Financial Data and Key Metrics Changes - In Q4 2022, Goosehead Insurance reported a premium growth of 44% and revenue growth of 43% compared to Q4 2021, with core revenue growth for 2022 at 41% and EBITDA growth at 76% [9][50] - Total written premium for Q4 2022 increased to $585 million, reflecting a strong performance [37] - Adjusted EBITDA for the quarter grew 123% to $11.9 million, with an EBITDA margin of 21% compared to 13% in the previous year [50] - Total revenues for 2023 are expected to be between $258 million and $267 million, representing organic growth of 23% to 28% [52] Business Line Data and Key Metrics Changes - Corporate agent productivity increased by 24% year-over-year in Q4, with January 2023 showing a 44% increase and first-year agent productivity up 77% year-over-year [26][11] - The company expects to add 150 to 200 producers to the franchise system in 2023, which could equate to approximately 250 to 350 new franchisees [14][15] - The top half of franchises accounted for around 90% of new business production in 2022, indicating a disparity in performance among franchises [28][72] Market Data and Key Metrics Changes - The company faced macro headwinds, including historically low contingent commission levels and declines in housing activity, but maintained a focus on client needs to adapt and deliver strong results [19][20] - The renewal book performed exceptionally well, with a client retention rate of 88% and premium retention of 100% [70] Company Strategy and Development Direction - Goosehead Insurance aims to become the number one distributor of personal lines P&C insurance in the U.S. and is focused on investing in and expanding its core business [21][20] - The company is rationalizing its franchise system by removing underperforming franchises and reallocating resources to high-performing ones [13][32] - Strategic partnerships with mortgage brokers and real estate organizations are being pursued to enhance distribution channels [17][66] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's unique business model, which provides a competitive advantage that is difficult to replicate [20] - The company anticipates material corporate producer growth beginning in Q3 2023 as new college graduates join the team [27] - Management acknowledged the challenges posed by the housing market but emphasized the strong productivity of agents and the potential for growth in various environments [85][84] Other Important Information - The company culled over 280 underperforming franchises in 2022, which had minimal impact on growth as they accounted for only 2% of new business production [32][38] - Total operating expenses for Q4 2022 were $45.5 million, up 30% from the previous year, driven by increased headcount and investments in technology and marketing [49][76] Q&A Session Summary Question: Is the variance in productivity seen only in newer recruits or also among longer-tenured agents? - Management indicated that the productivity variance is predominantly in agents with less than two years of experience, but some longer-tenured agents also face challenges [55] Question: How does the company plan to address productivity challenges among longer-tenured agents? - Management confirmed they can identify productivity issues at the agent level and are implementing training programs to support agents throughout their careers [57] Question: What is the outlook for contingent commissions in 2023? - Management remains cautious about contingent commissions despite positive trends in written premium productivity, indicating a potential for upside but not counting on it [58] Question: How does the company view the impact of housing market headwinds versus pricing tailwinds? - Management believes that the pricing tailwinds from auto and home insurance will outweigh the housing market headwinds, positioning the company well for productivity growth [85] Question: What is the expected retention ratio for franchises moving forward? - Management anticipates that the culling of underperforming agencies will be largely complete by the end of Q2 2023, which should help stabilize retention ratios [94] Question: What went wrong with the underperforming franchises, and what solutions are being implemented? - Management noted that many franchises signed during the pandemic did not commit fully, leading to a high turnover rate. They are now focusing on quality recruitment and converting successful corporate agents into franchisees [120][122]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 For the transition period from _______ to ______ Commission file number: 001-38466 GOOSEHEAD INSURANCE, INC. FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Delaware 82-3886022 (IRS Employer Identification No.) Not applicable (Former ...

Goosehead Insurance, Inc (NASDAQ:GSHD) Q2 2022 Earnings Conference Call July 27, 2022 4:30 PM ET Company Participants Dan Farrell – Vice President, Capital Markets Mark Jones – Chairman and Chief Executive Officer Mark Miller – President and Chief Operating Officer Mark Colby – Chief Financial Officer Conference Call Participants Ryan Tunis – Autonomous Research Matt Carletti – JMP Paul Newsome – Piper Sandler Meyer Shields – KBW Mark Hughes – Truist Pablo Singzon – J.P. Morgan Operator Thank you for standi ...

