What changed in this filing

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Item 1. Business

2023-02-27 compared with 2022-02-28 · 156 added, 175 removed, 312 unchanged (51% of the section changed)

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We believe that most clients currently buying through single-product platforms are either over-paying or not properly covered because 1) their current insurance company does not offer the appropriate coverage or 2) valuable coverages were removed to make the pricing competitive.

We are able to solve that by partnering with over 154 carriers and using technology to shop for our clients and quickly identify the Carrier who is targeting their segment of the market.

We are able to solve that by partnering with approximately 150 carriers and using technology to shop for our clients and quickly identify the Carrier who is targeting their segment of the market.

This allows us to provide value by finding the right coverage at the lowest price, and to do so in one phone-call so that the client does not have to spend hours shopping for themselves.

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Proprietary technology

Independent agents typically are working on outdated technology platforms, leading to delays in insurance quotes and very limited ability to interact with their agent.

Independent agents typically are working on outdated technology platforms, leading to delays in insurance quotes and very limited ability to interact with their client.

We have leveraged our scale to empower our agents and now our clients with technology that allows them to run quotes and place business quickly and accurately.

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Our choice model, superior sales and service agents, and proprietary technology has led to 88% client retention during 2022, which we believe is among the best in our industry.

Goosehead's Digital Agent, a proprietary online quoting platform, allows clients to shop their home and auto insurance rates with top carriers.

The Digital Agent combines millions of data points, which includes Goosehead's proprietary quoting data over hundreds of thousands of transactions from 20+ years of experience, to bring clients actual quotes specific to their needs.

Clients can then bind these quotes through a short call with one of our local licensed agents with expertise in the client's specific market.

All client data is treated confidentiality with the client's privacy and security top of mind.

Unlike other online quoting platforms, Goosehead never shares the client's data without the client's permission and never sells it to a third party.

Agent perspective

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Low close rates are also due to the agents’ outdated and ineffective marketing playbook.

They typically pay for expensive retail store-front locations and spend significant amount of money on paper mailers and internet leads.

They typically pay for expensive retail store-front locations and spend significant amounts of money on paper mailers and internet leads.

This broken marketing model leads to high overhead costs and limited success.

Additionally,

these captive agents are working on outdated technology platforms and many have no economic interest in their book of business.

Additionally, these captive agents are working on outdated technology platforms and many have no economic interest in their book of business.

Finally, and most importantly, these agents are responsible for processing all of their client’s service needs in house;

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All policy fulfillment and servicing is handled by our centralized service team, which retains our clients at 88%, unlocking the agent’s time to focus on new sales.

Our proprietary technology platform allows our agents to identify Referral Partners, run quotes in less than five minutes, and gives them all the analytics they need to make smart decisions around building a successful agency.

Our 12 corporate-owned offices and 320 corporate sales agents serve as the blueprint for what is possible in the Goosehead model, and our corporate agents provide critical training and support to help the franchise agents reach their full potential.

We have proven that this system delivers superior results as demonstrated by agents, who with a few years tenure, are 1.7 more productive than industry best practice according to Reagan Consulting's 2020 Best Practices Study .

We have proven that this system delivers superior results as demonstrated by agents, who with a few years tenure, are 2.5x more productive than industry best practice according to Reagan Consulting's 2022 Best Practices Study .

In addition to recruiting current insurance agents with a superior value proposition, we are also bringing in sales and marketing savvy professionals who are attracted to the recession-resistant and residual economics offered by a career in insurance.

The value and opportunity we provide to agents has led to our rapid growth to 2,151 franchise locations (inclusive of 953 franchises that are under contract but yet to be opened as of December 31, 2021).

The value and opportunity we provide to agents has led to our rapid growth to 1,413 operating franchise locations.

Carrier perspective

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Our 2022 average commission rate on new business premium was 15% and on renewal business premium was 13%.

Commission rates can vary across Carriers, states and lines of business, and typically range from 10% to 20% Many “insuretech” carriers saw the complexity of working with traditional agents and have sought to build models that eliminate the role of the agent.

Commission rates can vary across Carriers, states and lines of business, and typically range from 10% to 20%.

Many “insuretech” carriers saw the complexity of working with traditional agents and have sought to build models that eliminate the role of the agent.

As they have grown, many have realized that 80% of the market still prefers to work with an agent (according to the Independent Insurance Agents & Brokers of America, Inc.), and that Goosehead allows them to reach that segment of the market without all the traditional complexity.

We now distribute for many of the insuretechs, increasing the breadth of our product portfolio.

Distributing through Goosehead allows carriers to see higher retention rates and more underwriting profitability when compared with other distribution channels, increasing the client lifetime value for the carrier.

Distributing through Goosehead allows Carriers to see higher retention rates and have a better client experience when compared with other distribution channels, increasing the client lifetime value for the carrier.

This value enables Goosehead to have a very competitive carrier portfolio, ensuring that clients find the best solution, and increasing agents’ close rates.

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(2) our agents’ leveraging of Goosehead's sales blueprint and proprietary technology leading to higher levels of productivity in winning new business;

and (3) our service centers’ ability to retain renewal business.

and (3) our service

centers’ ability to retain renewal business.

All our growth has been organic;

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Furthermore, we are profitable.

