What changed in this filing

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Item 1A. Risk Factors

2024-02-22 compared with 2023-02-27 · 77 added, 148 removed, 589 unchanged (28% of the section changed)

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In such an event, the trading price of our Class A common stock could decline, and you could lose part or all of your investment.

Summary of principal risk factors

Risks relating to our business

An overall decline in economic activity could have a material adverse effect on the financial condition and results of operations of our business.

• Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our profitability.

• Because the revenue we earn on the sale of certain insurance products is based on premiums and commission rates set by Carriers, any decreases in these premiums or commission rates, or actions by Carriers seeking repayment of commissions, could result in revenue decreases or expenses to us.

• Contingent Commissions we receive from Carriers are less predictable than standard commissions, and any decrease in the amount of the commissions we receive could adversely affect our results of operations.

• Regulations affecting Carriers with which we place business affect how we conduct our operations.

• Competition in our industry is intense and, if we are unable to compete effectively, we may lose clients and our financial results may be negatively affected.

• Our business is dependent upon information processing systems.

Security breaches, cyberattacks or other similar incidents with respect to our or our vendors' information processing systems may damage our reputation and negatively impact client retention and carrier, franchise, and Referral Partner relationships.

• We rely on the availability and performance of information technology services provided by third parties.

• Our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, regulatory actions, reputational harm or legal liability.

• Damage to our reputation could have a material adverse effect on our business.

• Our inability to retain or hire qualified employees, as well as the loss of any of our executive officers, could negatively impact our ability to retain existing business and generate new business.

• Pandemics or other outbreaks of contagious diseases and efforts to mitigate their spread have had, and could in the future have, widespread impacts on the way we operate

• Non-compliance with or changes in laws, regulations or licensing requirements applicable to us could restrict our ability to conduct our business.

• Changes in our accounting estimates and assumptions could negatively affect our financial position and operating results.

• We derive a significant portion of our commission revenues from a limited number of Carriers, the loss of which would result in additional expense and loss of market share.

• Our business may be harmed if we lose our relationships with Carriers, fail to maintain good relationships with Carriers, become dependent upon a limited number of Carriers or fail to develop new Carrier relationships.

• The failure by Mark Jones and Robyn Jones to maintain either a minimum voting interest in us or the ability to elect or designate for election at least a majority of our board of directors could trigger a change of control default under our Credit Agreement.

• We may require additional debt financing in the future, which may not be available or may be available only on unfavorable terms.

Risks relating to our franchise business

• The failure to attract and retain highly qualified Franchisees could compromise our ability to expand the Goosehead network.

• Our financial results are affected directly by the operating results of Franchisees and agents, over whom we do not have direct control.

• Our Franchisees and agents could take actions that could harm our business.

• Failure to support our expanding franchise system could have a material adverse effect on our business, financial condition or results of operations.

• Our franchising activities are subject to a variety of state and federal laws and regulations regarding franchises, and any failure to comply with such existing or future laws and regulations could adversely affect our business.

• We are subject to certain risks related to litigation filed by or against us, and adverse results may harm our business and financial condition.

Risks relating to intellectual property, data privacy and cybersecurity

• Failure to obtain, maintain, protect, defend or enforce our intellectual property rights, or allegations that we have infringed, misappropriated or otherwise violated the intellectual property rights of others, could harm our reputation, ability to compete effectively, financial condition and business.

• Improper disclosure of confidential, personal or proprietary information, whether due to human error, misuse of information by employees or vendors, or as a result of security breaches, cyberattacks or other similar incidents with respect to our or our vendors' systems, could result in regulatory scrutiny, legal liability or reputational harm, and could have an adverse effect on our business or operations.

• We are subject to complex and evolving laws, regulations, rules, industry standards and contractual obligations regarding data privacy and cybersecurity, which can increase the cost of doing business, compliance risks and potential liability.

Risks relating to ownership of our Class A common stock

• Future sales, or the possibility of future sales, of a substantial number of our shares of Class A common stock could adversely affect the price of our shares of Class A common stock.