Part I [Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for Goosehead Insurance, Inc. show a net loss of $3.0 million for the six months ended June 30, 2022, primarily due to increased operating expenses [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Total revenues increased 39% to $53.0 million in Q2 2022, but a 38% rise in operating expenses led to a net income decrease to $2.4 million, resulting in a $3.0 million net loss for the six-month period Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended June 30, | | Six Months Ended June 30, | | | :--- | :--- | :--- | :--- | :--- | | | **2022** | **2021** | **2022** | **2021** | | **Total revenues** | $53,022 | $38,173 | $94,300 | $69,401 | | **Total operating expenses** | $47,355 | $34,387 | $94,735 | $66,417 | | **Income (loss) from operations** | $5,667 | $3,786 | $(435) | $2,984 | | **Net income (loss)** | $2,389 | $3,136 | $(2,994) | $2,047 | | **Net income (loss) attributable to Goosehead Insurance, Inc.** | $342 | $1,487 | $(1,944) | $1,091 | | **Diluted EPS** | $0.02 | $0.07 | $(0.10) | $0.05 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2022, total assets increased to $291.3 million and total liabilities to $350.0 million, resulting in a total equity deficit of $58.7 million Condensed Consolidated Balance Sheet Highlights (in thousands) | | **June 30, 2022** | **December 31, 2021** | | :--- | :--- | :--- | | **Total current assets** | $51,110 | $47,813 | | **Total assets** | $291,286 | $267,798 | | **Total current liabilities** | $26,194 | $27,777 | | **Total liabilities** | $350,033 | $336,986 | | **Total equity** | $(58,747) | $(69,188) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities decreased to $10.1 million for the six months ended June 30, 2022, with a period-end cash balance of $33.5 million Six Months Ended June 30, Cash Flow Summary (in thousands) | | **2022** | **2021** | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $10,092 | $19,992 | | **Net cash used for investing activities** | $(6,802) | $(9,286) | | **Net cash used for financing activities** | $(221) | $(416) | | **Net increase in cash and restricted cash** | $3,069 | $10,290 | | **Cash and cash equivalents, and restricted cash, end of period** | $33,548 | $36,526 | [Note 1: Organization](index=11&type=section&id=Note%201%20Organization) Goosehead Insurance, Inc. operates as an insurance brokerage through corporate and expanding franchise networks, onboarding 141 new locations in Q2 2022 - The company operates through corporate-owned locations and a growing network of franchises[22](index=22&type=chunk) Operational Growth as of June 30 | Metric | **2022** | **2021** | | :--- | :--- | :--- | | Corporate-owned locations | 15 | 11 | | Operating franchise locations | 1,344 | 1,072 | | New franchises onboarded (Q2) | 141 | 108 | [Note 3: Revenues](index=13&type=section&id=Note%203%20Revenues) Total revenues reached $94.3 million for the six months ended June 30, 2022, primarily from recurring renewal-based commissions and royalty fees, reflecting the company's predictable business model Disaggregation of Revenue (in thousands) | Revenue Source | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | **Commissions and agency fees** | | | | Renewal Commissions | $14,541 | $24,748 | | New Business Commissions | $6,730 | $12,097 | | Agency Fees | $3,114 | $5,751 | | Contingent Commissions | $1,880 | $3,678 | | **Franchise revenues** | | | | Renewal Royalty Fees | $18,870 | $32,872 | | New Business Royalty Fees | $4,821 | $9,113 | | Initial Franchise Fees | $2,591 | $4,887 | | **Total Revenues** | **$53,022** | **$94,300** | [Note 7: Debt](index=16&type=section&id=Note%207%20Debt) The company refinanced its debt in July 2021 to a $50.0 million revolving credit facility and a $100.0 million term note, with $25.0 million drawn on the revolver and $96.9 million on the term note as of June 30, 2022, while remaining in compliance with all covenants - The company refinanced its debt in July 2021, increasing its credit facilities to a **$50.0 million** revolver and a **$100.0 million** term note[54](index=54&type=chunk) - As of June 30, 2022, **$25.0 million** was drawn on the revolving credit facility, with **$24.8 million** available[55](index=55&type=chunk) - The term note requires quarterly principal payments with a balloon payment on July 21, 2026, and the company was in compliance with all covenants[56](index=56&type=chunk)[59](index=59&type=chunk) [Note 8: Income Taxes](index=17&type=section&id=Note%208%20Income%20taxes) The effective tax rate for Q2 2022 was 48%, significantly higher due to fewer stock option exercises, with a total liability of $105.3 million under the Tax Receivable Agreement as of June 30, 2022 - The effective tax rate for Q2 2022 was **48%**, up from 7% in Q2 2021, mainly due to fewer employee stock option exercises[63](index=63&type=chunk) - The total liability for payments due under the Tax Receivable Agreement (TRA) was **$105.3 million** as of June 30, 2022[68](index=68&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong Q2 2022 performance with a 39% revenue increase and 42% growth in total written premiums, driven by investments in headcount and technology, while maintaining sufficient liquidity for future needs [Financial