Goosehead Insurance(GSHD) - 2025 Q2 - Quarterly Report

PART I This section presents unaudited consolidated financial statements and management's discussion and analysis Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including statements of operations, balance sheets, stockholders' equity, and cash flows, along with detailed notes explaining the company's organization, significant accounting policies, revenue recognition, asset details, debt, income taxes, equity, noncontrolling interests, equity-based compensation, dividends, segment information, and litigation Condensed Consolidated Statements of Operations This section provides a summary of the company's revenues, operating income, and net income for the reported periods | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total revenues | $94,027 | $78,088 | $169,611 | $142,548 | | Income from operations | $15,660 | $15,397 | $22,274 | $16,852 | | Net income | $8,283 | $10,875 | $10,929 | $12,684 | | Net income attributable to Goosehead Insurance, Inc. | $5,150 | $6,198 | $7,492 | $8,012 | | Basic EPS | $0.20 | $0.25 | $0.30 | $0.32 | | Diluted EPS | $0.18 | $0.24 | $0.27 | $0.29 | - Total revenues increased by 20% for the three months ended June 30, 2025, and by 19% for the six months ended June 30, 2025, compared to the respective prior-year periods[14] - Net income attributable to Goosehead Insurance, Inc. decreased by $1.048 million (16.9%) for the three months ended June 30, 2025, and by $0.52 million (6.5%) for the six months ended June 30, 2025, compared to the respective prior-year periods[14] Condensed Consolidated Balance Sheets This section details the company's assets, liabilities, and equity at specific points in time | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :-------------------------------- | :--------------------------------- | | Total assets | $436,587 | $397,653 | | Total liabilities | $567,181 | $358,577 | | Total stockholders' equity | $(78,589) | $43,889 | | Total equity | $(130,594) | $39,076 | - Total assets increased by $38.934 million (9.8%) from December 31, 2024, to June 30, 2025[15] - Total liabilities significantly increased by $208.604 million (58.2%) from December 31, 2024, to June 30, 2025, primarily due to a substantial increase in the note payable (net of current portion) and liabilities under tax receivable agreement[15] - Total stockholders' equity and total equity shifted from positive to negative, indicating a significant reduction in equity during the period[15] Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity, including accumulated deficit and noncontrolling interests - The company reported a significant accumulated deficit of $(153.695) million as of June 30, 2025, compared to $(15.401) million at January 1, 2025, largely due to dividends declared[16] - Total stockholders' equity decreased from $43.889 million at January 1, 2025, to $(78.589) million at June 30, 2025, primarily driven by dividends declared of $(145.786) million[16] - Noncontrolling interests also saw a significant decrease from $(4.813) million to $(52.005) million, influenced by distributions and share repurchases[16] Condensed Consolidated Statements of Cash Flows This section presents the cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $44,397 | $30,942 | | Net cash used for investing activities | $(8,368) | $(5,822) | | Net cash provided by (used for) financing activities | $1,620 | $(42,882) | | Net increase (decrease) in cash and cash equivalents, and restricted cash | $37,649 | $(17,762) | | Cash and cash equivalents, and restricted cash, end of period | $95,622 | $26,285 | - Net cash provided by operating activities increased by $13.455 million (43.5%) for the six months ended June 30, 2025, compared to the same period in 2024[18] - Net cash used for investing activities increased by $2.546 million (43.7%) for the six months ended June 30, 2025, primarily due to increased capital expenditures[18] - Financing activities shifted from a net cash outflow of $42.882 million in 2024 to a net cash inflow of $1.620 million in 2025, largely due to new debt proceeds and reduced share repurchases, despite significant member distributions and dividends[18] Note 1 Organization This note describes the company's corporate structure and primary business activities in insurance brokerage services - Goosehead Insurance, Inc. (GSHD) is the sole managing member of Goosehead Financial, LLC (GF), consolidating GF's financial results and reporting noncontrolling interest[20] - The Company provides personal and commercial property and casualty insurance brokerage services through