• We may not be able to successfully maintain effective internal controls over financial reporting.

• We expect that our stock price will be volatile, which could cause the value of your investment to decline, and you may not be able to resell your shares at or above your investment.

Risks relating to our business

An overall decline in economic activity could have a material adverse effect on the financial condition and results of operations of our business.

Factors, such as business revenue, economic conditions, including adverse conditions resulting from uncertainty concerning government shutdowns, debt ceilings or funding, the volatility and strength of the capital markets, the recent resurgence of inflation, expected interest rate increases and public health emergencies such as the COVID-19 pandemic can affect the business and economic environment.

For example, in 2022, the global economic environment was characterized by persistent inflation, rising interest rates, volatility in global financial markets (leading to, among other things, a decline in equity prices), supply chain complications, recessionary fears, and geopolitical uncertainty regarding the war between Russia and Ukraine and its impact on global security and markets, including the energy markets.

The demand for property and casualty insurance generally rises as the overall level of household income increases and generally falls as household income decreases, affecting both the commissions and fees generated by our business.

The majority of our new accounts are sourced by referral sources tied to home closing transactions, and major slowdowns in the various housing markets Goosehead serves could impact our ability to generate new business.

Factors, such as business revenue, economic conditions, including adverse conditions resulting from uncertainty concerning government shutdowns, debt ceilings or funding, the volatility and strength of the capital markets, increased rates of inflation, high interest rates and public health emergencies can affect the business and economic environment.

For example, in 2023, the global economic environment was characterized by continued market uncertainty, inflationary pressures, high interest rates, weak housing markets, recessionary fears, and geopolitical uncertainty regarding the ongoing conflict in Ukraine, tensions across the Taiwan Strait, the Israel-Hamas conflict and other hostilities in the Middle East and their impact on global security and markets.

The economic activity that impacts property and casualty insurance is most closely correlated with employment levels, corporate revenue and asset values.

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Consequently, inflation is expected to increase our operating expenses over time and may adversely impact our results of operating cash flow.

Moreover, during inflationary periods, interest rates have historically increased, which would have a direct effect on the interest expense in case we decide to refinance our existing long-term borrowings, in particular the Credit Agreement, or incur in any additional indebtedness.

Additionally, this may impact the market for new homes, which could adversely impact our leadflow of new home purchase clients.

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Such failures or insurance withdrawals on the part of our Carriers could occur for any number of reasons, including large unexpected payouts related to climate change or other emerging risk areas.

Regulations affecting Carriers with which we place business affect how we conduct our operations.

Insurers are also regulated by state insurance departments for solvency issues and are subject to reserve requirements.

We cannot guarantee that all Carriers with which we do business comply with regulations instituted

by state insurance departments.

We may need to expend resources to address questions or concerns regarding our relationships with these insurers, diverting management resources away from operating our business.

Competition in our industry is intense and, if we are unable to compete effectively, we may lose clients and our financial results may be negatively affected.

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In addition, a number of Carriers are engaged in the direct sale of insurance, primarily to individuals, and do not pay commissions to brokers or other market intermediaries.

Furthermore, we compete with various other companies that provide risk-related services or alternatives to traditional insurance services, including Insurtech start-up companies, which are focused on using technology and innovation, including artificial intelligence (AI), digital platforms, data analytics, robotics and blockchain, to simplify and improve the client experience, increase efficiencies, alter business models and effect other potentially disruptive changes in the industries in which we operate.

Furthermore, we compete with various other companies that provide risk-related services or alternatives to traditional insurance services, including Insurtech start-up companies, which are focused on using technology and innovation, including artificial intelligence, machine learning, digital platforms, data analytics, robotics and blockchain, to simplify and improve the client experience, increase efficiencies, alter business models and effect other potentially disruptive changes in the industries in which we operate.

In addition, in recent years, private equity sponsors have invested tens of billions of dollars into the insurance sector, transforming existing players and creating new ones to compete with large brokers.