For the year ended December 31, 2021 the Company had $8.3 million of net income, compared to $18.8 million in 2020.

Management's discussions and analysis of financial condition and results of operations - Key performance indicators" for additional information and a reconciliation to the most directly comparable GAAP financial measure.

Our Go-to-Market Strategy

Our business model allows our sales agents in both Segments to concentrate on sales and marketing activities related to acquiring new clients and issuing new policies, thus growing New Business Revenue and Renewal Revenue more rapidly than in other systems.

Their primary marketing efforts are focused on establishing referral

relationships with other financial services providers in their communities using our proprietary marketing strategy.

Our business model allows both our corporate and franchise sales agents to concentrate on sales and marketing activities related to acquiring new clients and issuing new policies, thus growing New Business Revenue and Renewal Revenue more rapidly than in other systems.

Their primary marketing efforts are focused on establishing referral relationships with other financial services providers in their communities using our proprietary marketing strategy.

We do not compensate Referral Partners for leads, but rather rely on our servicing capabilities to generate repeat business.

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With as little as three data points – name, address, and date of birth – the proprietary tool arms consumers with accurate home and auto quotes from a variety of A-rated insurance companies in less than two minutes and connects them with a knowledgeable agent to complete the purchase process.

The Digital Agent, available across the U.S., is powered by key data integrations and agent-driven machine learning.

The Digital Agent, available across the U.S., is powered by key data integrations and a proprietary database.

It automatically populates information about consumers’ homes and vehicles during the quoting process and combines that information with millions of data points from two decades worth of Goosehead expert agents’ quoting decisions and accumulated experiences.

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The burden of providing ongoing service distracts from the ability to acquire new clients, and ultimately limits an agent's opportunity for growth.

Our agents are freed from the burden of ongoing service, and as a result, agents in both Segments are substantially more productive than top performers in our industry as it relates to new sales.

Compared to the 2020 Best Practices Study, which uses 2019 industry data, Corporate Channel agents with more than three years of tenure averaged 2.9 as much New Business Production per Agent as the industry best practice during 2020.

Franchise Channel agents with more than three years of tenure averaged 1.7 as much New Business Production per Agent (Franchise) as the industry best practice during 2020.

Our agents are freed from the burden of ongoing service, and as a result, both corporate sales and franchise agents are substantially more productive than top performers in our industry as it relates to new sales.

Compared to the 2022 Best Practices Study, which uses 2021 industry data, corporate sales agents with more than three years of tenure averaged 4.1x as much New Business Production per Agent as the industry best practice during 2021.

Franchise sales agents with more than three years of tenure averaged 2.5x as much New Business Production per Agent (Franchise) as the industry best practice during 2021.

New Business Revenue per agent by tenure ($000s)

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If the Best Practices Study included Unvalidated Producers, our New Business Production per Agent outperformance would be even larger.

In 2021, New Business Production per Agent in the Corporate Channel was $52 thousand for agents with less than 1 year of tenure and $111 thousand for agents with more than one year of tenure.

Including all producers in the Franchise Channel in 2021, New Business Production per Agency was $38 thousand for agencies with less than 1 year of tenure and $126 thousand for agents with more than one year of tenure in Texas.

In 2022, New Business Production per Agent in corporate sales was $50 thousand for agents with less than 1 year of tenure and $110 thousand for agents with more than one year of tenure.

Including all producers in franchise sales in 2022, New Business Production per Agency was $50 thousand for agencies with less than 1 year of tenure and $130 thousand for agents with more than one year of tenure in Texas.

Outside of Texas during 2022, New Business Production per Agency was $40 thousand for agencies with less than 1 year of tenure and $77 thousand for agencies with more than one year of tenure.

Corporate sales

Corporate sales consists of company-owned and financed operations with employees who are hired, trained and managed by us.

Corporate sales also serves as a research and development department, where we develop best practices and beta test new technology before implementing system-wide.

Additionally, our corporate sales function serves as an invaluable support network for our franchise sales function, providing sales coaching and mentoring for Franchisees.

The majority of candidates are sourced through a combination of on-campus recruiting, employee referrals and highly targeted internet recruiting campaigns.

Our recruitment team seeks candidates with strong communication skills who display a high aptitude for learning new concepts, are motivated by professional and financial incentives and display the ability to succeed in a team-oriented environment.

After the recruitment team has selected candidates, they are placed into a training class that lasts approximately two weeks.

All agents are required to become fully licensed P&C agents prior to training.

The combination of hiring highly motivated and talented individuals, giving them proper tools and training and removing the burden of ongoing client service allows our corporate sales agents to become significantly more productive than average personal lines agents.

Compared to the 2022 Best Practices Study, corporate sales agents with more than three years of tenure averaged 4.1x as much New Business Production per Agent (Corporate) as the industry best practice.

In corporate sales, we generate Core Revenue in the form of Renewal Commissions, New Business Commissions and non-refundable Agency Fees charged directly to clients for efforts performed in the issuance of new insurance policies.

We also generate Ancillary Revenue in the form of Contingent Commissions from Carriers related to the overall growth and loss performance of the Book of Business we have placed with them.

Corporate sales is comprised of employed sales agents located in 12 sales offices across Texas, Illinois, Colorado, Ohio, Nevada, and North Carolina.

