Financial Data and Key Metrics Changes - The company reported a 31% increase in total revenue for Q2 2023, reaching $69.3 million, with core revenue growing by 27% to $61 million [14][67] - Adjusted EBITDA increased by 85% year-over-year to $23.1 million, with the adjusted EBITDA margin expanding to 33% from 24% [92] - Premiums increased by 36% to $767 million, with franchise premiums up 40% to $588 million and corporate premiums up 22% to $180 million [34] Business Line Data and Key Metrics Changes - Productivity for corporate agents increased by 57% compared to Q2 2022, with new agents from college campuses showing a 70% increase in productivity over their counterparts from the previous year [6][20][131] - The restructuring of the corporate sales team has led to significant improvements in agent productivity and overall performance [20][24] Market Data and Key Metrics Changes - The company accounted for approximately 4.4% of new mortgage real estate transactions in the U.S., up from 3.7% a year ago [63] - The company has onboarded 24 new carriers to its platform this year, enhancing its product offerings amid a challenging market [44][102] Company Strategy and Development Direction - The company is focused on expanding its franchise network and improving the productivity of existing franchises by removing underperforming agents and onboarding high-quality producers [46][55] - The introduction of Quote to Issue technology is expected to enhance agent productivity and improve the purchasing experience for clients [27][58] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate challenging market conditions, emphasizing that the restructuring efforts are yielding strong top-line growth and sustainable profitability improvements [44][50] - The company anticipates a reacceleration of revenue and premium growth throughout 2024 as it continues to add high-quality producers and improve productivity [32][91] Other Important Information - The company expects total written premiums for 2023 to be between $2.89 billion and $2.98 billion, representing organic growth of 30% to 35% [38] - A one-time non-cash impairment charge of $3.6 million was recorded due to the consolidation of office space [37] Q&A Session Summary Question: Long-term growth expectations and digital agent evolution - Management indicated that while growth was slower than expected, the focus remains on maximizing productivity and profitability before adding new agents, which sets the stage for long-term growth [76] Question: Margin improvement expectations - Management noted that while margin improvements may be more modest in the second half of the year, they are committed to investing in growth initiatives [84][100] Question: Contingent commissions growth drivers - The growth in contingent commissions was primarily driven by volume-based contingencies rather than profitability-based ones, with expectations for around 40 basis points of total written premium for the year [104] Question: Impact of market conditions on growth expectations - Management remains committed to growth initiatives despite challenging market conditions, emphasizing the productivity gains achieved by agents [105] Question: Franchise onboarding and productivity - The company onboarded 72 agencies in the quarter and expects to continue recruiting throughout the summer [106]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) This section provides basic identification details for Goosehead Insurance, Inc. and its filing status [Registrant Information](index=1&type=section&id=Registrant%20Information) This section details Goosehead Insurance, Inc.'s identification, filing status, and outstanding common stock as of July 24, 2023 - **Goosehead Insurance, Inc. is incorporated in Delaware and headquartered in Westlake, TX**[2](index=2&type=chunk) - **The company's Class A Common Stock (GSHD) is registered on NASDAQ**[3](index=3&type=chunk) Outstanding Common Stock as of July 24, 2023 | Class | Shares Outstanding | | :---- | :----------------- | | Class A | 23,898,757 | | Class B | 13,795,166 | [Table of Contents](index=2&type=section&id=Table%20of%20contents) This section provides an organized listing of all chapters and sub-sections within the Form 10-Q document [Commonly Used Defined Terms](index=3&type=section&id=Commonly%20used%20defined%20terms) This section defines key financial and operational terms used throughout the Form 10-Q for clarity [Key Definitions](index=3&type=section&id=Key%20Definitions) This section defines key revenue streams (Core, Cost Recovery, Ancillary) and operational metrics (Client Retention, NPS) - **Core Revenue includes Renewal Commissions, Renewal Royalty Fees, New Business Commissions, New Business Royalty Fees, and Agency Fees, representing the most predictable revenue streams**[9](index=9&type=chunk) - **Cost