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To respond to increased competition and pricing pressure, we may have to lower the cost of our services or decrease the level of service provided to clients, which could have an adverse effect on our business, financial condition and results of operations.

Some of our competitors may be able to sustain the costs of litigation more effectively than we can because they have substantially greater resources.

In the event any of such competitors initiate litigation against us, such litigation, even if without merit, could be time-consuming and costly to defend and may divert management’s attention and resources away from our business and adversely affect our business, financial condition and results of operations.

Similarly, any increase in competition due to new legislative or industry developments could adversely affect us.

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If the service providers to which we outsource these functions do not perform effectively, we may not be able to achieve the expected cost savings and may have to incur additional costs to correct errors made by such service providers.

Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies, the loss of or damage to intellectual property through a security breach, the loss of confidential proprietary or personal data (including sensitive personal data) through a security breach, or otherwise.

Depending on the function involved, such errors may also lead to business disruption, processing

inefficiencies, the loss of or damage to intellectual property through a security breach, the loss of confidential proprietary or personal data (including sensitive personal data) through a security breach, or otherwise.

While we or our third-party service providers have not experienced any significant disruption, failure or breach impacting our or their information technology systems, any such disruption, failure or breach could adversely affect our business, financial condition and results of operations.

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We could potentially lose key executives, personnel, client data or experience material adverse interruptions to our operations or delivery of services to clients in a disaster recovery scenario.

We may experience additional disruption due to system upgrades, outages, an increase in remote work or other impacts as a result of the ongoing COVID-19 pandemic.

We may experience additional disruption due to system upgrades, outages or an increase in remote work.

Our inability to successfully recover should we experience a disaster or other business continuity problem, could materially interrupt our business operations and cause material financial loss, loss of human capital, regulatory actions, reputational harm, damaged client relationships, or legal liability.

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Such coverage may not be adequate, or may not continue to be available at commercially reasonable rates and terms.

We utilize artificial intelligence, which could expose us to liability or adversely affect our business.

We utilize artificial intelligence, machine learning, and similar tools and technologies that collect, aggregate, analyze or generate data or other materials or content (collectively, “AI”) in connection with our business.

There are significant risks involved in utilizing AI and no assurance can be provided that our use of such AI will enhance our products or services or produce the intended results.

For example, AI algorithms may be flawed, insufficient, of poor quality, reflect unwanted forms of bias, or contain other errors or inadequacies, any of which may not be easily detectable;

AI has been known to produce false or “hallucinatory” inferences or outputs;

AI can present ethical issues and may subject us to new or heightened legal, regulatory, ethical, or other challenges;

and inappropriate or controversial data practices by developers and end-users, or other factors adversely affecting public opinion of AI, could impair the acceptance of AI solutions, including those incorporated in our products and services.

If the AI tools that we use are deficient, inaccurate or controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputation harm, or other adverse impacts on our business and financial results.

If we do not have sufficient rights to use the data or other material or content on which the AI tools we use rely, or the output of such AI tools, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, privacy or other rights, or contracts to which we are a party.

In addition, regulation of AI is rapidly evolving as legislators and regulators are increasingly focused on these powerful emerging technologies.

The technologies underlying AI and its uses are subject to a variety of laws and regulations, including intellectual property, data privacy and cybersecurity, consumer protection, competition, and equal opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations.

AI is the subject of ongoing review by various U.S.

governmental and regulatory agencies, and various U.S.

states are applying, or are considering applying, their platform moderation, data privacy and cybersecurity laws and regulations to AI or are considering general legal frameworks for AI.

We may not be able to anticipate how to respond to these rapidly evolving frameworks, and we may need to expend resources to adjust our operations or offerings in certain jurisdictions if the legal frameworks are inconsistent across jurisdictions.

Furthermore, because AI technology itself is highly complex and rapidly developing, it is not possible to predict all of the legal, operational or technological risks that may arise relating to the use of AI.