Highlights](index=22&type=section&id=Financial%20Highlights) Goosehead demonstrated strong Q2 2022 growth, with total revenue up 39% to $53.0 million, total written premiums up 42% to $566.0 million, and Adjusted EBITDA increasing 85% to $12.5 million Q2 2022 Financial Highlights vs. Q2 2021 | Metric | Q2 2022 | % Change YoY | | :--- | :--- | :--- | | Total Revenue | $53.0 million | +39% | | Core Revenue* | $48.1 million | +39% | | Total Written Premiums | $566.0 million | +42% | | Adjusted EBITDA* | $12.5 million | +85% | | Policies in Force | 1,181,000 | +35% | | Total Franchises | 2,341 | +30% | | Corporate Sales Headcount | 503 | +11% | - *Core Revenue and Adjusted EBITDA are non-GAAP measures[88](index=88&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Total revenues increased 39% to $53.0 million in Q2 2022, driven by strong growth in both commissions and franchise revenues, while operating expenses rose 41% due to increased headcount and equity-based compensation - Renewal Commissions grew **41%** in Q2 2022, driven by an increase in policies in their renewal term and steady client retention of **89%**[101](index=101&type=chunk) - Renewal Royalty Fees increased **62%** in Q2 2022, also due to more policies entering the renewal term where the company's royalty share increases from 20% to 50%[106](index=106&type=chunk) - Employee compensation and benefits expense rose **41%** in Q2 2022, caused by a **25%** increase in total headcount and a **189%** increase in equity-based compensation[110](index=110&type=chunk) [Key Performance Indicators](index=28&type=section&id=Key%20performance%20indicators) Key performance indicators show strong growth, with Total Written Premium increasing 42% to $1.02 billion, Policies in Force growing 35% to 1,181,000, and client retention remaining high at 89% with an NPS of 90 Total Written Premium (in thousands) | | **Six Months Ended June 30, 2022** | **Six Months Ended June 30, 2021** | **% Change** | | :--- | :--- | :--- | :--- | | Corporate sales | $257,239 | $201,403 | 28% | | Franchise sales | $759,634 | $516,412 | 47% | | **Total** | **$1,016,873** | **$717,815** | **42%** | - Policies in Force increased **35%** to **1,181,000** as of June 30, 2022, from 872,000 a year prior[120](index=120&type=chunk) - Client retention remained constant at **89%** as of June 30, 2022, and the Net Promoter Score (NPS) was **90**[122](index=122&type=chunk)[124](index=124&type=chunk) [Non-GAAP Measures](index=29&type=section&id=Non-GAAP%20Measures) Non-GAAP measures show Core Revenue grew 39% to $48.1 million and Adjusted EBITDA increased 85% to $12.5 million in Q2 2022, with the margin expanding to 24% Reconciliation of Net Income to Adjusted EBITDA (in thousands) | | **Three Months Ended June 30, 2022** | **Three Months Ended June 30, 2021** | | :--- | :--- | :--- | | **Net Income** | **$2,389** | **$3,136** | | Interest expense | 1,114 | 546 | | Depreciation and amortization | 1,658 | 1,132 | | Tax (benefit) expense | 2,164 | 223 | | Equity-based compensation | 5,173 | 1,852 | | Other (income) expense | — | (119) | | **Adjusted EBITDA** | **$12,498** | **$6,770** | | **Adjusted EBITDA Margin** | **24%** | **18%** | Reconciliation of Basic EPS to Adjusted EPS | | **Three Months Ended June 30, 2022** | **Three Months Ended June 30, 2021** | | :--- | :--- | :--- | | **Earnings per share - basic (GAAP)** | **$0.02** | **$0.08** | | Add: equity-based compensation | $0.14 | $0.05 | | **Adjusted EPS (non-GAAP)** | **$0.16** | **$0.13** | [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity, including $31.1 million cash on hand and $10.1 million from operations, is deemed sufficient to meet its $306.7 million contractual obligations, including $105.3 million in tax receivable liabilities and $96.9 million in debt - As of June 30, 2022, cash and cash equivalents were **$31.1 million**[147](index=147&type=chunk) Contractual Obligations as of June 30, 2022 (in thousands) | Obligation | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating leases | $78,219 | $3,742 | $19,500 | $20,588 | $34,389 | | Debt obligations payable | $96,875 | $5,625 | $18,125 | $73,125 | — | | Liabilities under the tax receivable agreement | $105,311 | — | $16,553 | $12,087 | $76,671 | | **Total** | **$306,655** | **$13,286** | **$57,358** | **$124,951** | **$111,060** | [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes to the company's market risk exposure since the disclosures in its 2021 Annual Report on Form 10-K - There have been no material changes to the company's market risk exposure as described in the Annual Report on Form 10-K[165](index=165&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation, the CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2022[166](index=166&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[167](index=167&type=chunk) Part II [Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, but management does not expect their resolution to materially affect its financial position or results of operations - The company may be involved in various legal proceedings, but management does not expect the outcomes to have a material adverse effect on its financials[83](index=83&type=chunk)[168](index=168&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K - No material changes have been made to the risk factors disclosed in the 2021 Form 10-K[169](index=169&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The report indicates no unregistered sales of equity securities, noting that LLC Units are redeemable for Class A common stock on a one-for-one basis - The report indicates no unregistered sales of equity securities during the period[170](index=170&type=chunk) [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) Exhibits filed with the Form 10-Q include a separation agreement, CEO and CFO certifications, and XBRL data files - Exhibits filed include a separation agreement with Michael C. Colby, Sarbanes-Oxley certifications, and XBRL documents[175](index=175&type=chunk)