As of December 31, 2022, we had corporate sales offices operating in the following locations:

Westlake, Texas;

Irving, Texas;

Fort Worth, Texas;

Houston, Texas;

The Woodlands, Texas;

Austin, Texas;

San Antonio, Texas;

Rosemont, Illinois;

Charlotte, North Carolina;

Englewood, Colorado;

Las Vegas, Nevada;

and Columbus, Ohio.

We expect to continue our expansion in 2023 within our existing markets.

In 2022, Goosehead began transitioning top corporate sales agents into franchise ownership.

These highly successful corporate agents have performed well as agency owners.

Owning a Goosehead franchise has become a viable and lucrative career path for top agents, which we believe helps Goosehead recruit top talent in the industry.

Franchise sales

Franchise sales consists of operations that are owned and managed by Franchisees.

This distribution is composed of Franchisees and sales agents that they hire as employees in their franchised businesses.

Our Franchise Agreement has a ten-year term and governs the terms under which we operate together, among other things, defining the Initial Franchise Fee, Royalty Fees and other costs a Franchisee pays.

Franchisees have contractual rights to revenue related to the Book of Business during the term of their agreement, but we retain ultimate ownership over the policies written in each franchised business.

These Franchisees have a contractual relationship with the Company to use our processes, Carrier Appointments, systems, and back-office support team to sell insurance and manage their business.

In exchange, the Company is entitled to an Initial Franchise Fee and ongoing Royalty Fees.

Our franchise sales function primarily recruits agents with prior business or industry experience.

Our franchise sales function has a unique value proposition to experienced agents who understand the limits and pain points of the traditional agency model:

• Franchise sales agents gain access to products from multiple Carriers in their markets, allowing the agents to better serve their clients and Referral Partners by providing choice.

Captive Agents typically can only sell products from one Carrier.

• Franchise sales agents can leverage our service centers to handle service requests and process renewals.

Most traditional agencies require their agents to handle client service and renewals which diminishes the time they can devote to winning additional new business and growing their agencies.

Traditional agencies can

become the victims of their own success as their increasing service burden crowds out time to sell new business.

• Franchise sales agents use our well-established and proprietary sales processes to win new business.

Franchise sales agents are trained side by side with corporate sales agents to leverage our training program, to acquire product and Carrier knowledge and to utilize our technology and back office support.

Our corporate sales function continues its investment in the success of our franchise sales well past initial training in the form of ongoing sales coaching and mentoring, as well as serving as fertile recruiting ground for future regional territory managers within our franchise support team.

• Franchise sales agents benefit from lean startup costs as they do not require additional employees or a retail location to launch their agencies.

Captive Agents are often required to immediately hire two to three additional employees as support staff, lease a storefront location, and contribute a specific percentage of revenue toward an advertising budget.

Further, most fixed costs in a traditional agency (e.g., administrative costs, technology fees, training expenses and service costs) are diminished or eliminated in our franchise sales due to Goosehead’s scale, and we expect that fixed costs will continue to decrease as franchise sales grows.

• Franchise sales agents own an economic interest in their Books of Business.

The recruiting team seeks applicants who have demonstrated a strong capacity to win new business and a desire to own their own business.

Our recruiting efforts have helped us create a franchise pool which is significantly more productive than most personal lines agents.

Compared to the 2022 Best Practices Study, franchise sales agents with more than three years of tenure averaged 2.5x as much New Business Production per Agent (Franchise) as the industry best practice.

Franchise sales agents with less than two years of tenure produced as much New Business Production per Agent (Franchise) as the industry best practice.

In franchise sales, we earn Core Revenue in the form of New Business Royalty Fees and Renewal Royalty Fees generated by the franchise location.

New Business Royalty Fees are set in the Franchise Agreements at 20% of commissions and Agency Fees received during the first term of the policy, and 50% of commissions every year the policy is renewed.

This economic relationship creates a mechanical step-up in revenue at the first renewal of each policy, creating strong revenue and margin expansion opportunities.

Cost Recovery Revenue consists of non-refundable Initial Franchise Fees, which compensate us for the training and onboarding efforts to launch a new franchise location, and Interest Income related to Franchisees which elect the payment plan option for their Initial Franchise Fee.

Ancillary Revenue consists of Contingent Commissions and Other Income.

We started franchising in 2012 and have since expanded rapidly.

Premiums in franchise sales grew 46% during 2022.

As of December 31, 2022, we have 2,125 total franchises, including 1,413 franchises operating and 712 in implementation, a 1% decrease in total franchises and a 18% increase in operating agencies in 2022 compared to 2021.

We have franchise locations either operating or signed in the following states, which cover over 99% of the US population:

Geographic footprint Operating or signed agencies

State December 31, 2022

California 153

Pennsylvania 84

North Carolina 81

South Carolina 56

(1) Number of franchise locations include 712 franchises which are under contract but yet to be opened as of December 31, 2022.

Our Service Centers

Both the Corporate Channel and the Franchise Channel are supported by our client service centers.

Both corporate sales and franchise sales are supported by our client service centers.

Our service centers are staffed by fully licensed property and casualty service agents, who provide fulfillment and quality control services for newly issued insurance policies, accounting services and ongoing support services for clients.