If we are unable to apply technology effectively in driving value for our clients through technology-based solutions or gain internal efficiencies and effective internal controls through the application of technology and related tools, our operating results, client relationships, growth and compliance programs could be adversely affected.

Our future success depends, in part, on our ability to anticipate and respond effectively to the threat of, and the opportunity presented by, digital disruption and other technology change.

These may include new applications or insurance-related services based on artificial intelligence, machine learning, robotics, blockchain or new approaches to data mining.

These may include new applications or insurance-related services based on AI, machine learning, robotics, blockchain or new approaches to data mining.

We may be exposed to competitive risks related to the adoption and application of new technologies by established market participants (for example, through disintermediation) or new entrants such as technology companies, Insurtech start-up companies and others.

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Any resulting erosion of trust and confidence among existing and potential clients, regulators and other parties important to the success of our business could make it difficult for us to attract new clients and maintain existing ones, which could have a material adverse effect on our business, financial condition and results of operations.

Increasing scrutiny and changing expectations from investors, clients and our employees with respect to our environmental, social and governance (“ESG”) practices may impose additional costs on us or expose us to new or additional risks.

There is increased focus, including from governmental organizations, investors, employees and clients, on ESG issues such as environmental stewardship, climate change, diversity and inclusion, pay equity, racial justice, workplace conduct and cybersecurity and data privacy.

Increasing scrutiny and changing expectations from investors, clients and our employees with respect to our corporate responsibility and stakeholder interest practices may impose additional costs on us or expose us to new or additional risks.

There is increased focus, including from governmental organizations, investors, employees and clients, on corporate responsibility and stakeholder interest issues such as environmental stewardship, climate change, diversity and workplace inclusion, pay equity, racial justice, workplace conduct and cybersecurity and data privacy.

There can be no certainty that we will manage such issues successfully, or that we will successfully meet society’s expectations as to our proper role.

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Any harm to our reputation could impact employees engagement and retention and the willingness of clients and Carriers to do business with us.

In 2022, we released a report on our ESG activities that incorporates the guidelines of the Sustainability Accounting Standards Board (SASB) and our own ESG assessments and priorities.

In addition, there exists certain negative sentiment about some individuals and government institutions related to corporate responsibility and stakeholder interests, and we may also face scrutiny, reputational risk, lawsuits or market access restrictions from these parties regarding these initiatives.

In 2022, we released a report on our corporate responsibility and stakeholder interest activities that incorporates the guidelines of the Sustainability Accounting Standards Board (SASB) and our own assessments and priorities.

Over time, we expect to expand our public disclosure in these areas.

It is possible that stakeholders may not be satisfied with our ESG practices or the speed of their adoption.

Actual or perceived shortcomings with respect to our ESG initiatives and reporting could negatively impact our business.

We could also incur additional costs and require additional resources to monitor, report, and comply with various ESG practices.

In addition, a variety of organizations have developed ratings to measure the performance of companies on ESG topics, and the results of these assessments are widely publicized.

Investments in funds that specialize in companies that perform well in such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance of such ESG measures to their investment decisions.

Unfavorable ratings of our company or our industry, as well as omission of inclusion of our stock into ESG-oriented investment funds may lead to negative investor sentiment and the diversion of investment to other companies or industries, which could have a negative impact on our stock price.

It is possible that stakeholders may not be satisfied with our corporate responsibility and stakeholder interest practices or the speed of their adoption.

Actual or perceived shortcomings with respect to such initiatives and reporting could negatively impact our business.

could also incur additional costs and require additional resources to monitor, report, and comply with various corporate responsibility and stakeholder interest practices.

In addition, a variety of organizations have developed ratings to measure the performance of companies on topics of corporate responsibility or stakeholder interests, and the results of these assessments are widely publicized.

Investments in funds that specialize in companies that perform well in such assessments remain popular, and major institutional investors have publicly emphasized the importance of such measures to their investment decisions.