corporate-owned agencies and franchise units[21] | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Corporate-owned locations | 14 | 13 | | Franchise locations onboarded (3 months) | 16 | 19 | | Operating franchise locations | 1,075 | 1,122 | Note 2 Summary of significant accounting policies This note details the accounting principles, estimates, and policies applied in preparing the financial statements - The financial statements are prepared in accordance with GAAP, with management making estimates and assumptions that may differ from actual results[24][26] - The Company experiences seasonal revenue fluctuations due to contingent commission recognition and housing market activity[25] - Intangible assets include web domain (15-year amortization), computer software (3-10 years), and purchased books of business (8 years)[27] - An impairment expense of $1.6 million for property and equipment and $3.1 million for right-of-use assets was recorded for the three months ended June 30, 2025, due to identified office leases to be exited or subleased[30] | Cash and Cash Equivalents | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $92,388 | $23,643 | | Restricted cash | $3,234 | $2,642 | | Total | $95,622 | $26,285 | Note 3 Revenues This note explains the company's revenue recognition policies across various commission and fee streams - Commissions are earned for placing initial and renewal insurance policies, with New Business Commissions recognized at policy effective date and Renewal Commissions upon renewal or replacement policy effective date[39][40] - Contingent commission revenue is estimated and recognized over time based on growth, profitability, or other performance metrics with insurance carriers[43][44] - Initial Franchise Fees are recognized as revenue over the 10-year life of the franchise contract, while New and Renewal Royalty Fees are recognized over time as policies are placed or renewed[46][47][48] | Revenue Stream | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Renewal Commissions | $23,119 | $20,591 | $40,071 | $36,552 | | New Business Commissions | $7,559 | $6,682 | $13,314 | $12,363 | | Agency Fees | $2,906 | $2,137 | $5,146 | $4,048 | | Contingent Commissions | $4,492 | $2,209 | $8,968 | $4,877 | | Renewal Royalty Fees | $45,381 | $36,828 | $82,625 | $65,881 | | New Business Royalty Fees | $7,820 | $7,169 | $14,749 | $13,402 | | Initial Franchise Fees | $1,247 | $1,631 | $2,589 | $3,875 | | Other Franchise Revenues | $1,324 | $598 | $1,781 | $1,055 | | Interest Income | $179 | $244 | $368 | $494 | | Total Revenues | $94,027 | $78,088 | $169,611 | $142,548 | Note 4 Franchise fees receivable This note provides details on the company's franchise fees receivable, including unamortized discount and allowance for uncollectible amounts | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :--------------------------------- | | Franchise fees receivable | $5,501 | $6,263 | | Less: Unamortized discount | $(1,323) | $(1,671) | | Less: Allowance for uncollectible franchise fees | $(29) | $(35) | | Net franchise fees receivable | $4,149 | $4,557 | | Allowance for Uncollectible Franchise Fees | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Balance at December 31 | $35 (2024) | $223 (2023) | | Charges to bad debts | $123 | $379 | | Write offs | $(129) | $(570) | | Balance at June 30 | $29 | $32 | Note 5 Allowance for uncollectible agency fees This note details the allowance for uncollectible agency fees, including changes from bad debts and write-offs | Allowance for Uncollectible Agency Fees | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Balance at December 31 | $363 (2024) | $508 (2023) | | Charges to bad debts | $597 | $816 | | Write offs | $(377) | $(925) | | Balance at June 30 | $583 | $399 | Note 6 Property and equipment This note provides a breakdown of property and equipment, net of accumulated depreciation | Property and Equipment | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :--------------------------------- | | Furniture & fixtures | $11,056 | $10,369 | | Computer equipment | $6,014 | $5,443 | | Network equipment | $563 | $481 | | Phone system | $220 | $227 | | Leasehold improvements | $35,775 | $35,288 | | Total | $53,628 | $51,808 | | Less accumulated depreciation | $(31,661) | $(27,707) | | Property and equipment, net | $21,967 | $24,101 | - Depreciation expense was $3.5 million for the six months ended June 30, 2025, a decrease from $3.7 million for the same period in 2024[62] Note 7 Intangible assets This note details the company's intangible assets, including computer software, web domain, and books of business | Intangible Assets | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :--------------------------------- | | Computer software & web domain | $30,698 | $24,475 | | Books of business | $7,854 | $6,895 | | Total | $38,552 | $31,369 | | Less: accumulated amortization | $(8,223) | $(6,294) | | Intangible assets, net | $30,329 | $25,075 | - Amortization expense increased to $1.9 million for the six months ended June 30, 2025, from $1.5 million for the same period in 2024[63] Note 8 Debt This note outlines the company's debt structure, including term loans and revolving credit facilities - On January 8, 2025, the Company entered into a new credit agreement for an aggregate $300 million term notes payable and a $75 million revolving credit facility, replacing the previous agreement[66] - The 2025 Initial Term Loan matures on January 8, 2032, with quarterly installments of $0.8 million and a balloon payment of $279.8 million[66] - As of June 30, 2025, the Company had no draws against the revolving credit facility, with $75.0 million available[68] - Subsequent to the quarter, on July 9, 2025, the Company refinanced the term loan, reducing the interest rate by 0.50% to Term SOFR plus 3.00%[75] Note 9 Income taxes This note explains the company's income tax expense, deferred tax assets, and liabilities under the Tax Receivable Agreement - Tax expense decreased to $1.9 million for the three months ended June 30, 2025 (effective tax rate 19%), from $3.0 million in 2024 (effective tax rate 22%), primarily due to lower pre-tax income and increased tax benefits from stock option exercises[77] - For the six months ended June 30, 2025, tax expense was $0.2 million (effective tax rate 2%), a significant change from a tax benefit of $5.6 million in 2024 (effective tax rate (79%)), mainly due to changes in state apportionment and filing requirements in 2024[77] - Deferred tax assets increased to $207.5 million at June 30, 2025, from $193.5 million at December 31, 2024, driven by additional redemptions of LLC Units[78] - The total liability under the Tax Receivable Agreement (TRA) was $171.8 million as of June 30, 2025, with $7.0 million classified as current[81][82] Note 10 Stockholders' equity This note details the company's capital structure, including common stock, share repurchases, and restatement information - As of June 30, 2025, there were 25,351 thousand shares of Class A common stock outstanding (with economic and voting rights) and 12,207 thousand shares of Class B common stock outstanding (with voting rights only)[85][86] - The Company restated prior period financial statements to correct errors in the allocation of stock option exercises, equity-based compensation, employee stock purchase plan activity, and LLC Unit redemptions, as well as deferred tax adjustments related to the TRA[88][89] | EPS Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.20 | $0.25 | $0.30 | $0.32 | | Diluted EPS | $0.18 | $0.24 | $0.27 | $0.29 | | Weighted average outstanding Class A common shares - Basic | 25,216 | 24,693 | 25,005 | 24,890 | | Weighted average outstanding Class A common shares - Diluted | 38,553 | 38,031 | 38,542 | 38,435 | - The board approved a new share repurchase program on April 23, 2025, authorizing up to $100 million of Class A common stock repurchases through May 1, 2026[100] - During the three and six months ended June 30, 2025, the Company repurchased 6 thousand shares for $0.5 million, significantly less than the 1,045 thousand shares for $63.6 million repurchased in the same periods of 2024[101] Note 11 Noncontrolling interest This note describes the noncontrolling interest in Goosehead Financial, LLC and related transactions - GSHD consolidates GF's financial results and reports a noncontrolling interest representing other GF members' economic interest[102] - For the three and six months ended June 30, 2025, GF made distributions of $5.2 million and $5.3 million, with $1.9 million and $1.9 million going to Pre-IPO LLC Members, respectively[103] - During the three and six months ended June 30, 2025, 268 thousand and 413 thousand LLC Units were redeemed by noncontrolling interest holders for Class A common stock, increasing GSHD's ownership in GF[105] | Ownership Interest in GF | June 30, 2025 (in thousands) | | :-------------------------------- | :----------------------------- | | LLC Units held by GSHD | 25,351 (67.5%) | | LLC Units held by noncontrolling interest holders | 12,207 (32.5%) | | Total LLC Units outstanding | 37,558 (100.0%) | Note 12 Equity-based compensation This note provides information on the company's equity-based compensation expenses | Metric | Three Months Ended June 30, 2025 (in millions) | Three Months Ended June 30, 2024 (in millions) | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Stock option expense | $6.0 | $6.6 | $12.3 | $14.0 | Note 13 Dividends This note details the special distribution and cash dividend declared by the company - On January 9, 2025, GF declared a special distribution of $175 million, with $59 million paid to noncontrolling interest holders[108] - Concurrently, the Company declared a one-time special cash dividend of $5.91 per Class A common stock, totaling $146 million, funded by prior tax distributions and the special distribution from GF[108] Note 14 Segment information This note clarifies that the company operates as a single reportable segment: insurance distribution - The Company operates as a single reportable segment: insurance distribution, providing various property and casualty insurance products[110] - All revenue is derived from within the United States, and business activities are managed on a consolidated basis[110] - The CEO, as the chief operating decision maker, uses net income to assess performance, allocate resources, and evaluate income generated from segment assets[111][113] Note 15 Litigation This note discusses the company's legal contingencies and ongoing litigation matters - The Company accrues for legal contingencies when a liability is probable and estimable, otherwise discloses reasonably possible material losses[114] - Management believes the likely results of ongoing legal matters will not materially adversely affect the Company's financial position, results of operations, or cash flows[114] - The 'Dollens Action' class action lawsuit, alleging invalid corporate governance documents, is currently stayed with a proposed non-monetary settlement involving revisions to the Stockholder Agreement[115] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of the company's financial performance, including key highlights for Q2 2025, a detailed analysis of revenue streams and operating expenses, and a discussion of key performance indicators. It also reconciles non-GAAP financial measures and outlines the company's liquidity, capital resources, and contractual obligations Overview This section provides a high-level description of Goosehead Insurance, Inc.'s business model and strategic focus - Goosehead Insurance, Inc. is a rapidly growing personal lines independent insurance agency focused on providing superior coverage and pricing through a differentiated business model and innovative technology[118] Financial Highlights for the Second Quarter of 2025 This section summarizes the key financial and operational achievements for the second quarter of 2025 - Total revenue increased 20% to $94.0 million - Core Revenue increased 18% to $86.8 million - Total Written Premiums placed increased 18% to $1.2 billion - Net income decreased by $2.6 million to $8.3 million (9% of total revenues) - Adjusted EBITDA increased 18% to $29.2 million (31% of total revenues) - Basic EPS was $0.20, Diluted EPS was $0.18, and Adjusted EPS was $0.49 - Policies in Force increased 13% to 1,793,000 - Corporate sales headcount increased 53% to 479 - Total operating franchises decreased 4% to 1,075 Certain Income Statement Line Items - Revenues This section analyzes the company's revenue streams, categorizing them by predictability and quality - Total revenue increased 20% to $94.0 million for Q2 2025 and 19% to $169.6 million for the six months ended June 30, 2025[122] - Total Written Premium, a key indicator of future revenue, increased 18% to $1.18 billion for Q2 2025 and 20% to $2.2 billion for the six months ended June 30, 2025[122] - Core Revenue (Renewal Commissions, Renewal Royalty Fees, New Business Commissions, New Business Royalty Fees, Agency Fees) is the most predictable and higher-quality revenue stream[126] - Cost Recovery Revenue (Initial Franchise Fees, Interest Income) reimburses the Company for recruitment, training, and support costs[126] - Ancillary Revenue (Contingent Commissions, Other Franchise Revenues) is unpredictable and susceptible to external factors like weather events[126] | Revenue Category | Q2 2025 (in thousands) | Q2 2024 (in thousands) | 6M 2025 (in thousands) | 6M 2024 (in thousands) | | :----------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Total Core Revenue | $86,785 (92%) | $73,407 (94%) | $155,905 (92%) | $132,246 (93%) | | Total Cost Recovery Revenue | $1,426 (2%) | $1,875 (2%) | $2,957 (2%) | $4,369 (3%) | | Total Ancillary Revenue | $5,816 (6%) | $2,807 (4%) | $10,749 (6%) | $5,933 (4%) | | Total Revenues | $94,027 (100%) | $78,088 (100%) | $169,611 (100%) | $142,548 (100%) | Consolidated Results of Operations This section provides a detailed analysis of the company's revenues and operating expenses for the reported periods | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total revenues | $94,027 | $78,088 | $169,611 | $142,548 | | Employee compensation and benefits | $50,388 | $42,551 | $98,722 | $84,681 | | General and administrative expenses | $24,647 | $16,855 | $42,206 | $34,035 | | Bad debts | $550 | $653 | $957 | $1,780 | | Depreciation and amortization | $2,782 | $2,632 | $5,452 | $5,200 | | Total operating expenses | $78,367 | $62,691 | $147,337 | $125,696 | | Income from operations | $15,660 | $15,397 | $22,274 | $16,852 | | Interest expense | $(6,303) | $(1,982) | $(12,126) | $(3,469) | | Other income (expense) | $815 | $441 | $983 | $(6,286) | | Income before taxes | $10,172 | $13,856 | $11,131 | $7,097 | | Tax expense (benefit) | $1,889 | $2,981 | $202 | $(5,587) | | Net income | $8,283 | $10,875 | $10,929 | $12,684 | | Net income attributable to Goosehead Insurance, Inc. | $5,150 | $6,198 | $7,492 | $8,012 | - Renewal Commissions increased 12% to $23.1 million (QoQ) and 10% to $40.1 million (YoY), driven by a $3.0 million release of variable consideration constraint and 84% client retention[132] - New Business Commissions increased 13% to $7.6 million (QoQ) and 8% to $13.3 million (YoY), due to more Corporate sales agents, offset by product challenges in Texas[133] - Agency Fees increased 36% to $2.9 million (QoQ) and 27% to $5.1 million (YoY), attributed to higher average fees and more policies written with fees[134] - Contingent Commissions increased significantly by $2.3 million to $4.5 million (QoQ) and $4.1 million to $9.0 million (YoY), due to increased Total Written Premium and qualifying for additional commissions[135] - Renewal Royalty Fees increased 23% to $45.4 million (QoQ) and 25% to $82.6 million (YoY), driven by more renewal policies, 84% client retention, rising premium rates, and a $1.0 million release of variable consideration constraint[137] - New Business Royalty Fees increased 9% to $7.8 million (QoQ) and 10% to $14.7 million (YoY), due to increased franchise productivity and rising premium rates[138] - Initial Franchise Fees decreased 24% to $1.2 million (QoQ) and 33% to $2.6 million (YoY), primarily due to lower franchise turnover[139] - Interest income decreased 27% to $0.2 million (QoQ) and 26% to $0.4 million (YoY), due to fewer franchises on payment plans[140] - Employee compensation and benefits increased 18% to $50.4 million (QoQ) and 17% to $98.7 million (YoY), mainly due to investments in corporate producers and service/technology functions[141] - General and administrative expenses increased 46% to $24.6 million (QoQ) and 24% to $42.2 million (YoY), primarily due to $4.7 million in asset impairment charges and increased spending on technology and professional services[142] - Bad debts decreased 16% to $0.6 million (QoQ) and 46% to $1.0 million (YoY), attributed to lower franchise turnover[143] - Depreciation and amortization increased 6% to $2.8 million (QoQ) and 5% to $5.5 million (YoY), due to increased software development spending[144] - Interest expense increased significantly by $4.3 million to $6.3 million (QoQ) and $8.7 million to $12.1 million (YoY), driven by higher outstanding borrowings[145] - Other income (expense) increased by $0.4 million (QoQ) and $7.3 million (YoY), due to interest income on cash balances and remeasurements of TRA liability in the prior year[146] - Tax expense (benefit) decreased by $1.1 million (QoQ) due to lower pre-tax income and higher stock option tax benefits, but increased by $5.8 million (YoY) due to prior year deferred tax asset remeasurements[147] Key Performance Indicators This section presents crucial metrics used to evaluate the company's operational performance and growth | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | % Change | | :-------------------------------- | :--------------------- | :--------------------- | :------- | | Corporate sales Total Written Premium | $217,147 | $205,788 | 6% | | Franchise sales Total Written Premium | $958,762 | $793,087 | 21% | | Total Written Premium | $1,175,909 | $998,875 | 18% | | Metric | 6M 2025 (in thousands) | 6M 2024 (in thousands) | % Change | | :-------------------------------- | :--------------------- | :--------------------- | :------- | | Corporate sales Total Written Premium | $393,753 | $374,288 | 5% | | Franchise sales Total Written Premium | $1,782,388 | $1,443,372 | 23% | | Total Written Premium | $2,176,141 | $1,817,660 | 20% | - Policies in Force increased 13% to 1.8 million at June 30, 2025, from 1.6 million at June 30, 2024[152] - Net Promoter Score (NPS) decreased to 84 at June 30, 2025, from 91 at June 30, 2024[154] - Client Retention remained steady at 84% at June 30, 2025, compared to June 30, 2024, despite rising premium rates[156] - Premium retention for the trailing twelve months ended June 30, 2025, was 95%, a decrease from 98% at December 31, 2024, due to moderating premium rate increases and stable client retention[156] - New Business Revenue grew 14% to $18.3 million (QoQ) and 11% to $33.2 million (YoY), driven by increased corporate sales agents, franchise productivity, and rising premium rates[158] - Renewal Revenue grew 19% to $68.5 million (QoQ) and 20% to $122.7 million (YoY), driven by the release of variable consideration constraint, increased renewal policies, 84% client retention, and rising premium rates[161] Non-GAAP Measures This section reconciles non-GAAP financial measures to their most directly comparable GAAP counterparts - Non-GAAP measures (Core Revenue, Cost Recovery Revenue, Ancillary Revenue, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted EPS) are used to facilitate operating performance comparisons by excluding non-representative items[163] - Core Revenue increased 18% to $86.8 million (QoQ) and 18% to $155.9 million (YoY), driven by increased renewal policies, new policies, rising premium rates, and release of variable consideration constraint[165] - Cost Recovery Revenue decreased 24% to $1.4 million (QoQ) and 32% to $3.0 million (YoY), primarily due to fewer franchises and less acceleration of initial franchise fee revenue from terminations[167] - Ancillary Revenue increased by $3.0 million to $5.8 million (QoQ) and $4.8 million to $10.7 million (YoY), mainly due to increased Total Written Premium and additional Contingent Commissions[169] | Non-GAAP Revenue | Q2 2025 (in thousands) | Q2 2024 (in thousands) | 6M 2025 (in thousands) | 6M 2024 (in thousands) | | :----------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Total Core Revenue | $86,785 | $73,407 | $155,905 | $132,246 | | Total Cost Recovery Revenue | $1,426 | $1,875 | $2,957 | $4,369 | | Total Ancillary Revenue | $5,816 | $2,807 | $10,749 | $5,933 | | Total Revenues (GAAP) | $94,027 | $78,088 | $169,611 | $142,548 | - Adjusted EBITDA increased 18% to $29.2 million (QoQ) and 23% to $44.7 million (YoY), driven by total revenue growth, including $4 million from the release of variable consideration constraint, partially offset by increased employee compensation[172] - Adjusted EBITDA Margin was 31% (QoQ) compared to 32% in 2024, and remained unchanged at 26% (YoY)[174] - Adjusted EPS was $0.49 (QoQ) compared to $0.43 in 2024, and $0.76 (YoY) compared to $0.70 in 2024[175] | Adjusted EBITDA Reconciliation | Q2 2025 (in thousands) | Q2 2024 (in thousands) | 6M 2025 (in thousands) | 6M 2024 (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income | $8,283 | $10,875 | $10,929 | $12,684 | | Interest expense | $6,303 | $1,982 | $12,126 | $3,469 | | Depreciation and amortization | $2,782 | $2,632 | $5,452 | $5,200 | | Tax benefit | $1,889 | $2,981 | $202 | $(5,587) | | Equity-based compensation | $6,016 | $6,632 | $12,253 | $13,989 | | Impairment expense | $4,694 | $0 | $4,694 | $347 | | Other (income) expense | $(815) | $(441) | $(983) | $6,286 | | Adjusted EBITDA | $29,152 | $24,661 | $44,672 | $36,388 | | Adjusted EBITDA Margin | 31% | 32% | 26% | 26% | | Adjusted EPS Reconciliation | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | :------ | :------ | | Earnings per share - basic (GAAP) | $0.20 | $0.25 | $0.30 | $0.32 | | Add: equity-based compensation | $0.16 | $0.18 | $0.33 | $0.37 | | Add: impairment expense | $0.13 | $0.00 | $0.13 | $0.01 | | Adjusted EPS (non-GAAP) | $0.49 | $0.43 | $0.76 | $0.70 | Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations and funding sources - The Company's liquidity is primarily managed through revenues, cash on hand ($92.4 million as of June 30, 2025), net working capital, and its revolving credit facility[181][189] - On January 8, 2025, a new credit agreement was established, providing a $300 million term loan and a $75 million revolving credit facility, replacing the prior agreement[182] - Subsequent to the period, on July 9, 2025, the term loan interest rate was reduced by 0.50% to Term SOFR plus 3.00%[183] | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | | Net cash provided by operating activities | $44,397 | $30,942 | $13,455 | | Net cash used for investing activities | $(8,368) | $(5,822) | $(2,546) | | Net