Recovery Revenue consists of Initial Franchise Fees and Interest Income, associated with selling and financing franchises**[9](index=9&type=chunk) - **Ancillary Revenue, such as Contingent Commissions and other income, is supplemental and often unpredictable**[9](index=9&type=chunk) - **Client Retention is calculated by comparing clients with at least one policy in force twelve months prior and at the measurement date**[9](index=9&type=chunk) - **NPS (Net Promoter Score) measures client loyalty based on referral likelihood**[9](index=9&type=chunk) [Special Note Regarding Forward-Looking Statements](index=4&type=section&id=Special%20note%20regarding%20forward-looking%20statements) This section provides a cautionary disclaimer about forward-looking statements, highlighting inherent risks and uncertainties [Forward-Looking Statements Disclaimer](index=4&type=section&id=Forward-Looking%20Statements%20Disclaimer) This disclaimer warns that forward-looking statements are predictions subject to risks, and actual results may differ materially - **Forward-looking statements are identified by words like 'may,' 'might,' 'will,' 'expects,' 'plans,' 'anticipates,' 'believes,' 'estimates,' 'predicts,' 'potential' or 'continue'**[10](index=10&type=chunk) - **Actual results, level of activity, performance, or achievements may differ materially from forward-looking statements due to various factors, including those discussed under 'Item 1A. Risk factors' in the Annual Report on Form 10-K**[10](index=10&type=chunk) - **The company is under no duty to update these statements after the Form 10-Q's date**[11](index=11&type=chunk) [PART I](index=5&type=section&id=PART%20I) This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents unaudited condensed consolidated financial statements, including operations, balance sheets, equity, cash flows, and detailed notes [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements show significant increases in total revenues, net income, and operating income for the periods ended June 30, 2023 Key Financial Highlights (Three Months Ended June 30) | Metric (in thousands) | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Total Revenues | $69,277 | $53,022 | $16,255 | 30.7% | | Income from operations| $11,190 | $5,667 | $5,523 | 97.5% | | Net income | $7,180 | $2,389 | $4,791 | 200.5% | | Basic EPS | $0.15 | $0.02 | $0.13 | 650.0% | Key Financial Highlights (Six Months Ended June 30) | Metric (in thousands) | 2023 | 2022 | Change ($) | Change (%) | | :-------------------- | :------- | :------- | :--------- | :--------- | | Total Revenues | $127,232 | $94,300 | $32,932 | 34.9% | | Income from operations| $12,659 | $(435) | $13,094 | >1000% | | Net income | $6,999 | $(2,994) | $9,993 | >1000% | | Basic EPS | $0.15 | $(0.10) | $0.25 | >100% | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance sheets show increased total assets and stockholders' equity, with decreased liabilities and non-controlling interests Balance Sheet Summary (in thousands) | Category | June 30, 2023 | December 31, 2022 | Change ($) | | :-------------------- | :------------ | :---------------- | :--------- | | Total Assets | $323,179 | $321,353 | $1,826 | | Total Liabilities | $336,627 | $354,977 | $(18,350) | | Total Stockholders' Equity | $29,670 | $10,670 | $19,000 | | Non-controlling interests | $(43,118) | $(44,294) | $1,176 | | Total Equity | $(13,448) | $(33,624) | $20,176 | - **Cash and cash equivalents decreased from $28.7 million at December 31, 2022, to $19.1 million at June 30, 2023**[16](index=16&type=chunk) - **Deferred income taxes, net, increased from $155.3 million to $164.5 million**[16](index=16&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement details changes in equity components from net income, stock options, equity compensation, and LLC Unit redemptions - **For the six months ended June 30, 2023, net income attributable to Goosehead Insurance, Inc. was $3,585 thousand, a significant improvement from a net loss of $(1,944) thousand in the prior year**[17](index=17&type=chunk)[18](index=18&type=chunk) - **Equity-based compensation contributed $12,492 thousand to additional paid-in capital for the six months ended June 30, 2023, up from $10,961 thousand in the prior year**[17](index=17&type=chunk)[18](index=18&type=chunk) - **Redemption of LLC Units resulted in a decrease in additional paid-in capital of $(2,102) thousand for the six months ended June 30, 2023, while increasing non-controlling interest by $2,102 thousand**[17](index=17&type=chunk)[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flows show increased operating cash, but higher investing and financing outflows led to a net decrease in cash Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2023 | 2022 | Change ($) | | :---------------------------- | :------- | :------- | :--------- | | Net