Thank you and good afternoon. 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 expectations, estimates, and projections of management as of today. Forward-looking statements in our discussions are subject to various assumptions, risks, and uncertainties that are difficult to predict and which could cause 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 on them. We refer all of you to our recent SEC filings for more detailed discussion of risks and uncertainties that could impact future operating results and financial condition of Goosehead. We disclaim any intention or obligation 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 period to period by including 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 the use of non-GAAP financial measures, including reconciliation of these measures to the most recent 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 An archived version will be available shortly after the call ends on the investor relations portion of the company's website at goosehead.com.
Now, I'd like to turn the call over to our President and CEO, Mark Miller.
Thanks, Dan. Good afternoon, everyone, and thank you for joining our Q3 2025 earnings call. We are pleased with the results this quarter as they reflect continued momentum and strong execution. Our sights remain squarely focused on our goal to become the largest distributor of personal lines insurance in the U.S. in our founder's lifetime. It has now been slightly over three years since I joined Goosehead, and I've never been more excited about the direction we're headed. What originally drew me to this business were the strong fundamentals and market dynamics that create the opportunity for durable and sustainable growth. To hit a few of the most critical points, we distribute a product with almost completely inelastic demand. If you live somewhere or drive something, you must have insurance. We operate in an industry with over $530 billion of Total Written Premium annually.
We've made great progress towards industry leadership over the past several years, growing from just over $2 billion in premiums in 2022 to over $4 billion this year. Interestingly, we still represent less than 1% of total market share, so our runway for future growth is enormous. Our industry remains fragmented. No individual distributor has more than 20% market share, which provides us freedom of movement across every market in the country and allows us to accelerate share capture. Our choice model and national scale are highly differentiated. We've worked incredibly hard to build out a product portfolio of national brands and niche regional products that allow our agents to be successful in just about every market in the country. Clients demand choice, and we have built a platform that provides a superior shopping experience.
The competitive set, specifically in the personal lines space, has major gaps in meeting client needs. Single product platforms like direct online distribution and captive agencies can't meet the client's needs for choice. Subscale independent agencies generally lack the necessary service capabilities, product depth, and technology to deliver an exceptional client experience. This very favorable backdrop attracted me here, and each one of these points remains true today. There are no structural limitations to our growth, and we believe we are positioned better than anyone else for long-term industry leadership. During our second quarter earnings call, I laid out five key strategic initiatives: supporting accelerated expansion of our existing agencies, placing the right new franchise owners in the right geographies, expanding our corporate team to further support top decile agency growth, ramping new go-to-market motions through our enterprise sales and partnership teams, and developing new and maturing technologies.
The first three key strategic initiatives relate directly to maximizing growth of the franchise channel, and we have made great progress here. For example, in Q3, our agency staffing program, which we call ASP, helped our franchise owners place 90 new producers into their agencies, a record for one quarter. We have identified the top markets to launch new franchises in, and we are aggressively pursuing that strategy, launching 34 new agencies across 13 different states during the quarter. We launched 10 corporate agents into franchises during the quarter, resulting in new business production equal to 77 average franchise producers. To further support corporate agents launching into the right geographies, we opened our newest corporate office in Nashville, Tennessee, on October 1st and have identified the next several locations for 2026.
Expanding the corporate office footprint creates amazing career opportunities for our corporate teammates, and it seeds new geographies with top decile future franchise talent. Our newest go-to-market team, the Enterprise Sales Team, which takes inbound leads from a diversified set of partners, continues to scale, growing over 100% versus Q3 last year. We have also made meaningful progress on our AI initiatives, implementing new tools into our service delivery function to improve the client experience, reduce complexity, and drive unit costs down. On our previous earnings call, we talked about several new partnerships that took the form of a Goosehead franchise. I am excited to share another win this quarter. Goosehead has partnered with the top 20 mortgage originator and servicer, who, upon launch, immediately will be poised to become one of the largest agencies in the Goosehead system.
We believe our industry knowledge, seamless user experience, and white-glove service will deliver an unparalleled client experience. Just to frame the size of the partnership business, we have already signed or taken live on our platform partners that represent, in total, more than 1 million home loans serviced and 75,000 home closings annually. Our partners, who have a captive audience, a great reputation with their clients, and a specific need to solve client pain points, are the perfect place to insert the Goosehead shopping experience. Over the years, Goosehead has become known for its innovative business model and technology. We have spent hundreds of thousands of hours and millions of dollars on building a technology stack that widens and deepens our competitive moat. Going back to 2018, we were unsatisfied with the comparative rating tools available in the market, so we built our own.