cash provided by (used for) financing activities | $1,620 | $(42,882) | $44,502 | | Net increase (decrease) in cash and cash equivalents | $37,649 | $(17,762) | $55,411 | | Cash and cash equivalents, and restricted cash, end of period | $95,622 | $26,285 | $69,337 | - Operating cash flow increased by $13.5 million, driven by higher commissions and agency fees and changes in contract liabilities, partially offset by prepaid expenses[186] - Investing cash flow used increased by $2.5 million, primarily due to higher purchases of property and equipment[187] - Financing activities shifted to a net cash inflow of $1.6 million from a $42.9 million outflow, due to new term loan proceeds, repayment of previous debt, special distributions/dividends, and reduced share repurchases[188] - Primary liquidity needs include funding organic growth, operating expenses, tax receivable agreement payments, debt service, income taxes, share repurchases, and potential dividends[190][192] - The Tax Receivable Agreement (TRA) obligates the Company to pay Pre-IPO LLC Members 85% of cash tax savings from tax basis adjustments resulting from LLC Unit redemptions/exchanges[193] | Contractual Obligations (in thousands) | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :-------------------------------- | :---- | :--------------- | :-------- | :-------- | :---------------- | | Operating leases | $72,350 | $11,512 | $23,662 | $19,754 | $17,422 | | Debt obligations payable | $299,250 | $3,000 | $6,000 | $6,000 | $284,250 | | Interest expense | $152,703 | $23,297 | $45,890 | $44,952 | $38,564 | | Liabilities under the tax receivable agreement | $171,802 | $6,993 | $45,512 | $22,002 | $97,295 | | Total | $696,105 | $44,802 | $121,064 | $92,708 | $437,531 | Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the Company's exposure to market risks since the Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No material changes to market risk exposure since the December 31, 2024, Annual Report on Form 10-K[203] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025. No material changes to internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were effective as of June 30, 2025[204] - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2025[205] PART II This section details legal proceedings, risk factors, equity sales, defaults, and other required disclosures Item 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 15 to the condensed consolidated financial statements - Legal proceedings information is referenced from Note 15 of the condensed consolidated financial statements[206] Item 1A. Risk Factors No material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, other than those described in the Q1 2025 Form 10-Q - No material changes to risk factors since the December 31, 2024, Annual Report on Form 10-K, except as noted in the Q1 2025 Form 10-Q[207] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Each LLC Unit is redeemable for one share of Class A common stock. The Company repurchased 6 thousand shares of Class A common stock for $0.5 million during the three months ended June 30, 2025, under a new $100 million share repurchase program approved in April 2025 - Each LLC Unit is redeemable for one share of Class A common stock, with corresponding Class B common stock cancellation[208] | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------------------------- | :------------------------------- | :--------------------------- | | April 1, 2024 - April 30, 2024 | 6 | $94.51 | | May 1, 2024 - May 31, 2024 | — | $— | | June 1, 2024 - June 30, 2024 | — | $— | | Total | 6 | | - A new $100 million share repurchase program was approved on April 23, 2025, valid through May 1, 2026[209] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the period - No defaults upon senior securities[210] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Not applicable[211] Item 5. Other Information The Company's CEO and director, Mark K. Miller, adopted a Rule 10b5-1 trading arrangement on April 29, 2025, for the potential sale of up to 60,000 shares - CEO Mark K. Miller adopted a Rule 10b5-1 trading arrangement on April 29, 2025, for the potential sale of up to 60,000 shares, terminating by May 1, 2026[212] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications, XBRL documents, and the cover page interactive data file - Exhibit 31.1: Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Exhibit 31.2: Certifications of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Exhibit 32: Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE) - Exhibit 104: Cover Page Interactive Data File