opportunities for agencies that are a little bit longer in the twos, closer to retirement, that possibly don't want to go through the next inflection point of technology innovation and change for our industry. Those become buying opportunities as they're not going to want to reinvest and or learn the new way forward. So we are seeing a few tenured agencies raise their hands and, you know, start to look for the exit. So that's buying opportunity. Those are going to be lower-sized agencies, and that becomes part of our M&A pipeline going forward. I think for the most part, the long-term forward-looking agencies are all adopting AI initiatives within their agencies. it's going to be the haves and have nots will be in the camp with abs if they're not already doing it they probably should be updating their their search results you know a year ago today everybody would be talking about seo today everybody's talking about geo and that's the distinction between how your business is found online seo is google GEO is your chat GPTs, your AI-initiated search. And we're seeing flow coming through from both. And I think most agencies are adopting and changing their technology platforms to be where they need to be in the new world going forward. As far as the district and mediation concerns, we've seen what's been rolled out so far. I think even Progressive announced in their call they're seeing very little traffic coming from that side, but they'll be in a position to be responsive should that ever change. And I think for us, we're going to be similarly forward-thinking and being in a situation to attract that traffic should that increase. Makes sense. Thanks. And then one of the just quick numbers questions, and I may have missed this, but it looks like that the commission rate on agency inboxes is kind of declining. Is there anything going on there? It should be relatively flat, and I think that's because when we get incentive comp, most of that ends up in our contingency line, and then there is a little differential between new business and renewal commission, and that as your portfolio grows, renewal commission becomes a larger portion of your portfolio than new business, So that could be slight shifts, but nothing material that I've seen. Great. That makes sense. Thank you. Thank you, our next question or comment comes from the line of Cameron Bianchi from Piper Sandler. Bianchi, your line is open. Hi, good afternoon. This is Cameron for Paul. I wonder if you could just talk about a little bit what you're seeing in the M&I pipeline, And if you continue to lead, the pipeline will be accretive to margins like the M&A operations that you're seeing from recent acquisitions? Yeah, so we did a reflective look back on all the prior acquisitions from the last several years, and we are seeing a consistent margin expansion theme from those operations. We believe that everything we're looking at in our pipeline needs to be accretive in order for it to be considered. And so we're monitoring what's working best in our prior acquisitions so we can make sure we incorporate those structures as we go forward for future acquisitions. It's our belief and our real results that the things we are acquiring are are created to margin, are created to revenue growth, and provide us talent that's going to be beneficial to us to sustain long-term growth. Understood. Could you talk a little bit about what you're seeing from a competitive standpoint in Texas and maybe a little in the Florida MGA business as well? Texas is its own country as most people know you have multiple geographies with different risk exposures the areas towards the coastline rate moderation at a higher level than those that are only hail exposed in Central Texas so you know similarly with North Texas it's more of a hail tornado exposure and their rates are moderating but not as significant as you would see along the hurricane exposed more cat priced around hurricane than inland. When you get to Florida, the whole state is a cat zone. You had a lot of successful takeout companies started in the last five years. You had lot of combined ratios come down with tort reform. So when they got rid of the assignment of benefits, that made a significant improvement in average loss costs and frequency of litigation. that market is softening and everybody's positioning, you know, for retention and growth of their programs. All programs are no different. We have to remain competitive in order to retain the initial takeout portfolios, as well as position the new business voluntary programs to be competitive in today's marketplace. The good news for us is we didn't have those voluntary programs in place prior, so we're not going to have massive decreases of premium over multiple years, given that most of the business we're providing is new business at more current rates, which would have been lower than they would have done two or three years ago. Thanks for the help. Thank you. Again, ladies and gentlemen, if you have a question or comment at this time, please press star 1-1 on your telephone keypad. Our next question or comment comes from the line of Roland Major from RBC Capital Markets. Mr. Major, the line is now open. Hi, good evening. I think in the prepared remarks, you mentioned PIF growth as a revenue driver, but I don't know if you gave an actual number. Could you maybe help me understand how the policies and reports are growing, and does organic normalize towards that as pricing softens? Yeah, so two things there. We've never provided PIF counts. We introduced that in our prepared remarks to explain the difference in our growth going into this softer market. During