cash from operating activities | $16,114 | $10,092 | $6,022 | | Net cash used for investing activities | $(11,286) | $(6,802) | $(4,484) | | Net cash used for financing activities | $(14,294) | $(221) | $(14,073) | | Net increase (decrease) in cash and restricted cash | $(9,466) | $3,069 | $(12,535) | - **Cash paid for interest increased to $3,282 thousand in 2023 from $2,143 thousand in 2022**[20](index=20&type=chunk) - **Cash consideration paid for asset acquisitions was $5,270 thousand in 2023, with no comparable amount in 2022**[20](index=20&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential context for financial statements, detailing accounting policies, debt, taxes, equity, and impairment [Note 1 Organization](index=11&type=section&id=Note%201%20Organization) This note describes GSHD's role as GF's managing member, its insurance services, and changes in corporate and franchise locations - **GSHD consolidates GF's financial results and reports non-controlling interest**[21](index=21&type=chunk) - **Corporate-owned locations decreased from 15 in 2022 to 12 in 2023**[23](index=23&type=chunk) - **Operating franchise locations remained stable at 1,344 as of June 30, 2023 and 2022**[23](index=23&type=chunk) [Note 2 Summary of Significant Accounting Policies](index=11&type=section&id=Note%202%20Summary%20of%20significant%20accounting%20policies) This note details accounting policies, including asset impairment, income taxes, restricted cash, and the LIBOR to SOFR transition - **The Company recorded an impairment expense of $1.1 million for internally-developed software that would not be completed during Q2 2023**[31](index=31&type=chunk) - **An additional impairment expense of $1.4 million for property and equipment and $1.1 million for right-of-use assets was recorded due to plans to sublease two office locations in Q2 2023**[32](index=32&type=chunk) - **The Company transitioned its variable interest rate debt from LIBOR to SOFR on April 26, 2023, under ASU 2020-04**[35](index=35&type=chunk) Cash and Restricted Cash Balances (in thousands) | Category | June 30, 2023 | June 30, 2022 | | :------------------------ | :------------ | :------------ | | Cash and cash equivalents | $19,131 | $31,121 | | Restricted cash | $1,790 | $2,427 | | Total | $20,921 | $33,548 | [Note 3 Revenues](index=14&type=section&id=Note%203%20Revenues) This note details revenue recognition policies and disaggregates revenue, showing strong growth in renewal and contingent commissions - **Renewal Commissions increased by 27% to $18,541 thousand for the three months ended June 30, 2023, and by 39% to $34,359 thousand for the six months ended June 30, 2023**[46](index=46&type=chunk) - **Renewal Royalty Fees increased by 46% to $27,552 thousand for the three months ended June 30, 2023, and by 53% to $50,304 thousand for the six months ended June 30, 2023**[46](index=46&type=chunk) - **Contingent Commissions increased by 111% to $3,971 thousand for the three months ended June 30, 2023, and by 60% to $5,890 thousand for the six months ended June 30, 2023**[46](index=46&type=chunk) Disaggregation of Revenue by Type (in thousands) | Revenue Stream | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :---------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Renewal Commissions | $18,541 | $14,541 | $34,359 | $24,748 | | New Business Commissions| $6,257 | $6,730 | $11,774 | $12,097 | | Agency Fees | $2,404 | $3,114 | $4,634 | $5,751 | | Contingent Commissions | $3,971 | $1,880 | $5,890 | $3,678 | | Renewal Royalty Fees | $27,552 | $18,870 | $50,304 | $32,872 | | New Business Royalty Fees| $6,267 | $4,821 | $11,909 | $9,113 | | Initial Franchise Fees | $3,287 | $2,591 | $6,350 | $4,887 | | Other Franchise Revenues| $581 | $145 | $1,198 | $505 | | Interest Income | $417 | $330 | $814 | $649 | | **Total Revenues** | **$69,277** | **$53,022** | **$127,232** | **$94,300** | [Note 4 Franchise Fees Receivable](index=16&type=section&id=Note%204%20Franchise%20fees%20receivable) Net franchise fees receivable decreased to $16.8 million, reflecting changes in the allowance for uncollectible fees Net Franchise Fees Receivable (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :---------------------------- | :------------ | :---------------- | | Franchise fees receivable | $24,324 | $35,606 | | Less: Unamortized discount | $(7,067) | $(9,896) | | Less: Allowance for uncollectible franchise fees | $(421) | $(487) | | **Net franchise fees receivable** | **$16,836** | **$25,223** | Allowance for Uncollectible Franchise Fees Activity (in thousands) | Activity | Six Months Ended June 30, 2023 | | :------------------------ | :----------------------------- | | Balance at Dec 31, 2022 | $487 | | Charges to bad debts | $823 | | Write offs | $(889) | | Balance at June 30, 2023 | $421 | [Note 5 Allowance for