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Our service agents are also focused on selling additional insurance coverages to clients which account for additional New Business Revenue.

Our two separate service centers provide us with the ability to cover the U.S.

Our four separate service centers provide us with the ability to cover the U.S.

time zones more broadly, and the ability to better manage business continuity risks.

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By maintaining this strong level of Client Retention, we are able to generate revenue that is highly predictable and recurring in nature.

The combination of expanding headcount in the Corporate and Franchise Channels, leveraging technology and maintaining our commitment to service led to revenue growth of 29% and Total Written Premium growth of 45% in 2021.

The combination of expanding total producer count, leveraging technology and maintaining our commitment to service led to revenue growth of 38% and Total Written Premium growth of 42% in 2022.

As of December 31, 2022, our 10-year Total Written Premium CAGR was 43% and our 5-year premium CAGR was 45%.

Total Written Premium by Channel Total Written Premium by Term

Total Written Premium Total Written Premium by Term

Carrier provided information

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Personal lines products typically include home, auto, umbrella, motorcycle, flood and recreational insurance.

We compete for business on

the basis of reputation, client service, product offerings and the ability to tailor our products to the specific needs of a client.

We compete for business on the basis of reputation, client service, product offerings and the ability to tailor our products to the specific needs of a client.

There are principally three types of businesses that sell personal lines products:

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A hard market is an insurance market characterized by a period of rising premium rates, which, absent other changes, can positively affect commissions earned by insurance agents.

We have two Segments that are managed by our headquarters and work together to drive our growth:

the Corporate Channel and Franchise Channel.

In addition to managing our two Segments, our headquarters is responsible for overseeing our client service centers, our network of Referral Partners, our recruiting team and our technology functions which integrate all aspects of our business.

Our headquarters also provides various risk

management, quality control, accounting, legal and finance functions in support of both the Corporate Channel and the Franchise Channel.

Our Segments are geared to leverage the strengths of two different talent pools to maximize productivity.

Our recruiting team, which included 104 people at December 31, 2021, is responsible for recruiting both Corporate sales agents, potential Franchise owners, and various back office employees.

The Corporate Channel recruits driven agents who are typically new to insurance distribution;

the Franchise Channel recruits agents with business or industry experience.

The combination of our two Segments enables us to prudently expand our business model while providing differentiated service to our clients.

Corporate Channel (50% of 2021 total revenue)

The Corporate Channel consists of company-owned and financed operations with employees who are hired, trained and managed by us.

The Corporate Channel also serves as a research and development department, where we develop best practices and beta test new technology before implementing system-wide.

Additionally, the Corporate Channel serves as an invaluable support network for our Franchise Channel, providing sales coaching and mentoring for Franchisees.

This channel primarily targets top college graduates or sales professionals who typically do not have experience in the insurance industry.

The majority of candidates are sourced through a combination of on-campus recruiting, employee referrals and highly targeted internet recruiting campaigns.

After the recruitment team has selected candidates, they are placed into a training class that lasts approximately two weeks.

All agents are required to become fully licensed P&C agents prior to training.

The combination of hiring highly motivated and talented individuals, giving them proper tools and training and removing the burden of ongoing client service allows our Corporate Channel agents to become significantly more productive than average personal lines agents.

Compared to the 2020 Best Practices Study, Corporate Channel agents with more than three years of tenure averaged 2.9 as much New Business Production per Agent (Corporate) as the industry best practice.

In the Corporate Channel, we generate Core Revenue in the form of Renewal Commissions, New Business Commissions and non-refundable Agency Fees charged directly to clients for efforts performed in the issuance of new insurance policies.

We also generate Ancillary Revenue in the form of Contingent Commissions from Carriers related to the overall growth and loss performance of the Book of Business we have placed with them.

The Corporate Channel is comprised of employed sales agents located in 15 sales offices across Texas, Illinois, Colorado, Ohio, Nevada, and North Carolina.

We have experienced rapid growth in sales agents and revenue in this Segment.

During 2021, our Corporate Channel sales agent headcount increased by 39% and our Corporate Channel premiums placed grew by 32%, in each case, versus the prior year.

Corporate Channel premium growth trailed headcount growth due to the large renewal mix of our premiums placed and the ongoing ramp up of recently hired producers.

As of December 31, 2021, we had corporate sales offices operating in the following locations:

Westlake, Texas;

Irving, Texas;

Fort Worth, Texas;

Houston, Texas (2 locations);

The Woodlands, Texas;

Austin, Texas (2 locations);

San Antonio, Texas;

Rosemont, Illinois (2 locations);

Charlotte, North Carolina;

Englewood, Colorado;

Henderson, Nevada;

and Columbus, Ohio.

We expect to continue our expansion in 2022 within our existing markets.

Franchise Channel (50% of 2021 total revenue)

The Franchise Channel consists of operations that are owned and managed by Franchisees.

This channel is composed of Franchisees and sales agents that they hire as employees in their franchised businesses.

These Franchisees have a contractual relationship with the Company to use our processes, Carrier Appointments, systems, and back-office support team to sell insurance and manage their business.

In exchange, the Company is entitled to an Initial Franchise Fee and ongoing Royalty Fees.