Revenue Growth - Total revenue increased by 32% from Q1 2021 to $41.3 million in Q1 2022[20] - Core Revenue increased by 37% from Q1 2021 to $36.5 million in Q1 2022[20] - Total Written Premiums placed increased by 41% from the prior-year period to $450.9 million[20] - Total Written Premium grew by 41% to $450.9 million for the three months ended March 31, 2022, compared to $318.9 million for the same period in 2021[12] - Core Revenue increased by $9.8 million, or 37%, to $36.5 million for the three months ended March 31, 2022, driven by increases in operating franchises and client retention[124] - Total core revenue reached $36,505 million, up 36.7% from $26,700 million year-over-year[135] Policy and Franchise Growth - Policies in Force increased by 39% from March 31, 2021, to 1,097,000 at March 31, 2022[20] - Total franchises increased by 41% compared to the prior year period to 2,298[20] - Policies in Force increased by 39% to 1,097,000 as of March 31, 2022, compared to 788,000 as of March 31, 2021[14] - Initial Franchise Fees increased by $0.9 million, or 60%, to $2.3 million for the three months ended March 31, 2022, due to a 41% increase in total franchises to 2,298[3] - New Business Royalty Fees rose by $1.1 million, or 36%, to $4.3 million for the three months ended March 31, 2022, attributed to a 28% increase in the total number of operating franchises to 1,268[2] Commission and Revenue Streams - Renewal Commissions increased by 32% to $10.2 million in Q1 2022 from $7.8 million in Q1 2021[96] - New Business Commissions increased by 16% to $5.4 million in Q1 2022 from $4.6 million in Q1 2021[97] - Renewal Royalty Fees increased by $5.3 million, or 60%, to $14.0 million for the three months ended March 31, 2022, driven by an increase in client retention to 89%[1] Financial Performance - Adjusted EBITDA decreased by 41% to $1.3 million, or 3% of total revenues in Q1 2022[20] - Adjusted EBITDA decreased by $0.9 million, or 41%, to $1.3 million for the three months ended March 31, 2022, primarily due to increased General and Administrative expenses[130] - Adjusted EBITDA Margin was 3% for the three months ended March 31, 2022, down from 7% for the same period in 2021, influenced by rising expenses and decreased revenue from Contingent Commissions[132] - The company reported a net loss of $5,383 million for Q1 2022, compared to a net loss of $1,089 million in Q1 2021[137] - Net cash used for operating activities was $5,154 million in Q1 2022, a decrease of $13,042 million compared to a net cash provided of $7,888 million in Q1 2021[141] - Cash and cash equivalents at the end of Q1 2022 were $22,679 million, down from $31,955 million at the end of Q1 2021[141] Client Retention and Service - Client Retention remained constant at 89% as of March 31, 2022, reflecting the service team's focus on delivering high service levels[118] Tax and Accounting - The company will record an increase in deferred tax assets based on enacted federal and state tax rates at the date of redemption or exchange[155] - The company estimates that it will not realize the full benefit of the deferred tax asset, leading to a potential reduction with a valuation allowance[155] - The company will record 85% of the estimated realizable tax benefit as an increase to the liability due under the tax receivable agreement[155] - There have been no significant changes to the company's critical accounting policies as disclosed in the Annual Report on Form 10-K[156] - There have been no material changes to the company's exposure to market risks as described in the Annual Report on Form 10-K[158] Liquidity and Obligations - The company’s liquidity sources include cash on hand of $21.2 million as of March 31, 2022, and cash flows from operations[139] - Total contractual obligations as of March 31, 2022, amounted to $284,994 million, with operating leases accounting for $66,090 million[152] - The company expects to fund its working capital requirements and commitments through cash on hand, net working capital, and cash flows from operations[145] - The company’s adjusted EPS for Q1 2022 was $0.04, compared to $0.03 in Q1 2021[138]

Call Start: 16:30 January 1, 0000 5:21 PM ET Goosehead Insurance, Inc. (NASDAQ:GSHD) Q1 2022 Earnings Conference Call April 26, 2022, 4:30 PM ET Company Participants Mark Jones – Chairman and Chief Executive Officer Brian Pattillo – Vice President Mark Colby – Chief Financial Officer Daniel Farrell – Vice President, Capital Markets Conference Call Participants Paul Newsome – Piper Sandler & Co. Mark Dwelle – RBC Capital Markets Meyer Shields – Keefe, Bruyette & Woods, Inc. Ryan Tunis – Autonomous Research J ...