Uncollectible Agency Fees](index=16&type=section&id=Note%205%20Allowance%20for%20uncollectible%20agency%20fees) The allowance for uncollectible agency fees increased to $653 thousand, driven by charges to bad debts and write-offs Allowance for Uncollectible Agency Fees Activity (in thousands) | Activity | Six Months Ended June 30, 2023 | | :------------------------ | :----------------------------- | | Balance at Dec 31, 2022 | $450 | | Charges to bad debts | $876 | | Write offs | $(673) | | Balance at June 30, 2023 | $653 | [Note 6 Property and Equipment](index=17&type=section&id=Note%206%20Property%20and%20equipment) Net property and equipment decreased to $33.2 million, with depreciation expense increasing to $3.8 million Property and Equipment, Net (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :------------------------ | :------------ | :---------------- | | Total | $52,208 | $50,571 | | Less accumulated depreciation | $(19,032) | $(15,224) | | **Property and equipment, net** | **$33,176** | **$35,347** | - **Depreciation expense increased by $0.9 million (31%) to $3.8 million for the six months ended June 30, 2023, compared to $2.9 million in the prior year**[56](index=56&type=chunk) [Note 7 Debt](index=17&type=section&id=Note%207%20Debt) This note details debt facilities, the LIBOR to SOFR transition, term note balance, and debt covenant compliance - **The Company's credit agreement was amended on April 26, 2023, to replace LIBOR with SOFR as the interest rate benchmark**[58](index=58&type=chunk) - **As of June 30, 2023, the Company had $49.8 million available to draw on its revolving credit facility**[59](index=59&type=chunk) - **An additional $10.0 million payment was made towards the term note on May 31, 2023, reducing the final balloon payment to $55.6 million**[60](index=60&type=chunk) Term Note Payable Maturities (in thousands) | Year | Amount | | :--- | :----- | | 2023 | $3,750 | | 2024 | $9,375 | | 2025 | $10,000| | 2026 | $58,125| | Total| $81,250| [Note 8 Income Taxes](index=18&type=section&id=Note%208%20Income%20taxes) This note details income tax expense, deferred tax assets, and the $134.2 million Tax Receivable Agreement liability Income Tax Expense and Effective Tax Rate | Period | Income Tax Expense (in thousands) | Effective Tax Rate | | :------------------------ | :-------------------------------- | :----------------- | | 3 Months Ended June 30, 2023 | $2,301 | 24% | | 3 Months Ended June 30, 2022 | $2,164 | 48% | | 6 Months Ended June 30, 2023 | $2,220 | 24% | | 6 Months Ended June 30, 2022 | $562 | (23)% | - **Deferred tax assets increased to $164.5 million at June 30, 2023, from $155.3 million at December 31, 2022, mainly due to LLC Unit redemptions**[68](index=68&type=chunk) - **The liability under the Tax Receivable Agreement (TRA) was $134.2 million as of June 30, 2023, representing 85% of expected tax benefits from basis increases due to LLC Unit redemptions**[71](index=71&type=chunk) [Note 9 Stockholders' Equity](index=19&type=section&id=Note%209%20Stockholder's%20equity) This note details Class A and Class B common stock structure and presents basic and diluted EPS calculations - **Class A common stock has economic rights and one vote per share, with 23,900 thousand shares outstanding at June 30, 2023**[73](index=73&type=chunk) - **Class B common stock has no economic rights but one vote per share, with 13,795 thousand shares outstanding at June 30, 2023**[74](index=74&type=chunk) Earnings Per Share (EPS) Summary | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $0.15 | $0.02 | $0.15 | $(0.10) | | Diluted EPS | $0.15 | $0.02 | $0.15 | $(0.10) | [Note 10 Non-Controlling Interest](index=20&type=section&id=Note%2010%20Non-controlling%20interest) This note details non-controlling interest, LLC Unit redemptions, and $12.6 million in distributions to unit holders - **GSHD's ownership interest in GF increased to 63.4% as of June 30, 2023**[84](index=84&type=chunk) - **Non-controlling interest holders redeemed 675 thousand LLC Units for Class A common stock during the six months ended June 30, 2023**[83](index=83&type=chunk) - **GF made distributions of $12.6 million to LLC Unit holders for the six months ended June 30, 2023, with $5.2 million going to Pre-IPO LLC Members**[80](index=80&type=chunk) [Note 11 Equity-Based Compensation](index=21&type=section&id=Note%2011%20Equity-based%20compensation) Equity-based compensation expense, mainly from stock options, increased for both three and six months ended June 30, 2023 Stock Option Expense (in thousands) | Period | 2023 | 2022 | | :------------------------ | :------ | :------ | | 3 Months Ended June 30 | $5,900 | $5,200 | | 6 Months Ended June 30 | $12,500 | $11,000 | [Note 12 Litigation](index=21&type=section&id=Note%2012%20Litigation) Management believes current legal proceedings will