The Franchise Channel primarily recruits agents with prior business or industry experience.

Our Franchise Channel has a unique value proposition to experienced agents who understand the limits and pain points of the traditional agency model:

• Franchise Channel agents gain access to products from multiple Carriers in their markets, allowing the agents to better serve their clients and Referral Partners by providing choice.

Captive Agents typically can only sell products from one Carrier.

• Franchise Channel agents can leverage our service centers to handle service requests and process renewals.

Most traditional agencies require their agents to handle client service and renewals which diminishes the time they can devote to winning additional new business and growing their agencies.

Traditional agencies can become the victims of their own success as their increasing service burden crowds out time to sell new business.

• Franchise Channel agents use our well-established and proprietary sales processes to win new business.

Franchise Channel agents are trained side by side with Corporate Channel agents to leverage our training program, to acquire product and Carrier knowledge and to utilize our technology and back office support.

Our Corporate Channel continues its investment in the success of our Franchise Channel well past initial training in the form of ongoing sales coaching and mentoring, as well as serving as fertile recruiting ground for future regional territory managers within our franchise support team.

• Franchise Channel agents benefit from lean startup costs as they do not require additional employees or a retail location to launch their agencies.

Further, most fixed costs in a traditional agency (e.g., administrative costs, technology fees, training expenses and service costs) are diminished or eliminated in our Franchise Channel due to Goosehead’s scale, and we expect that fixed costs will continue to decrease as the Franchise Channel grows.

• Franchise Channel agents own an economic interest in their Books of Business.

The recruiting team seeks applicants who have demonstrated a strong capacity to win new business and a desire to own their own business.

Our recruiting efforts have helped us create a franchise pool which is significantly more productive than most personal lines agents.

Compared to the 2020 Best Practices Study, Franchise Channel agents with more than three years of tenure averaged 1.7 as much New Business Production per Agent (Franchise) as the industry best practice.

Franchise Channel agents with less than two years of tenure produced as much New Business Production per Agent (Franchise) as the industry best practice.

In the Franchise Channel, we earn Core Revenue in the form of New Business Royalty Fees and Renewal Royalty Fees generated by the franchise location.

This economic relationship creates a mechanical step-up in revenue at the first renewal of each policy, creating strong revenue and margin expansion opportunities.

Ancillary Revenue consists of Contingent Commissions and Other Income.

We started franchising in 2012 and have since expanded rapidly.

Premiums in the Franchise Channel grew 51% during 2021.

As of December 31, 2021, we have 2,151 total franchises, including 1,198 franchises operating and 953 in implementation, a 47% increase in total franchises and a 34% increase in operating agencies in 2021 compared to 2020.

We have franchise locations either operating or signed in the following states, which cover over 99% of the US population:

Geographic footprint Operating or signed agencies

State December 31, 2021

California 198

Pennsylvania 88

North Carolina 61

New Jersey 54

(1) Number of franchise locations include 953 franchises which are under contract but yet to be opened as of December 31, 2021.

Our Competitive strengths

We believe that our competitive strengths include the following:

• Highly motivated producers in the Corporate Channel .

The agents in the Corporate Channel are fundamentally different than the typical agents in the personal lines industry.

• Highly motivated producers in corporate sales .

The agents in corporate sales are fundamentally different than the typical agents in the personal lines industry.

Substantially all of our agents are recent college graduates, whereas 61% of personal lines agents in the industry are over 50 years old, according to the 2022 Future One Agency Universe Case Study.

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In the short-term, our agents have proven to be especially adept at learning new techniques and mastering new technologies.

This has enabled our agents to generate approximately 2.9 as much new business as top performing personal lines agents after three years, according to the 2021 Best Practices Study.

This has enabled our agents to generate approximately 4.1x as much new business as top performing personal lines agents after three years, according to the 2022 Best Practices Study.

Over the long-term, we believe our youth will enable us to avoid the shrinking workforce challenges that many of our competitors face and win an even larger market share from other agencies.

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We believe an aging industry workforce will create significant disruption in the personal lines distribution industry, and we will be in a position to win displaced clients.

Additionally, our Corporate Channel agents view the success of the Franchise Channel as a potential catalyst to their career trajectories.

The support structure provided by the Corporate Channel to the Franchise Channel creates unique career paths in sales management, territory management, and franchise ownership.

• Franchise Channel solves the inherent flaws in the traditional agency model .

Additionally, our corporate sales agents view the success of franchise sales as a potential catalyst to their career trajectories.

The support structure that our corporate sales agents provide to our franchise sales agents creates unique career paths in sales management, territory management, and franchise ownership.

• Franchise sales solves the inherent flaws in the traditional agency model .

We believe that the traditional agency model is flawed for several reasons, including:

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Given the size of the traditional agency market and its inability to adapt to these challenges without introducing significant channel conflict, we believe there is a meaningful opportunity to disrupt the traditional agency marketplace.

Agents in the Franchise Channel are able to focus on marketing, winning new business, providing clients with choice by offering products from multiple Carriers, and they own an economic interest in their Book of Business.

Furthermore, by removing the service burden which takes a significant amount of time and energy, we believe our platform provides Franchise Channel agents with the ability to grow more quickly and manage larger Books of Business than agents working in a traditional agency model.

