gshd-20230331

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 March 31, 2023


☐			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

GOOSEHEAD INSURANCE, INC.

(Exact name of registrant as specified in its charter)


Delaware			82-3886022
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)
1500 Solana Blvd, Building 4, Suite 4500
Westlake
Texas			76262
(Address of principal executive offices)			(Zip Code)

(469) 480-3669

(Registrant's telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Class A Common Stock, par value $.01 per share	GSHD	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☑ No

As of April 24, 2023, there were 23,480,674 shares of Class A common stock outstanding and 14,047,138 shares of Class B common stock outstanding.

Table of contents



		Page
Part I
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

Part II
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	34

SIGNATURES		34

Commonly used defined terms

As used in this Quarterly Report on Form 10-Q ("Form 10-Q"), unless the context indicates or otherwise requires, the following terms have the following meanings:

•Ancillary Revenue: Revenue that is supplemental to our Core Revenue and Cost Recovery Revenue, Ancillary Revenue is unpredictable and often outside of the Company's control. Included in Ancillary Revenue are Contingent Commissions and other income.

•Agency Fees: Fees separate from commissions charged directly to clients for efforts performed in the issuance of new insurance policies.

•Annual Report on Form 10-K: The Company's annual report on Form 10-K for the fiscal year ended December 31, 2022.

•Carrier: An insurance company.

•Carrier Appointment: A contractual relationship with a Carrier.

•Client Retention: Calculated by comparing the number of all clients that had at least one policy in force twelve months prior to the date of measurement and still have at least one policy in force at the date of measurement.

•Contingent Commission: Revenue in the form of contractual payments from Carriers contingent upon several factors, including growth and profitability of the business placed with the Carrier.

•Core Revenue: The most predictable revenue stream for the Company, these revenues consist of New Business Revenue and Renewal Revenue. New Business Revenue is lower-margin, but fairly predictable. Renewal Revenue is higher-margin and very predictable.

•Cost Recovery Revenue: Revenue received by the Company associated with cost recovery efforts associated with selling and financing franchises. Included in Cost Recovery Revenue are Initial Franchise Fees and Interest Income.

•Franchise Agreement: Agreements governing our relationships with Franchisees.

•Franchisee: An individual or entity who has entered into a Franchise Agreement with us.

•GF: Goosehead Financial, LLC.

•Initial Franchise Fee: Contracted fees paid by Franchisees to compensate Goosehead for the training, onboarding and ongoing support of new franchise locations.

•LLC Unit: a limited liability company unit of Goosehead Financial, LLC.

•New Business Commission: Commissions received from Carriers relating to policies in their first term.

•New Business Revenue: New Business Commissions, Agency Fees, and New Business Royalty Fees.

•New Business Royalty Fees: Royalty Fees received from Franchisees relating to policies in their first term

•NPS: Net Promoter Score is calculated based on a single question: “How likely are you to refer Goosehead Insurance to a friend, family member or colleague?” Clients that respond with a 6 or below are Detractors, a score of 7 or 8 are called Passives, and a 9 or 10 are Promoters. NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters.

•Policies in Force: As of any reported date, the total count of current (non-cancelled) policies placed by us with our Carriers.

•Pre-IPO LLC Members: owners of LLC Units of GF prior to the Offering.

•Renewal Revenue: Renewal Commissions and Renewal Royalty Fees.

•Royalty Fees: Fees paid by Franchisees to the Company that are tied to the gross commissions paid by the Carriers related to policies sold or renewed by a franchisee.

•The Offering: The initial public offering completed by Goosehead Insurance, Inc. on May 1, 2018.

•Total Written Premium: As of any reported date, the total amount of current (non-cancelled) gross premium that is placed with Goosehead’s portfolio of Carriers.

Special note regarding forward-looking statements

We have made statements in this Form 10-Q that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed under the caption entitled “Item 1A. Risk factors” in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

The forward-looking statements included in this Form 10-Q are made only as of the date hereof. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this Form 10-Q to conform our prior statements to actual results or revised expectations.

PART I

Item 1. Condensed Consolidated Financial Statements (Unaudited)


		Page
Condensed Consolidated Statements of Operations		6
Condensed Consolidated Balance Sheets		7
Condensed Consolidated Statements of Stockholders' Equity		8
Condensed Consolidated Statements of Cash Flows		9
Notes to the Condensed Consolidated Financial Statements		10
Note 1	Organization	10
Note 2	Summary of significant accounting policies	10
Note 3	Revenues	12
Note 4	Franchise fees receivable	14
Note 5	Allowance for uncollectible agency fees	14
Note 6	Property and equipment	15
Note 7	Debt	15
Note 8	Income taxes	16
Note 9	Stockholder's equity	17
Note 10	Non-controlling interest	18
Note 11	Equity-based compensation	19

Note 12	Litigation	19

Goosehead Insurance, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended March 31,
		2023		2022
Revenues:
Commissions and agency fees		$	25,484	$	20,009
Franchise revenues		32,074		20,950
Interest income		397		319
Total revenues		57,955		41,278
Operating Expenses:
Employee compensation and benefits		36,882		31,484
General and administrative expenses		15,856		13,524
Bad debts		1,655		796
Depreciation and amortization		2,093		1,576
Total operating expenses		56,486		47,380
Income (loss) from operations		1,469		(6,102)
Other Income (Expense):