not materially adversely affect the Company's financial position or operations - **Management believes current litigation will not materially adversely affect the Company's financial position or results of operations**[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of financial condition, operational results, KPIs, and non-GAAP measures [Overview](index=22&type=section&id=OVERVIEW) This overview highlights substantial Q2 2023 financial growth in revenue, net income, written premiums, and Adjusted EBITDA - **Total revenue increased 31% to $69.3 million in Q2 2023**[92](index=92&type=chunk) - **Net income increased by $4.8 million to $7.2 million in Q2 2023**[92](index=92&type=chunk) - **Total Written Premiums placed increased 36% to $767.3 million**[92](index=92&type=chunk) - **Adjusted EBITDA increased 85% to $23.1 million, representing 33% of total revenues**[92](index=92&type=chunk) - **Policies in Force increased 21% to 1,427,000 at June 30, 2023**[92](index=92&type=chunk) - **Corporate sales headcount decreased 44% to 280 at June 30, 2023**[92](index=92&type=chunk) [Certain Income Statement Line Items](index=23&type=section&id=Certain%20income%20statement%20line%20items) This section analyzes revenue streams and operating expenses, noting growth in renewal commissions and increased compensation [Revenues](index=23&type=section&id=Revenues) Total revenues increased significantly, driven by a 36% rise in Total Written Premium and strong growth in renewal commissions - **Total Written Premium, a leading indicator of future revenue, increased 36% to $767 million for the three months ended June 30, 2023**[93](index=93&type=chunk) - **Renewal Commissions increased by 28% to $18.5 million for the three months ended June 30, 2023, driven by more policies in renewal term and premium rate increases**[104](index=104&type=chunk) - **New Business Commissions decreased by 7% to $6.3 million for the three months ended June 30, 2023, primarily due to a decrease in Corporate Sales agents**[105](index=105&type=chunk) - **Revenue from Contingent Commissions increased by $2.1 million to $4.0 million for the three months ended June 30, 2023, attributable to an increase in Total Written Premium**[106](index=106&type=chunk) - **Renewal Royalty Fees increased by 46% to $27.6 million for the three months ended June 30, 2023, due to an increase in renewal policies and rising premium rates**[108](index=108&type=chunk) - **Initial Franchise Fees increased by 27% to $3.3 million for the three months ended June 30, 2023, mainly due to higher franchise turnover accelerating revenue recognition**[110](index=110&type=chunk) [Expenses](index=27&type=section&id=Expenses) Operating expenses increased due to higher employee compensation, asset impairment charges, and rising interest expenses - **Employee compensation and benefits increased by 18% to $37.5 million for the three months ended June 30, 2023, primarily due to a 14% increase in equity-based compensation**[112](index=112&type=chunk) - **General and administrative expenses increased by 40% to $17.3 million for the three months ended June 30, 2023, mainly due to $3.6 million in asset impairment charges**[113](index=113&type=chunk) - **Bad debts decreased by 46% to $0.9 million for the three months ended June 30, 2023, but increased by 4% to $2.6 million for the six months ended June 30, 2023, due to higher franchise turnover**[114](index=114&type=chunk) - **Interest expenses increased by $0.6 million to $1.7 million for the three months ended June 30, 2023, driven by rising interest rates**[116](index=116&type=chunk) [Key Performance Indicators](index=28&type=section&id=Key%20performance%20indicators) Key performance indicators show strong growth in Total Written Premium, Policies in Force, NPS, and Renewal Revenue Total Written Premium (in thousands) | Category | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | % Change | | :------------------------ | :--------------------------- | :--------------------------- | :------- | | Corporate sales | $179,638 | $146,844 | 22% | | Franchise sales | $587,614 | $419,117 | 40% | | **Total Written Premium** | **$767,252** | **$565,961** | **36%** | - **Policies in Force increased 21% year-over-year to 1.4 million as of June 30, 2023**[121](index=121&type=chunk) - **Net Promoter Score (NPS) increased to 91 as of June 30, 2023, from 90 in the prior year**[123](index=123&type=chunk) - **Client Retention remained constant at 88% at June 30, 2023, while premium retention was 103%**[125](index=125&type=chunk) - **Renewal Revenue grew 38% to $46.1 million for the three months ended June 30, 2023, driven by client retention and rising premium rates**[129](index=129&type=chunk) [Non-GAAP Measures](index=29&type=section&id=Non-GAAP%20Measures) This section defines and reconciles non-GAAP measures, highlighting