Agents in franchise sales are able to focus on marketing, winning new business, providing clients with choice by offering products from multiple Carriers, and they own an economic interest in their Book of Business.

Furthermore, by removing the service burden which takes a significant amount of time and energy, we believe our platform provides franchise sales agents with the ability to grow more quickly and manage larger Books of Business than agents working in a traditional agency model.

As a result, the Goosehead model has proven to be attractive to high-performing agents who wish to achieve greater professional and financial success.

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• Proven and experienced senior management team .

Our senior management team has a long history of cohesively operating together and implementing our business model.

◦ Our Chairman and Chief Executive Officer, Mark E.

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Jones was a Senior Partner and Director at Bain & Company, a global management consulting firm, where he also served for many years as Global Head of Recruiting.

Many of our management, sales and recruiting practices were developed and refined by Mr.

Jones during his time at Bain and instituted at Goosehead.

Jones has received a wide variety of accolades for his leadership accomplishments, including being recognized as one of the Top Rated CEOs from among more than 7,000 companies with less than 1,000 employees on Glassdoor’s “Employee’s Choice Award” in 2017.

◦ In 2006, Michael Colby was recruited to join Goosehead as Controller.

Over the last 14 years, Mr.

Colby has worked closely with Mr.

Jones in all aspects of the business, taking on increasing responsibility;

becoming Chief Financial Officer in 2010, Chief Operating Officer of our Franchise Channel in 2011, Chief Operating Officer of Goosehead in 2014, and President and Chief Operating Officer of Goosehead in 2016.

◦ Mark Colby has served as Chief Financial Officer since 2016.

Colby joined Goosehead in 2012 as Manager of Strategic Initiatives, where he worked on Information Systems platform development and migration, real estate planning, and business diversification initiatives.

Colby oversees Goosehead’s internal and external financial reporting, budgeting and forecasting, payroll/401(k) administration, treasury function, and investor relations.

◦ Ryan Langston joined Goosehead Insurance in 2014 as Vice President and General Counsel.

◦ Mark Miller serves as the President and Chief Operating Officer for Goosehead.

In addition, Mr.

Miller has served on the board since March 2018.

For the past 15 years, Mr.

Miller has worked for some of the largest private equity firms in the world helping drive large scale financial and operational transformations.

Miller was the Chief Financial Officer of Pluralsight, Finastra, Marketo, and Active Networks (all Vista Equity Partners portfolio companies at the time).

He also served as the Chief Financial Officer of Sabre, and L.H.P.

Hospital Group.

At Sabre, he held multiple operating and finance positions and was instrumental in the company’s initial public offering and its subsequent $5 billion privatization transaction.

joined Goosehead in 2016 as Controller, was promoted to Vice President - Finance in 2020, and Chief Financial Officer in 2022.

Jones currently oversees Goosehead’s internal and external financial reporting, financial planning and analysis, treasury function, and investor relations.

Jones made significant contributions in strengthening the finance function leading up to and following the Company’s initial public offering.

Prior to joining Goosehead, Mr.

Jones worked in Ernst & Young’s Audit practice, primarily focused on financial services companies.

◦ Ryan Langston joined Goosehead Insurance in 2014 as Vice President and General Counsel and was promoted to Chief Legal Officer in 2022.

He is responsible for coordinating and leading legal activity and compliance.

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To accomplish this goal, we intend to focus on the following key areas:

• Continue to expand recruiting in the Corporate Channel .

In order to grow both the Corporate Channel and Franchise Channel, we must expand our agent count in the Corporate Channel.

We have a highly developed process for recruiting new agents which we have continually refined over the last decade and has resulted in higher success rates for our Corporate Channel agents.

• Continue to expand recruiting in corporate sales .

In order to grow both corporate sales and franchise sales, we must expand our agent count in corporate sales.

We have a highly developed process for recruiting new agents which we have continually refined over the last decade and has resulted in higher success rates for our corporate sales agents.

We plan to continue to expand our recruiting to additional college campuses and engage in highly targeted internet recruiting campaigns as we grow.

Our compensation package for sales agents is very competitive in comparison to other professional services and offers attractive long-term compensation opportunities.

• National penetration of the Franchise Channel .

• National penetration of the Franchisees .

As of December 31, 2022, we have signed Franchise Agreements in 47 states covering over 99% of the total US population.

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As of December 31, 2022, 56% of our Franchisees had less than one year of tenure.

Given the anticipated New Business productivity uplift that comes with more years of experience, and the elevated Royalty Fees on renewal business, we believe our Franchise Channel is positioned for strong growth and margin expansion.

Given the anticipated New Business productivity uplift that comes with more years of experience, and the elevated Royalty Fees on renewal business, we believe our franchise sales category is positioned for strong growth and margin expansion.

This growth will be further enhanced by the approximately 171,000 potential franchise candidates in our current pipeline.

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The pace of our national build-out will be aided by the regulatory approvals, product offering approvals and Carrier relationships we have already established across the continental United States.

Franchise Channel tenure profile

Franchise tenure profile

(1) Number of franchise locations include 712 franchises which are under contract but yet to be opened as of December 31, 2022.

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We believe that our agents are already among the most efficient personal lines agents in the industry.