PART I [Business](index=7&type=section&id=Item%201.%20Business) Goosehead operates as a rapidly growing independent insurance agency in the U.S. personal lines market, utilizing a differentiated model with two main channels: a Corporate Channel with employed agents and a Franchise Channel with independent franchisees - Goosehead is a rapidly growing independent insurance agency focused on personal lines, using a differentiated business model and proprietary technology to deliver a superior customer experience[18](index=18&type=chunk) - 2021 Performance Highlights | Metric | 2021 Value | 2020 Value | % Change | | :--- | :--- | :--- | :--- | | Total Written Premium | $1.6 billion | $1.1 billion | 45% | | Total Revenue | $151.3 million | $117.0 million | 29% | | Net Income | $8.3 million | $18.8 million | -55.8% | | Policies in Force | 1,011,000 | 713,000 | 42% | | Total Franchises | 2,151 | 1,468 | 47% | - The company's model is viewed from three perspectives: the insurance buyer (choice, knowledgeable agents, technology), the agent (access to carriers, proven marketing, centralized service), and the carrier (scale distribution, quality control, profitable growth)[18](index=18&type=chunk)[19](index=19&type=chunk)[28](index=28&type=chunk) [Company Overview](index=7&type=section&id=Company%20Overview) Goosehead is a fast-growing independent insurance agency that differentiates itself through a superior client experience, a compelling value proposition for agents, and efficient distribution for carriers - The company's model separates sales and service functions, enabling agents to focus on selling and service personnel to deliver superior client service, achieving a Net Promoter Score of **91**, **2.3x** the industry average[18](index=18&type=chunk)[21](index=21&type=chunk) - Goosehead provides agents with access to a wide array of carriers, a proven go-to-market strategy focusing on referral partners, and a centralized service team, leading to agent productivity **1.7 times** higher than the industry best practice[26](index=26&type=chunk) - For carriers, Goosehead offers scale distribution with a single point of contact, standardized training, and quality control, resulting in higher retention rates and underwriting profitability[28](index=28&type=chunk) [Our Segments](index=11&type=section&id=Our%20Segments) The company operates through two distinct segments which each contributed **50%** of total revenue in 2021: the Corporate Channel and the Franchise Channel - The Corporate Channel, with **506** sales agents across **15** offices, focuses on recruiting and training new talent, serving as an R&D hub for the company It generated **50%** of 2021 revenue[48](index=48&type=chunk)[50](index=50&type=chunk) - The Franchise Channel, with **2,151** total franchises (**1,198** operating), targets experienced agents by offering access to multiple carriers, centralized servicing, and a lean startup model It also accounted for **50%** of 2021 revenue[51](index=51&type=chunk)[55](index=55&type=chunk) - Franchise Royalty Fee Structure | Policy Term | Royalty Fee Rate | | :--- | :--- | | New Business (First Term) | 20% of commissions & agency fees | | Renewal Business | 50% of commissions | - Total franchises grew **47%** to **2,151** in 2021, with operating franchises increasing by **34%** to **1,198**[55](index=55&type=chunk)[70](index=70&type=chunk) [Our Competitive Strengths and Growth Strategy](index=15&type=section&id=Our%20Competitive%20Strengths%20and%20Growth%20Strategy) Goosehead's competitive strengths are rooted in its highly motivated and young corporate agent workforce, a franchise model that addresses the flaws of traditional agencies, a unified proprietary technology platform, and efficient service centers that drive high client retention - A key strength is the young, tech-adept Corporate Channel workforce, with agents generating **2.9x** more new business than top industry performers after three years[58](index=58&type=chunk) - The Franchise Channel solves traditional agency flaws by offering choice, removing the service burden, and providing an economic interest in the business, attracting high-performing agents[58](index=58&type=chunk) - A single, proprietary cloud-based technology platform drives efficiencies, with service expenses being **3.4x** lower than the industry best practice[59](index=59&type=chunk) - Growth strategy includes national penetration of the Franchise Channel, with agreements signed in **47** states and a pipeline of approximately **137,000** potential candidates[60](index=60&type=chunk) - Maximizing renewal business is critical, as renewal royalty fees from franchisees are significantly higher (**50%**) than new business fees (**20%**) This is supported by an **89%** client retention rate[62](index=62&type=chunk)[69](index=69&type=chunk) [Regulatory Matters and Human Capital](index=20&type=section&id=Regulatory%20Matters%20and%20Human%20Capital) The company is subject to extensive regulation, including FTC and state franchise laws, state-specific insurance licensing, and evolving data privacy laws like the CCPA - The company's franchise operations are regulated by the FTC's "Franchise Rule" and various state laws, requiring specific disclosures (FDD) and registrations[75](index=75&type=chunk) - Goosehead and its employees must maintain insurance licenses in the states where they operate, and are subject to regulations on agent compensation and data privacy[76](index=76&type=chunk)[78](index=78&type=chunk)[82](index=82&type=chunk) - As of December 31, 2021, the company had approximately **1,238** full-time and **52** part-time employees The workforce grew by over **500** individuals in 2021[83](index=83&type=chunk)[84](index=84&type=chunk) - The company promotes diversity and inclusion, with more than half of its employees being women and over one-third identifying as racially diverse It established a Women's Professional Development Program in 2015[92](index=92&type=chunk)[94](index=94&type=chunk) [Risk Factors](index=23&type=section&id=Item%201A.