We call that technology Aviator, and it allows our agents to quote more efficiently. We built a client-facing quoting tool, our Digital Agent, that today provides lead flow to agents across the country and gives clients a real look at potential insurance options. We then deepened our integrations with a number of our carriers, developing Quote to Issue technology within Aviator that allows our agents to bind policies without ever leaving the Goosehead ecosystem, speeding up time to close and reducing friction. Building this foundation has been critical for the next step in our evolution: direct-to-consumer technology, which will integrate our Quote to Issue technology into our existing client-facing Digital Agent. We believe the Digital Agent will revolutionize how personal lines insurance is distributed, and it will break through the human capital bottleneck.
Over the next year, we plan to deploy this tool to our existing and new partnerships, leveraging their client relationships to provide a tailored insurance shopping experience that ultimately maximizes value creation across the entire distribution chain. For our carrier partners, delivering the highest quality client by utilizing precise client segmentation analysis and target marketing. For our distribution partners, increasing the lifetime value of their clients and solving pain points in their existing business. For our agents, increased productivity, allowing them to focus on marketing and cross-selling into our existing client base. For Goosehead, by driving high growth and high margin business at scale, and most importantly, for our clients, providing a world-class insurance shopping experience that doesn't exist in the U.S. today. This incredible opportunity is about investing for the long term and remaining laser-focused on delivering shareholder value. Mark Jones Jr.
will give you more specifics on the timing and level of investment. We have an exciting road ahead of us at Goosehead as we enter into what appears to be a stable pricing cycle that we believe will allow our business to operate much more efficiently, resulting in higher client retention, higher bind rates, higher package rates, higher contingent commissions, and most importantly, higher client satisfaction. As I turn this call over, I am pleased with our performance. This quarter demonstrates that we continue to gain momentum, remain focused on our clients, empower our teammates, and execute with excellence. We have a massive head start on our competition, and I'm confident in our team. I would like to sincerely thank the Goosehead team for their hard work. With that, I will hand the call over to Mark Jones Jr., our CFO and COO.
Thanks, Mark, and good afternoon to everyone joining us today. My nine-year anniversary with Goosehead is on Monday, but in reality, I've been around the business since its inception. I've seen or been directly involved in every iteration, every major decision, every success, and every mistake from the front row. I can say with complete conviction this is the most exciting time in our company's 22-year history. We are literally building the future of personalized distribution in real time. As Mark Miller mentioned, our evolution of the Digital Agent to allow a frictionless experience for clients, which paired with our strategic partnerships, is a massive opportunity for Goosehead to rapidly take share in a sustainable and profitable fashion. For many years, the investor community has asked us why we can't simply invest more money to drive faster growth.
Our limitation has always been our ability to absorb new agents into existing teams, not a capital constraint. With the next iteration of our Digital Agent, we now have the opportunity to utilize our strong cash flow to invest aggressively in areas that break the human capital bottleneck and allow for much more rapid growth in the future. While we believe the independent agent will remain a critical piece for personalized distribution, we also recognize there's a growing portion of the population that wants to interact and transact digitally. With that segment of the population, the bottleneck to growth isn't how many producers we add or how productive each producer is, but how seamless and educational we can make the process for clients and about capturing the maximum amount of lead flow.
Today, we're going to talk about the investments we're making in both of those areas: the technology build and the business enablement through partnerships. While both are well underway, now is the time to double down and aggressively drive towards a full-scale platform. Let's review several numbers. In 2025, so far, we have invested $10.9 million into the Digital Agent platform, of which $8 million has been capitalized and $2.9 million recognized into operating expenses. During 2026 and 2027, in each year, we expect to invest between $25 million and $35 million and anticipate approximately 70%, or $17 million-$24 million, to be capitalized with the remaining $8 million-$11 million flowing through operating expenses. Operating expenses will include approximately $7 million-$10 million in headcount costs between both technology and partnership enablement, and an additional $1 million in G&A.
We expect revenue contributions to begin in the second half of 2026, with meaningful acceleration as additional carriers, states, and partners come online throughout 2027 and beyond. The Digital Agent provides us the ability to efficiently penetrate significant portions of our total addressable market in a much more scalable fashion than our traditional referral partner relationships. Because of this, we believe the Digital Agent can add substantial incremental growth on top of our existing business, with the potential to drive to 40%+ Total Written Premium growth within the next five years. As Mark Miller mentioned, during the quarter, we signed a new partnership with a top 20 mortgage originator and servicer. This new partnership and others already on our platform are the ideal place to implement the next iteration of our Digital Agent.
By integrating with our partners, we will be able to utilize the full depth of our data to provide actionable insights into what coverages make the most sense for a particular client, and pairing that with newly developed AI tools, be able to risk match with carrier demand in their geography. This is critically important because it allows us to deliver exceptional value to clients, partners, and carriers. While these new go-to-market motions are exciting and will be important for the medium and long term, our core business continues to perform and gain momentum. Franchise producers at quarter end were 2,124, up 1% from a year ago, and producers per franchise was 2, growing 6% over the previous year. As we have previously discussed, consolidation in our franchise network is continuing to take place.