Franchise Channel agents with more than three years of tenure averaged 1.7 as much New Business Production per Agent (Franchise) as the industry best practice.

We believe there is an opportunity to further expand productivity, particularly in the Franchise Channel.

We have historically deployed the intellectual capital accumulated in the Corporate Channel (including sales practices, client relationship management practices, recruiting practices and technology) into the Franchise Channel to optimize new business production.

franchise sales agents with more than three years of tenure averaged 2.5x as much New Business Production per Agent (Franchise) as the industry best practice.

We believe there is an opportunity to further expand productivity.

We have historically deployed the intellectual capital accumulated in corporate (including sales practices, client relationship management practices, recruiting practices and technology) into franchisees to optimize new business production.

We will continue to innovate going forward in an effort to both better serve our clients and expand our platform.

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As a distributor, we compete for business on the basis of reputation, client service, product offerings and the ability to efficiently tailor our products to the specific needs of a client.

Agents in both the Corporate Channel and the Franchise Channel are primarily responsible for acquiring new clients.

Agents in both corporate sales and franchise sales are primarily responsible for acquiring new clients.

Agents are encouraged to procure new clients through both relationships with Referral Partners and traditional channels (friends, family, client referrals, inbound inquiries and outbound inquiries), and we give them proprietary tools and technology to leverage our years of experience in successfully executing this go-to-market strategy.

The Company represents over 145 Carriers, of which 53 provide national coverage.

The Company represents approximately 150 Carriers, of which 58 provide national coverage.

During 2022, two carriers represented more than 10% of total revenue at 14% and 12%.

Franchise agreements

Our Franchise Channel operates under a franchising model and each franchise is governed by a Franchise Agreement.

Franchise sales operate under a franchising model and each franchise is governed by a Franchise Agreement.

The Franchise Agreements for all existing franchises are nearly identical.

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The Initial Franchise Fee, which is non-refundable after training, covers our costs to recruit, train, onboard, and support the Franchisee for the first year.

Franchisees are also required to pay a monthly Royalty Fee, which entitles the Franchisee to continue to operate in our Franchise Channel.

Franchisees are also required to pay a monthly Royalty Fee, which entitles the Franchisee to continue to operate.

The Royalty Fee is derived from a percentage of gross revenues on insurance policies in their initial (20%) and renewal terms (50%).

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Franchisees who sign a Franchise Agreement after January 1, 2018, are required to pay a minimum monthly Royalty Fee if the Royalty Fee derived from the gross revenues on insurance policies does not exceed a specific amount.

Total Franchises increased by 47% to 2,151 in 2021 from 1,468 in 2020.

Total Franchises decreased by 1% to 2,125 in 2022 from 2,151 in 2021.

Total Franchises operating increased by 18% to 1,413 in 2022 from 1,198 in 2021.

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While it is difficult to quantify the impact on our business from individuals purchasing insurance over the Internet, we believe this risk is generally isolated to personal lines customers with single-line auto insurance coverage, which represent a small portion of our overall business.

The majority of our new accounts are sourced by referral sources tied to home closing transactions.

Major slowdowns in the various housing markets Goosehead serves could impact our ability to generate new business.

Additionally, an increase in interest rates may decrease the number of home closing transactions, which could negatively impact our ability to generate new business.

We experience seasonality and revenue related to the sale of insurance policies throughout the course of a calendar year that is tied to the seasonality of new home sales.

Revenue from home insurance leads is higher from April to August and lower from October through January.

While this can impact month-to-month or quarter-to-quarter results, we expect productivity to normalize year-over-year.

Intellectual property

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In the United States, numerous federal and state laws, rules and regulations require insurers to protect the security and confidentiality of customer information, to regulate disclosures and disposal of customer information, and to notify customers about their policies and practices relating to the collection, use, retention, security, transfer, disclosure and other processing of customer information and other personal information.

For example, the NAIC Insurance Data Security Model Law, which has been adopted in some form by several states, and the New York State Department of Financial Services cybersecurity regulation, establish standards for data security and for the investigation of and notification to insurance commissioners of cybersecurity events.

In addition, the California Consumer Privacy Act imposes significant compliance requirements for businesses that collect personal information on California residents.

The United States Congress, state legislatures, and regulatory authorities have considered and are expected to consider additional laws, rules and regulations relating to privacy and other aspects of customer information, which will likely require us to devote additional significant operational resources and incur additional significant expenses for compliance and may also increase our exposure to risk of claims that we have not complied with all applicable data privacy and cybersecurity laws, rules and regulations.

For example, the NAIC Insurance Data Security Model Law, which has been adopted in some form by at least 22 states, and the New York State Department of Financial Services cybersecurity regulation, establish standards for data security and for the investigation of and notification to insurance commissioners of cybersecurity events.

In addition, the California Consumer Privacy Act, as modified by the California Privacy Rights Act, imposes significant compliance requirements on covered businesses that collect personal information on California residents.

The United States Congress, state legislatures, and regulatory authorities have considered and are expected to consider additional laws, rules and regulations relating to data, privacy, cybersecurity and other aspects of customer information, which will likely require us to devote additional significant operational resources and incur additional significant expenses for compliance and may also increase our exposure to risk of claims that we have not complied with all applicable data privacy and cybersecurity laws, rules and regulations.