a hard market, you're getting growth both from PIF count, but more pressure or more growth coming from rate as the market is softening. Now we're shifting the narrative to say that more of our organic growth is coming from PIP count rather than rate. The rate environment is something that you know, will make it incumbent upon us to add new customers across all existing customers and grow our total policies in order to sustain organic growth at the levels that we want to achieve. Thank you. And then I guess during the year, the margin guide has moved up. Part of that I think is contingent. And I think if my memory serves, the first half was impacted by some hiring. Could you help me understand what normalized margins might look like and how your business mix towards corporate and MGA impacts that? Yeah, we've talked about our margins. So where our margins have been for 26 is elevated. Most of that elevation was due to the MGA takeout business that had income without corresponding commission expense. As that's normalizing, policies are renewing with full-term economics where we're actually paying the commission expenses. That's going to come down. When we went public several years ago, you know, our target long-term margin was in the low 20s, so between 22 to 23. We've given and reaffirmed our full-year guidance for this calendar year at a higher range, and that's because we've had the benefit of the first three quarters with that takeout business and the favorable economics there. Thank you for the answers. thank you our next question or comment comes from the line of pablo sings on from jp morgan mr sings on your line is now open um hello uh for organic growth this quarter i was wondering what was it excluding the the impact of the florida uh takeout business janice has been waiting for you to ask that question pablo If it is including? No, no, the excluding of the takeout business. No, it's 16.6. I know, but excluding the takeouts. Oh, we can give that information? Well, we're not supposed to give you the excluding stuff because it's smoothing over the results. So what we can say is organic was in the double digits irregardless of activities in the state of Florida. Okay. Yep. And then I guess just to follow up to the last question on margins, it's a similar attack here, right? So to your point, Gordy, the margins benefited from Florida. Is sort of like your outlook for margins still in the low 20s ex-Florida, or are we moving closer to the mid-20s here? Thank you. So for 26, the only guidance we put out, we put margin, we've given you the range, and um if we look at long term we think that uh our margins as we continue to do creative m&a as we Continue to expand mix shift to uh commercial lines and mga programs uh that that's going to be the lower end of the mid-20s probably is a better range um as we normalize economics and so right now you know our reaffirmed was 24 to 27 uh and you know that's for calendar 26 and we look at we haven't given guidance for 27 but that's kind of how i would frame it thank you yep thank you our next question or comment is a follow-up from mr michael Zaremski from BMO Capital Markets. Your line is now open, sir. Hey, thanks. Just a quick follow-up. And if you think it's just splitting hairs, and feel free to say we could follow up offline. But back to the contingent question earlier. So I think your answer was you're taking a haircut by locking in certain elements of commission now, but then you also said there could be upside in January, so in 4Q, based on, I'm not sure what, maybe it's how the loss ratio trends for home and auto, but I don't know, is it worth teasing out what you mean by potential upside? So we had a higher total contingency revenue in 25, and that was an outstanding combined ratio a year across multiple geographies and all lines of business. We have a lower current accrual for contingent income. That's a very solid number based on everything we've already locked in. Many of the contingencies we get from smaller regional or super regional carriers, they do not provide us line of sight mid-year or at nine months on where we're at on the performance of those plans. So we still have some accruals left for those, but there's room for them to come in at higher levels, similar to what happened in 25, of which we just don't have, they don't communicate to us, so we don't know what's coming. So if you look at quarter over quarter, though, our contingent is relatively flat. So in Q4 is when we'll get the, you know, increase, just like we did in Q4, a 25. Yep. We do expect that number to go up in Q5, for sure. Okay. Yep, that's helpful. Thank you. Thank you, I'm showing no additional questions in the queue at this time. I would like to turn the conference back over to Mr. Bunch for any closing remarks. Thank you operator, and thank you all for attending today's call. I do want to reiterate, You know, we've had excellent three quarters so far through 26. We've given out, you know, tightened guidance for the remainder of calendar year 26. We have, throughout the calendar year, you Know, mentioned the economic changes of the takeout business normalizing. And that view is included in our updated guidance, as well as the current softening market. We see great opportunities for our company going forward, and we look forward to hosting many of you here in our office next week for our very first Investor Day, and look forward seeing those who are able to attend in person on November 12th and those who can participate online. Without any other questions, I just thank you again for attending today's call. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.