%20Risk%20factors) The company faces a range of risks that could materially affect its business, including economic downturns, premium volatility, carrier dependence, operational challenges, and structural financial obligations [Risks Relating to Our Business](index=25&type=section&id=Risks%20Relating%20to%20Our%20Business) Business-related risks include the potential negative impact of the COVID-19 pandemic and general economic downturns on insurance demand and premium payments - The COVID-19 pandemic and economic downturns could reduce demand for insurance, affect clients' ability to pay premiums, and decrease contingent commissions[107](index=107&type=chunk)[114](index=114&type=chunk) - Revenue is subject to volatility as it depends on premiums and commission rates set by carriers, which are cyclical and can be affected by intense price competition[117](index=117&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) - A significant portion of commission revenue is derived from a limited number of carriers In 2021, two carriers represented **17%** and **11%** of total revenue[184](index=184&type=chunk)[66](index=66&type=chunk) - The business is highly concentrated in Texas, California, Florida, and Illinois, making it vulnerable to adverse economic, natural disaster, or regulatory events in these states[180](index=180&type=chunk) [Risks Relating to Our Franchise Business](index=38&type=section&id=Risks%20Relating%20to%20Our%20Franchise%20Business) The franchise model's success depends on attracting and retaining high-quality franchisees, whose operational success directly affects the company's financial results - The company's success depends on its ability to attract and retain high-quality franchisees, as its financial results are directly tied to their operational performance[189](index=189&type=chunk)[191](index=191&type=chunk) - Franchisees are independent businesses, and their actions (e.g., poor service, misconduct, legal violations) could harm the company's brand, reputation, and lead to vicarious liability claims[193](index=193&type=chunk)[194](index=194&type=chunk) - Franchising activities are subject to extensive state and federal regulations (e.g., FTC Franchise Rule), and non-compliance could result in adverse business impacts[199](index=199&type=chunk) [Risks Relating to Intellectual Property, Data Privacy and Cybersecurity](index=40&type=section&id=Risks%20Relating%20to%20Intellectual%20Property%2C%20Data%20Privacy%20and%20Cybersecurity) The company's success is tied to its strong brand and intellectual property, which could be harmed by infringement or failure to protect these assets - Failure to maintain, protect, and enhance the "Goosehead Insurance" brand could hurt business growth, especially in new markets[204](index=204&type=chunk) - Improper disclosure of confidential or personal information, whether from human error or cyberattacks, could result in regulatory scrutiny, legal liability, and reputational harm[211](index=211&type=chunk)[213](index=213&type=chunk) - The company is subject to complex and evolving data privacy and cybersecurity laws (e.g., GLBA, CCPA, CPRA), which can increase compliance costs and potential liability[217](index=217&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) [Risks Relating to Our Organizational Structure](index=44&type=section&id=Risks%20Relating%20to%20Our%20Organizational%20Structure) Goosehead Insurance, Inc. is a holding company dependent on distributions from its subsidiary, Goosehead Financial, LLC, with significant voting power concentrated in Pre-IPO LLC Members - As a holding company, Goosehead Insurance, Inc. is dependent on distributions from Goosehead Financial, LLC to pay dividends, taxes, and expenses, including payments under the Tax Receivable Agreement[223](index=223&type=chunk) - Pre-IPO LLC Members control approximately **46%** of the combined voting power, allowing them to approve or disapprove most major corporate actions[227](index=227&type=chunk) - The company is required to pay Pre-IPO LLC Members **85%** of the cash tax savings realized from increases in tax basis resulting from redemptions or exchanges of LLC units These payments could be substantial[234](index=234&type=chunk)[235](index=235&type=chunk) - Upon a change of control, the company could be required to make accelerated payments under the tax receivable agreement that are greater than actual cash tax savings, which could negatively impact liquidity[238](index=238&type=chunk) [Properties](index=49&type=section&id=Item%202.%20Properties) The company's headquarters is in a leased **177,000** square foot office in Westlake, Texas, with a lease expiring in January 2031 - The company's headquarters is located in a leased office of approximately **177,000** square feet in Westlake, Texas, with the lease expiring in January 2031[252](index=252&type=chunk) - As of year-end 2021, the company-owned insurance brokerage leases a total of approximately **393,000** square feet of office space under **15** leases across Texas, Nevada, Illinois, North Carolina, and Ohio[252](index=252&type=chunk) [Legal Proceedings](index=49&type=section&id=Item%203.%20Legal%20proceedings) The company may be involved in various legal proceedings incidental to its business from time to time, but as of the report date, Goosehead is not a party to any material legal proceedings - The company is not currently a party to any material legal proceedings[253](index=253&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=50&type=section&id=Item%205.