Human Capital

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We will continue to strive for a one-of-a-kind company culture and offer a competitive compensation and benefits package, which includes health insurance, a 401(k) plan, an Employee Stock Purchase Program, and the potential for option awards.

As of December 31, 2021, we had approximately 1,238 full-time and 52 part-time employees.

As of December 31, 2022, we had approximately 1,426 full-time and 1 part-time employee.

Our Franchisees are independent businesses, and we do not control the essential terms and conditions of employment for their employees;

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None of our employees are represented by a union.

Building our Team

Since 2018, we have grown our workforce at a compound annual growth rate (CAGR) of 47% annually and in 2021 increased our workforce by more than 500 individuals bringing our total employee count at year-end to 1,290 employees.

Our corporate sales agent count grew to 506 (from 364 at the beginning of 2021) and our operating franchise count grew to 1,198.

With this level of growth, we invest heavily in initial and ongoing training and professional development, utilizing both virtual and in-person components.

Employee Retention

We develop and promote from within.

The average tenure of our director level employees is 10 years prior to their promotions.

Our corporate sales agents have a turnover rate of roughly 25% while our franchises turnover at roughly 10% annually.

This turnover is concentrated more in the early tenure of agents and franchisees and importantly, only account for less than 1-2% of new business production in any given year.

We believe these churn rates represent healthy levels of turnover to maintain a motivated, high-octane sales force and productive energized corporate culture.

Learning and Development

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We also regularly reach out to our employees and franchise partners by conducting in-person town halls across various geographic locations in the United States.

This feedback loop is extremely valuable and often results in near real-time updates to our operating platform to deliver better service and business processes to our agent network - we made over 3,000 platform improvement sin 2021 alone.

Employee Benefits and Compensation

We believe in a holistic and competitive compensation package that includes opportunities for bonuses and equity compensation, as well as access to our stock ownership program.

Goosehead employees are also eligible to be awarded incentive stock options under our Omnibus Incentive Plan, which is designed to motivate and reward key employees to perform at the highest level and contribute significantly to our long term success, thereby aligning our employee incentives with the best interests of our shareholders.

Goosehead employees are also eligible to be awarded incentive stock options under our Omnibus Incentive Plan, which is designed to motivate and reward key

employees to perform at the highest level and contribute significantly to our long term success, thereby aligning our employee incentives with the best interests of our shareholders.

Goosehead offers its employees a competitive health benefits package, including medical, dental, and vision insurance, as well as flex and health savings accounts, life insurance, short-term disability insurance, long-term disability insurance, accident insurance, critical illness insurance, and the opportunity to participate in our 401(k) retirement savings plan.

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Our co-founder, Robyn Jones, established a Women's Professional Development Program ("WPDP") in 2015 to provide a place of connection and support for the women leaders of Goosehead to grow personally and professionally.

Goosehead's WPDP is open to all female employees and franchise agents and hosts small group and plenary sessions designed to promote engagement with salient topic unique to women professionals.

Goosehead's WPDP is open to all female employees and franchise agents and hosts small group and plenary sessions designed to promote engagement with salient topics unique to women professionals.

It also offers Goosehead women an opportunity to interact with Goosehead's rising and longer-tenured female leaders and organically establish and enhance our mentorship culture.

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These standards are designed to deter wrongdoing and to promote honest and ethical conduct.

The full text of our code of business conduct and ethics

policy is available on our website at https://ir.gooseheadinsurance.com/governance/documents-and-charters.

Any waiver of the code for directors or executive officers may be made only by our Board of Directors or a board committee to which the board has delegated that authority and will be promptly disclosed to our shareholders as required by applicable U.S.

The full text of our code of business conduct and ethics policy is available on our website at https://ir.gooseheadinsurance.com/governance/documents-and-charters.

required by applicable U.S.

federal securities laws and the corporate governance rules of the Nasdaq Global Select Market.

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Any amendments to the code, or any waivers of its requirements for which disclosure is required, will be disclosed on our website.

Impact of COVID-19

Ahead of the SARS-CoV-2 (Covid-19) pandemic in 2020, we have invested consistently and significantly in technology and built an entirely cloud based environment to keep our people and teams connected and able to work effectively anywhere.

Additionally, at the onset of the pandemic, we accelerated our purchases of computers and other workforce technology to avoid any supply chain disruptions and support our significant growth rates.

Despite our ability to avoid major supply chain issues, Covid-19 did present some unique challenges in 2020 and again in 2021 as the Delta and Omicron variants spread across the United States.

While the labor market was strong in 2020, it tightened up in 2021, which not only impacted recruiting, but also the timing of franchise launches and how we train our agents.

We also experienced higher than expected agent and referral partner absenteeism.

Further, our carrier partners faced higher loss ratios in 2021 versus 2020 as driving activity increased, which resulted in higher loss ratios and lower Contingent Commissions.

We have incorporated lessons learned from the pandemic into our work environment:

our company and culture values the benefits provided by an in-person workplace, but also promotes flexibility with a premium placed on health and well-being of our team members.

We will continue to strive to follow all local government and CDC guidelines in our approach to reopening fully while continuing to prioritize the health and safety of our team .

Available Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business