significant increases in Core Revenue, Adjusted EBITDA, and Adjusted EPS - **Core Revenue increased by 27% to $61.0 million for the three months ended June 30, 2023, driven by higher renewal policies and 103% premium retention**[133](index=133&type=chunk) - **Adjusted EBITDA increased by 85% to $23.1 million for the three months ended June 30, 2023, primarily due to growing higher-margin Renewal Revenue, decreases in Corporate agent headcount, and slower growth in General and Administrative expenses**[139](index=139&type=chunk) - **Adjusted EBITDA Margin was 33% for the three months ended June 30, 2023, up from 24% in the prior year**[141](index=141&type=chunk) Adjusted EPS Reconciliation | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | | :-------------------------- | :--------------------------- | :--------------------------- | | Earnings per share - basic (GAAP) | $0.15 | $0.02 | | Add: equity-based compensation | $0.16 | $0.14 | | Add: impairment expense | $0.10 | — | | **Adjusted EPS (non-GAAP)** | **$0.41** | **$0.16** | [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20capital%20resources) Liquidity is managed through revenues and credit, with increased operating cash offset by higher investing and financing outflows - **Net cash provided by operating activities increased by $6.0 million to $16.1 million for the six months ended June 30, 2023**[151](index=151&type=chunk) - **Net cash used for investing activities increased by $4.5 million to $11.3 million, primarily due to $5.3 million in cash paid for asset acquisitions (books of business)**[152](index=152&type=chunk) - **Net cash used for financing activities increased significantly by $14.1 million to $14.3 million, driven by an additional $10.0 million debt repayment and $5.2 million in member distributions**[153](index=153&type=chunk) - **The Tax Receivable Agreement (TRA) obligates the Company to pay Pre-IPO LLC Members 85% of realized cash tax savings from increases in tax basis due to LLC Unit redemptions**[157](index=157&type=chunk)[158](index=158&type=chunk) [Contractual Obligations, Commitments and Contingencies](index=35&type=section&id=Contractual%20obligations,%20commitments%20and%20contingencies) Total contractual obligations reached $310.9 million, primarily from operating leases, debt, and TRA liabilities Contractual Obligations as of June 30, 2023 (in thousands) | Type of Obligation | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :------------------------------ | :------- | :--------------- | :-------- | :-------- | :---------------- | | Operating leases | $80,528 | $10,843 | $23,054 | $22,846 | $23,785 | | Debt obligations payable | $81,250 | $8,125 | $17,500 | $55,625 | — | | Interest expense | $14,923 | $5,649 | $8,272 | $1,002 | — | | Liabilities under the tax receivable agreement | $134,159 | $463 | $32,806 | $16,076 | $84,814 | | **Total** | **$310,860** | **$25,080** | **$81,632** | **$95,549** | **$108,599** | - **The Company has a $50 million revolving credit facility, with nothing drawn as of June 30, 2023**[161](index=161&type=chunk) [Critical Accounting Policies](index=35&type=section&id=Critical%20accounting%20policies) No significant changes to critical accounting policies have occurred, with minor adjustments to revenue estimation - **The Company adjusted techniques for estimating revenues during the period, with an insignificant effect on reported financial results**[163](index=163&type=chunk) - **No significant changes to critical accounting policies have occurred since the December 31, 2022, Annual Report on Form 10-K**[163](index=163&type=chunk) [Recent Accounting Pronouncements](index=35&type=section&id=Recent%20accounting%20pronouncements) This section refers to Note 2 for details on recent accounting pronouncements, including the LIBOR to SOFR transition - **Refer to Note 2 for details on recently adopted accounting pronouncements, including ASU 2020-04 (Reference Rate Reform)**[164](index=164&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk exposure have occurred since the previous Annual Report on Form 10-K - **No material changes to market risk exposure have occurred since the previous Annual Report on Form 10-K**[165](index=165&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective, with no material changes to internal control during the quarter - **Disclosure controls and procedures were effective as of June 30, 2023**[166](index=166&type=chunk) - **No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2023**[167](index=167&type=chunk) [PART II](index=37&type=section&id=PART%20II) This part addresses legal proceedings, risk factors, equity sales, defaults, and other required disclosures [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) Information on legal proceedings is incorporated by reference from Note 12, with no material adverse