%20Market%20for%20registrant%27s%20common%20equity%2C%20related%20stockholder%20matters%20and%20issuer%20purchases%20of%20equity%20securities) Goosehead's Class A Common Stock trades on NASDAQ under the symbol "GSHD," while its Class B stock is not traded - Class A Common Stock is traded on NASDAQ under the symbol "GSHD" Class B Common Stock is not traded[255](index=255&type=chunk) - As a holding company, Goosehead Insurance, Inc.'s ability to pay dividends is subject to the ability of its subsidiary, Goosehead Financial, LLC, to provide distributions[258](index=258&type=chunk) - Stock Performance Since IPO (May 1, 2018) | Index | 5/1/2018 | 12/31/2021 | | :--- | :--- | :--- | | GSHD | $100 | $914 | | S&P 500 | $100 | $192 | | Russell 2000 | $100 | $153 | - Equity Compensation Plan Information (as of Dec 31, 2021) | Metric | Value | | :--- | :--- | | Securities to be issued upon exercise of outstanding options | 2,069,000 | | Weighted-average exercise price of outstanding options | $34.68 | | Securities remaining available for future issuance | 2,126,000 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=53&type=section&id=Item%207.%20Management%27s%20discussion%20and%20analysis%20of%20financial%20condition%20and%20results%20of%20operations) In 2021, Goosehead's total revenue grew **29%** to **$151.3 million**, driven by a **40%** increase in Core Revenues to **$133.4 million** [Financial Highlights and Key Performance Indicators](index=53&type=section&id=Financial%20Highlights%20and%20Key%20Performance%20Indicators) For fiscal year 2021, Goosehead reported a **29%** increase in total revenue to **$151.3 million** and a **45%** increase in Total Written Premiums to **$1.6 billion** - Key Financial Metrics (FY 2021 vs. FY 2020) | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $151.3M | $117.0M | +29% | | Core Revenues* | $133.4M | $95.1M | +40% | | Total Written Premiums | $1.6B | $1.1B | +45% | | Net Income | $8.3M | $18.8M | -56% | | Adjusted EBITDA* | $20.8M | $27.8M | -25% | | Adjusted EPS* | $0.48 | $0.68 | -29% | - Key Operational Metrics (as of Dec 31, 2021) | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Policies in Force | 1,011,000 | 713,000 | +42% | | Corporate Sales Headcount | 506 | 364 | +39% | | Operating Franchises | 1,198 | 891 | +34% | | Client Retention | 89% | 88% | +1 ppt | | Net Promoter Score (NPS) | 91 | 92 | -1 pt | - The decrease in profitability (Net Income, Adjusted EBITDA) was primarily driven by a significant **$6.7 million** (**39%**) decrease in high-margin but unpredictable Ancillary Revenue (mainly Contingent Commissions) and continued investments in growth[309](index=309&type=chunk)[311](index=311&type=chunk)[312](index=312&type=chunk) [Consolidated Results of Operations](index=62&type=section&id=Consolidated%20Results%20of%20Operations) For the year ended December 31, 2021, total revenues increased **29%** to **$151.3 million**, driven by growth in both commissions and franchise revenues - Consolidated Statement of Operations Summary (in millions) | Line Item | 2021 (in millions) | 2020 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $151.3M | $117.0M | 29.3% | | Employee compensation and benefits | $93.0M | $66.8M | 39.2% | | General and administrative expenses | $41.7M | $25.5M | 63.4% | | Total operating expenses | $142.6M | $97.1M | 47.0% | | Income from operations | $8.7M | $19.9M | -56.5% | | Net Income | $8.3M | $18.8M | -55.8% | - Revenue from Renewal Royalty Fees in the Franchise channel grew **57%** to **$46.1 million**, driven by an increasing number of policies in their renewal term where the company earns a higher royalty rate (**50%** vs **20%** on new business)[325](index=325&type=chunk) - Contingent commission revenue decreased **40%** to **$9.9 million**, primarily due to increased loss ratios experienced by carrier partners[324](index=324&type=chunk) - The **39%** increase in employee compensation and benefits was due to higher headcount and additional stock option grants The **63%** increase in G&A was driven by eased travel restrictions and continued investment in technology[329](index=329&type=chunk)[330](index=330&type=chunk) [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2021, the company held **$30.5 million** in cash, with net cash from operations increasing to **$35.4 million** - Comparative Cash Flows (in millions) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $35.4M | $24.6M | | Net cash used for investing activities | ($15.4M) | ($10.3M) | | Net cash used for financing activities | ($15.8M) | ($3.3M) | | **Net increase in cash** | **$4.2M** | **$11.0M** | - On July 21, 2021, the company refinanced its credit facilities, resulting in a **$100 million** term loan and a **$50 million** revolving credit facility As of year-end, **$98.8 million** was outstanding on the term loan and **$25.0 million** was drawn on the revolver[337](index=337&type=chunk)[444](index=444&type=chunk)[445](index=445&type=chunk)[446](index=446&type=chunk) - The liability under the Tax Receivable Agreement increased to **$101.0 million** as of December 31, 2021, up from **$62.1 million** in 2020, due to redemptions of LLC units by Pre-IPO members[357](index=357&type=chunk)[462](index=462&type=chunk) - In July 2021, the company declared and paid an extraordinary dividend of **$60 million** to all holders of LLC Units and Class A common stock[484](index=484&type=chunk) [Quantitative and Qualitative Disclosure of Market Risks](index=70&type=section&id=Item%207A.%20Quantitative%20and%20qualitative%20disclosure%20of%20market%20risks) The company is exposed to market risk primarily through insurance premium pricing cyclicality and interest rate changes - The company is exposed to insurance market cyclicality, where a "soft market" (declining premium rates) can negatively affect commissions[359](index=359&type=chunk) - There is carrier concentration risk, as two carriers represented **17%** and **11%** of total revenue in 2021[360](index=360&type=chunk) - As of December 31, 2021, the company had **$123.8 million** of floating-rate debt tied to LIBOR, creating exposure to interest rate risk[361](index=361&type=chunk) [Financial Statements and Supplementary Data](index=71&type=section&id=Item%208.