Unfavorable ratings of our company or our industry, as well as omission of inclusion of our stock into investment funds oriented toward various corporate responsibility and stakeholder interests may lead to negative investor sentiment and the diversion of investment to other companies or industries, which could have a negative impact on our stock price.

Climate risks, including the risk of an economic crisis, risks associated with the physical effects of climate change and disruptions caused by the transition to a low-carbon economy, could adversely affect our business, results of operations and financial condition.

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Our competitors may be able to offer a work environment with higher compensation or more opportunities than we can.

Any new personnel we hire may not be or become as productive as we expect, as we may face challenges in adequately or appropriately integrating them into our workforce and culture.

Any new personnel we hire may not be or become as productive as we expect, as we may face challenges adapting them to our Operating Principles or adequately or appropriately integrating them into our workforce culture.

Our effort to retain and develop personnel may also result in significant additional expenses, which could adversely affect our profitability.

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However, there can be no assurance that we will be successful in enforcing these contracts.

In addition, on January 5, 2023, the FTC voted to publish a proposed rule that, if finalized, would impose a near-complete ban on employers offering, entering, and maintaining non-compete agreements with their workers, by defining such arrangements as per se methods of unfair competition.

In addition, on January 5, 2023, the FTC voted to publish a proposed rule that, if finalized, would impose a near-complete ban on employers offering, entering, and maintaining non-compete

agreements with their workers, by defining such arrangements as per se methods of unfair competition.

The FTC’s proposed prohibition is no distinction and provides no exemption based on a worker’s earnings or job function, or on whether a worker acts in a competitively sensitive function for their employer.

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We currently do not maintain key person insurance on these individuals.

Although we operate with a decentralized management system, the loss of our senior managers or other key personnel in any circumstance, including, any limitation on the performance of their duties or short- or long-term absence as a result of COVID-19, or our inability to continue to identify, recruit and retain such personnel, could materially and adversely affect our business, financial condition and results of operation.

Although we operate with a decentralized management system, the loss of our senior managers or other key personnel in any circumstance, including, any limitation on the performance of their duties or short- or long-term absence as a result of an acute illness, or our inability to continue to identify, recruit and retain such personnel, could materially and adversely affect our business, financial condition and results of operation.

Pandemics or other outbreaks of contagious diseases and efforts to mitigate their spread have had, and

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The spread of COVID-19 and mitigating measures caused unprecedented disruptions to the global economy and normal business operations across sectors and countries, including the sectors and countries in which we, our clients, Carriers, suppliers and other third parties operate.

A resurgence of the COVID-19 outbreak, including as a result of new variants, or future pandemics or other outbreaks of contagious diseases may result in similar or worse economic implications and disruptions.

Future pandemics or other outbreaks of contagious diseases, including a resurgence of COVID-19, may result in similar or worse economic implications and disruptions.

The occurrence of natural or man-made disasters could result in declines in business and increases in claims that could adversely affect our financial condition, results of operations and cash flows.

We are exposed to various risks arising out of natural disasters, including earthquakes, hurricanes, fires, floods, landslides, tornadoes, typhoons, tsunamis, hailstorms, explosions, climate events or weather patterns and pandemic health events (such as the COVID-19 virus), as well as man-made disasters, including acts of terrorism, military actions, security breaches, cyberattacks and other similar incidents, explosions and biological, chemical or radiological events.

The continued threat of terrorism and ongoing military actions may cause significant volatility in

global financial markets, and a natural or man-made disaster could trigger an economic downturn in the areas directly or indirectly affected by the disaster.

The continued threat of terrorism and ongoing military actions may cause significant volatility in global financial markets, and a natural or man-made disaster could trigger an economic downturn in the areas directly or indirectly affected by the disaster.

These consequences could, among other things, result in a decline in business and increased claims from those areas.

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Finally, a natural or man-made disaster could increase the incidence or severity of E&O claims against us.

The extent to which the COVID-19 pandemic and the related economic impact may affect our financial condition or results of operations is uncertain.