effect expected - **Information on legal proceedings is incorporated by reference from Note 12. Litigation**[168](index=168&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have occurred since the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 - **No material changes to risk factors have occurred since the Annual Report on Form 10-K for the fiscal year ended December 31, 2022**[169](index=169&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred, but LLC Units are redeemable for Class A common stock - **No unregistered sales of equity securities occurred**[170](index=170&type=chunk) - **LLC Units are redeemable for Class A common stock on a one-for-one basis, with corresponding Class B common stock cancellation**[170](index=170&type=chunk) [Item 3. Defaults Upon Senior Securities](index=37&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported by the Company - **No defaults upon senior securities were reported**[171](index=171&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company's operations - **This item is not applicable**[172](index=172&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) No other information was reported under this item - **No other information was reported**[173](index=173&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including agreements, CEO/CFO certifications, and XBRL data files - **Exhibit 10.1 is an Agreement dated April 26, 2023, between Goosehead Insurance and P. Ryan Langston**[175](index=175&type=chunk) - **Certifications of the Chief Executive Officer and Chief Financial Officer are included pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002**[175](index=175&type=chunk) - **XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents are filed**[175](index=175&type=chunk) [Signatures](index=38&type=section&id=SIGNATURES) The report is duly signed by the Chairman, CEO, and CFO of Goosehead Insurance, Inc. on July 26, 2023 - **The report was signed by Mark E. Jones, Chairman and Chief Executive Officer, and Mark E. Jones, Jr., Chief Financial Officer, on July 26, 2023**[178](index=178&type=chunk)

Financial Performance - Revenue for Q1 2023 increased by 40% to $58.0 million from $41.3 million in Q1 2022[80] - Total Written Premium growth was 41%, reaching $637.7 million in Q1 2023 compared to $450.9 million in Q1 2022[80] - Adjusted EBITDA surged 707% to $10.2 million, representing 18% of total revenues[80] - Core Revenue increased by 42% to $52.0 million in Q1 2023 from $36.5 million in Q1 2022[80] - Renewal Revenue surged by 59% to $38.6 million for the three months ended March 31, 2023, from $24.2 million for the same period in 2022, supported by an 88% client retention rate[115] - Basic earnings per share (GAAP) for Q1 2023 was $0.00, compared to a loss of $0.11 in Q1 2022; Adjusted EPS (non-GAAP) increased to $0.17 from $0.04[130] Policy and Franchise Metrics - Policies in Force rose by 23% to 1,354,000 as of March 31, 2023, compared to the previous year[80] - Total franchises decreased by 19% to 1,865, while operating franchises increased by 9% to 1,387[80] - Revenue from New Business Royalty Fees increased by $1.4 million, or 32%, to $5.7 million for the three months ended March 31, 2023, from $4.3 million for the same period in 2022, driven by a 9% increase in operating franchises to 1,387[96] - Revenue from Initial Franchise Fees rose by $0.8 million, or 33%, to $3.1 million for the three months ended March 31, 2023, attributed to higher franchise turnover during the quarter[97] Cost and Cash Flow - Net cash used for operating activities improved to $0.6 million in Q1 2023 from $5.2 million in Q1 2022, reflecting a decrease in net loss[134] - Net cash used for investing activities was $2.7 million in Q1 2023, slightly higher than $2.5 million in Q1 2022, driven by increased asset purchases[135] - Net cash used for financing activities rose to $0.9 million in Q1 2023 from $0.2 million in Q1 2022, primarily for repayment of notes payable[136] - Cash and cash equivalents as of March 31, 2023, were $24.6 million, with a net decrease in cash and cash equivalents of $4.2 million for the quarter[131][133] Obligations and Liquidity - Total contractual obligations as of March 31, 2023, amounted to $322.6 million, including $81.7 million in operating leases and $93.1 million in debt obligations[144] - The company anticipates sufficient liquidity from cash on hand, net working capital, and cash flows from operations to meet future commitments[137] - The company has a tax receivable agreement that requires payment of 85% of cash savings realized from tax benefits, with liabilities under this agreement totaling $129.2 million[144] Operational Changes - Corporate sales headcount decreased by 44% to 276 as of March 31, 2023[80] - Cost Recovery Revenue increased by $0.8 million, or 32%, to $3.5 million for the three months ended March 31, 2023, from $2.6 million for the same period in 2022, driven by an increase in franchise terminations[120] - The company recorded a rent expense of $2.0 million for Q1 2023, compared to $1.4 million for Q1 2022[144] - The company refinanced its credit facilities in July 2021, with a $100 million term loan and a $25 million revolving credit facility, of which nothing was drawn as of March 31, 2023[145]