Our best agencies are reinvesting their cash flow into two main areas for growth: first, onboarding new producers, and second, acquiring other franchise owners in their regions to further grow their total cash generation. Our most productive agencies are the ones most active in franchise consolidation, which helps further drive value creation as they onboard the newly acquired book and reach out to the existing client base. Acquiring agencies during the quarter had 3x higher average productivity per producer than agencies that were acquired. Operating franchise count for the quarter was 1,068, a decrease of 4% over the previous year. This is intentional and drives higher performance from the existing franchise base and further protects our brand. We expect operating franchises to continue to decline for the next 12 months-18 months. However, we anticipate continued growth in producer count during that time.
Our corporate team delivered its highest growth quarter in nearly four years, generating new business commissions growth of 20% year-over-year, accelerating off of 13% in the second quarter of this year. Our strategy with our corporate sales team can be boiled down into one simple goal: to become a talent incubator for the rest of the organization. This team is the best place in our business to learn the Goosehead operating model. Our agents learn the value proposition to our clients and referral partners, the nuance of individual carriers, our systems and management practices, how to take care of clients on a daily basis, and are grounded in the Goosehead winning culture. Success for our corporate sales team should be measured in terms of franchise launches, tenure-adjusted productivity, and turnover.
When we are consistently populating the country with high-quality franchises out of corporate, demonstrating best practices while setting the bar for productivity and minimizing turnover, our corporate sales team is executing exactly as designed. During 2025, we will launch a total of 10 franchises from our corporate sales team, and looking into 2026, we expect that to be at least 20, with a medium-term goal of 50 or more a year. Turnover is trending in the right direction but remains higher than our targeted level. We expect to reduce turnover with three key actions. First, reducing the sales manager's span of control. Second, by investing in additional training and development programs that help our agents come down the learning curve faster and create a greater sense of connection to the organization.
Third, as we look into 2026, smoothing out hiring of new corporate agents through the first three quarters of 2026, with limited onboarding in the fourth quarter. Our corporate sales team ended the quarter with 523 total agents, up 14% over the previous year, inclusive of 423 traditional corporate sales agents and 100 Enterprise Sales Agents. The product market has improved dramatically over the last several months, with national brands becoming more available, new entrants into important markets, and more stable year-over-year pricing throughout the book of business. As we progress through the rest of 2025 and into 2026, we expect the product market to become a tailwind rather than the headwind it has been for the last three and a half years. Remember, our business functions much more efficiently in a stable pricing environment. More product is available, close rates and cross-sell rates for our agents improve.
The burden on our service team comes down, client retention improves, and contingent commissions become more meaningful. Simply put, lower year-over-year premium increases are a great thing for our business. During the third quarter, we generated strong profitable growth. Total revenue grew 16% over the previous year to $90.4 million, core revenue growing 14% to $83.9 million, and adjusted EBITDA growing 14% to $29.7 million. Adjusting for our renewal commission recovery in the second quarter of $4 million, core revenue year-over-year accelerated 131 basis points during the third quarter. We expect continued acceleration in the fourth quarter and improvement for the full year 2026. As of quarter end, client retention improved to 85% after four consecutive quarters at 84%. We expect to see continued improvement in client retention over time as we enter into a softer pricing cycle.
We see no structural reason our client retention cannot ultimately return to or exceed our previous high of 89%, given the level of investment we've made into our service delivery function and client-facing tools like our mobile Policies in Force at quarter end were 1.9 million, a 13% increase over the previous year Policies in Force growth rate, while still 13%, has accelerated 37 basis points during the quarter, and we anticipate further acceleration in the fourth quarter. Total Written Premium was $1.2 billion for the quarter, up 15% from a year ago. This includes franchise premiums of $976 million, up 18%, and corporate premiums of $206 million, an increase of 1% from a year ago. We anticipate similar year-over-year growth in Total Written Premium in the fourth quarter as improvements in client retention are offset by pricing declines, followed by acceleration through 2026.
Contingent commissions for the quarter were $4.5 million compared to $2.5 million in the previous year, an increase of 82%. Based on current carrier loss performance and the frequency of catastrophic events in 2025, we now expect contingent commissions of 55 basis points-80 basis points as a percentage of Total Written Premium. While our outlook has improved, there remains a wide range of potential outcomes for the fourth quarter. Cost recovery revenue was $1.5 million compared to $1.6 million a year ago. Adjusted EBITDA for the quarter grew 14% to $29.7 million from $26.1 million in the prior year period. Adjusted EBITDA margin for the quarter was 33% compared to 34% a year ago. Adjusted EBITDA margin, excluding the effect of contingent commissions, was 29% compared to 31% a year ago.