The extent of the impact on our operational and financial performance will depend on several other factors such as the duration and spread of the outbreak.

Non-compliance with or changes in laws, regulations or licensing requirements applicable to us could restrict our ability to conduct our business.

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In the event those interpretations eventually prove different from the interpretations of regulatory authorities, we may be penalized.

In extreme cases, revocation of a subsidiary’s authority to do business in one or more jurisdictions could result from failure to comply with regulatory requirements.

In extreme cases, revocation of a subsidiary’s authority to do business in one or more jurisdictions could result from failure to comply with

regulatory requirements.

In extreme cases, revocation of a subsidiary’s authority to do business in one or more jurisdictions could result from failure to comply with regulatory requirements.

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and the risk of additional liabilities associated with these efforts.

In addition, many of the businesses that we acquire and develop will likely have significantly smaller scales of operations prior to the implementation of our growth strategy.

In addition, many of the businesses that we acquire and develop will likely have significantly smaller scales of operations prior

to the implementation of our growth strategy.

If we are not able to manage the growing complexity of these businesses, including improving, refining or revising our systems and operational practices, and enlarging the scale and scope of the businesses, our business may be adversely affected.

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As of December 31, 2023, we had total consolidated debt outstanding of approximately $77.5 million, collateralized by substantially all of the Company’s assets, including rights to future commissions.

In the year ended December 31, 2022, we had debt servicing costs of $34.4 million, $4.4 million of which was attributable to scheduled principal payments, $25.0 million, net, was attributable to principal payments related to the revolving credit facility (see "Note 9.

In the year ended December 31, 2023, we had debt servicing costs of $23.4 million, $6.9 million of which was attributable to scheduled principal payments, $10.0 million of which was an additional voluntary principal payment (see "Note 9.

Debt" in the consolidated financial statements included herein), and $6.6 million of which was attributable to interest.

In the year ended December 31, 2021, we had debt servicing costs of $5.4 million, $1.9 million of which was attributable to scheduled principal payments, $0.7 million was attributable to principal payments related to refinancing of existing indebtedness (see "Note 9.

Debt" in the consolidated financial statements included herein) and $5.0 million of which was attributable to interest.

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Our ability to make interest and principal payments, to refinance our debt obligations and to fund our planned capital expenditures will depend on our ability to generate cash from operations.

Our ability to generate cash from operations is, to a certain extent,

subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, such as an environment of rising interest rates.

Our ability to generate cash from operations is, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, such as an environment of rising or continuously high interest rates.

The need to service our indebtedness will also reduce our ability to use cash for other purposes, including working capital, dividends to stockholders, acquisitions, capital expenditures, share repurchases, and general corporate purposes.

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We cannot make any assurances that we will be able to refinance our debt or obtain additional financing on terms acceptable to us, or at all.

In addition, our variable rate debt, including our Credit Agreement, exposes us to interest rate risk.

interest rates were to increase, our debt service obligations on our variable rate indebtedness would increase even

if the amount borrowed remained the same.

To the extent that interest rate risk materializes and is not fully

mitigated, the resulting increase in interest expense could have a material adverse effect on our results of

In addition, our variable rate debt, including our Credit Agreement (which bears interest on a floating basis tied to the Secured Overnight Finance Rate ("SOFR") and therefore is subject to changes in the associated interest expense), exposes us to interest rate risk including variable rate exposure resulting from changes to the SOFR.

If interest rates were to increase, our debt service obligations on our variable rate indebtedness would increase even if the amount borrowed remained the same.

To the extent that interest rate risk materializes and is not fully mitigated, the resulting increase in interest expense could have a material adverse effect on our results of operations.

A failure to comply with the restrictions under the Credit Agreement could result in a default under the financing obligations or could require us to obtain waivers from our lenders for failure to comply with these restrictions.

The occurrence of a default that remains uncured or the inability to secure a necessary consent or waiver could cause our obligations with respect to our debt to be accelerated and have a material adverse effect on our business, financial condition and results of operations.