Financial Performance - Total Written Premium grew 42% to $2.2 billion from $1.6 billion in 2021, indicating strong organic growth [30]. - The company achieved a revenue growth of 38% and Total Written Premium growth of 42% in 2022, with a 10-year Total Written Premium CAGR of 43% [55]. - Premiums in franchise sales grew by 46% during 2022, with a total of 2,125 franchises as of December 31, 2022, including 1,413 operating franchises [50]. - New Business Royalty Fees are set at 20% of commissions during the first term of the policy and 50% for renewals, creating strong revenue and margin expansion opportunities [48]. Client Retention and Satisfaction - Client retention rate reached 88% in 2022, which is nearly 2.6 times the 2021 P&C industry average [23]. - The company maintained a Net Promoter Score (NPS) of 90 in 2022, which is 2.6 times the industry average, and an 88% Client Retention rate [54]. - The company achieved a 2022 Net Promoter Score (NPS) of 90, leading to an 88% Client Retention rate and a 100% premium retention rate [68]. Sales Performance - Average commission rate on new business premium was 15% and on renewal business premium was 13% in 2022 [29]. - Corporate sales agents with more than three years of tenure averaged 4.1 times the New Business Production per Agent compared to industry best practices [41]. - Franchise sales agents with more than three years of tenure averaged 2.5 times the New Business Production per Agent compared to industry best practices [27]. - New Business Production per Agent in corporate sales was $110,000 for agents with more than one year of tenure in 2022 [39]. Growth and Expansion - The company has expanded to 1,413 operating franchise locations, reflecting rapid growth in its franchise model [28]. - The company expects to continue its expansion in 2023 within existing markets [42]. - Franchise locations increased by 18% to 1,413 in 2022 from 1,198 in 2021, while total franchises decreased by 1% to 2,125 in 2022 from 2,151 in 2021 [76]. - As of December 31, 2022, the company has signed Franchise Agreements in 47 states, covering over 99% of the total US population, with a potential franchise candidate pipeline of approximately 171,000 [65]. Operational Efficiency - Goosehead's Digital Agent allows clients to receive accurate home and auto quotes in less than two minutes [34]. - Service expenses as a percentage of gross commissions were 2.9 times lower than the industry best practice, allowing for best-in-class NPS scores and retention [63]. - The company’s service centers drive both new and renewal business, enabling agents to focus on cultivating new relationships and winning new business [63]. - The company made over 2,400 platform improvements in 2022 to enhance service and business processes for its agent network [93]. Technology and Innovation - The company invests in technology to drive efficiencies and maintain a competitive edge in the market [69]. - Goosehead offers a competitive health benefits package, including medical, dental, and vision insurance, along with a 401(k) retirement savings plan with matching contributions that vest over four years [96]. Diversity and Inclusion - More than half of Goosehead's employees are women, and over one-third identify as racially diverse, reflecting the company's commitment to diversity, equity, and inclusion [97]. - Goosehead has established a Women's Professional Development Program (WPDP) to support female employees' personal and professional growth since 2015 [99]. - The company maintains strong Equal Opportunity and Anti-Harassment policies, ensuring a respectful and inclusive workplace [98]. Corporate Governance - Goosehead's code of business conduct and ethics applies to all employees and is designed to promote honest and ethical conduct [101]. - The company emphasizes a meritocratic culture, where performance is rewarded, and employees are encouraged to create value [100]. - Goosehead's operating principles focus on integrity, exceptional service, and teamwork, which are central to its business model [100]. - The company files its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q with the SEC, ensuring transparency and compliance with federal securities laws [103].

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 ...

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 ...

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 - ...