Interest expense		(1,731)		(883)
Loss before taxes		(262)		(6,985)
Tax benefit		(81)		(1,602)
Net loss		(181)		(5,383)
Less: net loss attributable to non-controlling interests		(100)		(3,126)
Net loss attributable to Goosehead Insurance, Inc.		$	(81)	$	(2,257)
Earnings per share:
Basic		$	—	$	(0.11)
Diluted		$	—	$	(0.11)
Weighted average shares of Class A common stock outstanding
Basic		23,206		20,240
Diluted		23,206		20,240

See Notes to the Condensed Consolidated Financial Statements

Goosehead Insurance, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except per share amounts)


	March 31,		December 31,
	2023		2022
Assets
Current Assets:
Cash and cash equivalents	$	24,588	$	28,743
Restricted cash	1,590		1,644

Commissions and agency fees receivable, net	7,108		14,440
Receivable from franchisees, net	8,928		4,932
Prepaid expenses	13,279		4,334

Total current assets	55,493		54,093
Receivable from franchisees, net of current portion	17,543		23,835
Property and equipment, net of accumulated depreciation	36,564		35,347
Right-of-use asset	42,725		44,080
Intangible assets, net of accumulated amortization	5,172		4,487
Deferred income taxes, net	159,468		155,318
Other assets	4,617		4,193
Total assets	$	321,582	$	321,353
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and accrued expenses	$	14,237	$	15,958
Premiums payable	1,590		1,644

Lease liability	8,218		6,627

Contract liabilities	5,394		6,031
Note payable	7,500		6,875
Total current liabilities	36,939		37,135
Lease liability, net of current portion	62,246		64,947

Note payable, net of current portion	84,893		86,711
Contract liabilities, net of current portion	34,715		40,522
Liabilities under tax receivable agreement	128,773		125,662
Total liabilities	347,566		354,977

Class A common stock, $0.01 par value per share - 300,000 shares authorized, 23,379 shares issued and outstanding as of March 31, 2023, 23,034 shares issued and outstanding as of December 31, 2022	231		228
Class B common stock, $0.01 par value per share - 50,000 shares authorized, 14,147 issued and outstanding as of March 31, 2023, 14,471 shares issued and outstanding as of December 31, 2022	143		146
Additional paid in capital	77,569		70,866
Accumulated deficit	(60,754)		(60,570)
Total stockholders' equity	17,189		10,670
Non-controlling interests	(43,173)		(44,294)
Total equity	(25,984)		(33,624)
Total liabilities and equity	$	321,582	$	321,353

See Notes to the Condensed Consolidated Financial Statements

Goosehead Insurance, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

(In thousands)


	Issued shares of Class A common stock	Issued shares of Class B common stock	Class A Common stock		Class B Common Stock		Additional paid in capital		Accumulated deficit		Total stockholders' equity		Non-controlling interest		Total equity
Balance, January 1, 2023	23,034	14,471	$	228	$	146	$	70,866	$	(60,570)	$	10,670	$	(44,294)	$	(33,624)

Net loss	—	—	—		—		—		(81)		(81)		(100)		(181)
Exercise of stock options	17	—	—		—		173		—		173		—		173
Equity-based compensation	—	—	—		—		6,620		—		6,620		—		6,620
Activity under employee stock purchase plan	4	—	—		—		201		—		201		—		201
Redemption of LLC Units	323	(323)	3		(3)		(990)		—		(990)		990		—
Deferred tax adjustments related to Tax Receivable Agreement	—	—	—		—		699		—		699		129		828
Reallocation of Non-controlling interest	—	—	—		—		—		(103)		(103)		103		—
Balance March 31, 2023	23,379	14,147	$	231	$	143	$	77,569	$	(60,754)	$	17,189	$	(43,173)	$	(25,984)


	Issued shares of Class A common stock	Issued shares of Class B common stock	Class A Common stock		Class B Common Stock		Additional paid in capital		Accumulated deficit		Total stockholders' equity		Non-controlling interest		Total equity
Balance, January 1, 2022	20,198	16,909	$	200	$	170	$	46,281	$	(60,671)	$	(14,020)	$	(55,168)	$	(69,188)

Net loss	—	—	—		—		—		(2,257)		(2,257)		(3,126)		(5,383)
Exercise of stock options	19	—	—		—		256		—		256				256
Equity-based compensation	—	—	—		—		5,788		—		5,788		—		5,788
Activity under employee stock purchase plan	3	—	—		—		214		—		214		—		214
Redemption of LLC Units	101	(101)	1		(1)		(344)		—		(344)		344		—
Deferred tax adjustments related to Tax Receivable Agreement	—	—	—		—		394		—		394		22		416
Reallocation of Non-controlling interest	—	—	—		—		—		(478)		(478)		478		—
Balance March 31, 2022	20,321	16,808	$	201	$	169	$	52,589	$	(63,406)	$	(10,447)	$	(57,450)	$	(67,897)

See Notes to the Condensed Consolidated Financial Statements

Goosehead Insurance, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(181)	$	(5,383)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization	2,150		1,632

Bad debt expense	1,655		796
Equity-based compensation	6,620		5,788
Impacts of Tax Receivable Agreement	3,574		2,235
Deferred income taxes	(3,322)		(2,885)
Noncash lease activity	245		1,004
Changes in operating assets and liabilities:

Receivable from franchisees	1,332		(

SEC Form 10-Q filed by Goosehead Insurance Inc.