%20Financial%20statements%20and%20supplementary%20data) This section contains the audited consolidated financial statements for Goosehead Insurance, Inc. for the fiscal year ended December 31, 2021, including the independent auditor's unqualified opinion - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of the company's internal control over financial reporting as of December 31, 2021[366](index=366&type=chunk)[367](index=367&type=chunk) - A critical audit matter was identified related to the estimation of commissions and royalty fees revenue, specifically the judgments required for estimating policy changes, cancellations, and constraints for renewal business[371](index=371&type=chunk)[372](index=372&type=chunk) - Consolidated Balance Sheet Summary (in millions) | Account | Dec 31, 2021 (in millions) | Dec 31, 2020 (in millions) | | :--- | :--- | :--- | | Total Assets | $267.8M | $185.8M | | Total Liabilities | $337.0M | $224.2M | | Total Equity | ($69.2M) | ($38.4M) | [Controls and Procedures](index=103&type=section&id=Item%209A.%20Controls%20and%20procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021, with no material changes to internal control over financial reporting during the year - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[497](index=497&type=chunk) - Management assessed internal control over financial reporting based on the COSO 2013 framework and concluded it was effective as of December 31, 2021[500](index=500&type=chunk) - The independent registered public accounting firm, Deloitte & Touche LLP, audited and issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2021[501](index=501&type=chunk)[505](index=505&type=chunk) PART III [Directors, Executive Officers, and Corporate Governance](index=106&type=section&id=Item%2010.%20Directors%2C%20executive%20officers%2C%20and%20corporate%20governance) Information regarding the company's directors, executive officers, and corporate governance is incorporated by reference from the company's definitive Proxy Statement for its 2022 Annual Meeting of Stockholders - The information required for this item is incorporated by reference from the company's 2022 Annual Meeting Proxy Statement[514](index=514&type=chunk) [Executive Compensation](index=106&type=section&id=Item%2011.%20Executive%20compensation) Details concerning executive compensation are incorporated by reference from the company's Proxy Statement for its 2022 Annual Meeting of Stockholders - The information required for this item is incorporated by reference from the company's 2022 Annual Meeting Proxy Statement[515](index=515&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=106&type=section&id=Item%2012.%20Security%20ownership%20of%20certain%20beneficial%20owners%20and%20management%20and%20related%20stockholder%20matters) Information regarding security ownership by certain beneficial owners and management, as well as related stockholder matters, is incorporated by reference from the company's 2022 Proxy Statement - The information required for this item is incorporated by reference from the company's 2022 Annual Meeting Proxy Statement[516](index=516&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=106&type=section&id=Item%2013.%20Certain%20relationships%20and%20related%20transactions%2C%20and%20director%20independence) Information regarding certain relationships, related-party transactions, and the independence of the company's directors is incorporated by reference from the company's Proxy Statement for its 2022 Annual Meeting of Stockholders - The information required for this item is incorporated by reference from the company's 2022 Annual Meeting Proxy Statement[517](index=517&type=chunk) [Principal Accountant Fees and Services](index=106&type=section&id=Item%2014.%20Principal%20accountant%20fees%20and%20services) Details regarding the fees paid to and services provided by the principal independent accountant are incorporated by reference from the company's Proxy Statement for its 2022 Annual Meeting of Stockholders - The information required for this item is incorporated by reference from the company's 2022 Annual Meeting Proxy Statement[518](index=518&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=107&type=section&id=Item%2015.%20Exhibits%20and%20financial%20statement%20schedules) This section lists the documents filed as part of the Annual Report on Form 10-K, including consolidated financial statements and an index of all exhibits - This section provides an index of all exhibits filed with or incorporated by reference into the Form 10-K[520](index=520&type=chunk)[522](index=522&type=chunk) - All financial statement schedules are omitted because the required information is included in the consolidated financial statements or the notes thereto[520](index=520&type=chunk)

Goosehead Insurance, Inc (NASDAQ:GSHD) Q4 2021 Results Earnings Conference Call February 24, 2022 4:30 PM ET Company Participants Daniel Farrell - Vice President of Capital Markets Mark Jones - Chairman and Chief Executive Officer Michael Colby - President and Chief Operating Officer Mark Colby - Chief Financial Officer Conference Call Participants Matthew Carletti - JMP Securities LLC Ryan Tunis - Autonomous Research Mark Dwelle - RBC Capital Markets Meyer Shields - Keefe, Bruyette & Woods Pablo Singzon - ...

Goosehead Insurance, Inc (NASDAQ:GSHD) Q3 2021 Results Conference Call October 27, 2021 4:30 PM ET Company Participants Daniel Farrell - Vice President of Capital Markets Mark Jones - Chairman and Chief Executive Officer Michael Colby - President and Chief Operating Officer Mark Colby - Chief Financial Officer Conference Call Participants Matthew Carletti - JMP Securities Ryan Tunis - Autonomous Research Mark Hughes - Truist Securities Mark Dwelle - RBC Capital Markets Pablo Singzon - JPMorgan Joshua Shank ...

OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to ______ Commission file number: 001-38466 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 GOOSEHEAD INSURANCE, INC. (Exact name of registrant as specified in its charter) (State or other jurisdicti ...