Replacement of the London Interbank Offered Rate could materially adversely affect our earnings

The London Interbank Offered Rate ("LIBOR"), the interest rate benchmark historically used as a reference rate on our variable rate debt, including our Credit Agreement, interest rate swaps, and cross currency interest rate swaps is in the process of being replaced.

The publication of most non-U.S.

dollar LIBOR rates ceased as of the end of December 2021 and the U.S.

dollar LIBOR rates that continue to be published are expected to cease being published as of the end of June 2023.

In March 2022, Congress enacted legislation to provide a uniform, nationwide solution for so-called tough legacy contracts governed by U.S.

law that do not have clear and practicable provisions for replacing LIBOR after June 30, 2023.

In contracts subject to this legislation, references to LIBOR will be replaced with a benchmark replacement based on the Secured Overnight Financing Rate (“SOFR”) that incorporates a spread adjustment.

SOFR is a broad Treasury repo financing rate that represents overnight secured funding transactions and is fundamentally different from LIBOR for two key reasons.

First, SOFR is a secured rate, whereas LIBOR is an unsecured rate.

Second, SOFR is an overnight rate, while LIBOR represents interbank funding over different maturities.

Given the inherent differences between LIBOR and SOFR or any other alternative benchmark rate that may be adopted, there are many uncertainties regarding the replacement of LIBOR, including but not limited to how this will impact the Company’s cost of variable rate debt and certain derivative financial instruments.

The Company will also need to consider new contracts and whether they should reference SOFR or another alternative benchmark rate.

The consequences of these developments cannot be entirely predicted and span multiple future periods but could result in an increase in the cost of our variable rate debt or derivative financial instruments which may be detrimental to our financial position or operating results.

Changes in our accounting estimates and assumptions could negatively affect our financial position and operating results.

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We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances.

Such assumptions, estimates or judgments, however, are both subjective and could change in the future as more

information becomes known, which could impact the amounts reported and disclosed in our consolidated financial statements.

Such assumptions, estimates or judgments, however, are both subjective and could change in the future as more information becomes known, which could impact the amounts reported and disclosed in our consolidated financial statements.

Additionally, changes in accounting standards could increase costs to the organization and could have an adverse impact on our future financial position and results of operations.

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

In 2020, three Carriers represented more than 10% of total revenue at 20%, 13%, and 12%.

In 2021, two Carriers represented more than 10% of total revenue at 17% and 11%.

Should any of these Carriers seek to terminate its arrangements with us, we could be forced to move our business to another Carrier and some additional expense and loss of market share could possibly result.

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In many cases, Carriers also have the ability to amend the terms of our agreements unilaterally on short notice.

Carriers may be unwilling to allow us to sell their existing or new insurance products or may amend our agreements with them, for a variety of reasons, including for competitive or regulatory reasons or because of a reluctance to distribute their products through our platform.

Carriers may be unwilling to allow us to sell their existing or new insurance products or may amend our agreements with them, for a

variety of reasons, including for competitive or regulatory reasons or because of a reluctance to distribute their products through our platform.

Carriers may decide to rely on their own internal distribution channels, choose to exclude us from their most profitable or popular products, or decide not to distribute insurance products in individual markets in certain geographies or altogether.

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Our business could also be harmed if we fail to develop new Carrier relationships.

In the future, it may become necessary for us to offer insurance products from a reduced number of Carriers or to derive a greater portion of our revenues from a more concentrated number of Carriers as our business and the

insurance industry evolve.

Should our dependence on a smaller number of Carriers increase, whether as a result of the termination of Carrier relationships, Carrier consolidation or otherwise, we may become more vulnerable to adverse changes in our relationships with our Carriers, particularly in states where we offer insurance products from a relatively small number of Carriers or where a small number of Carriers dominate the market.

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Certain extraordinary hazards, however, may not be covered, and insurance may not be available (or may be available only at prohibitively expensive rates) with respect to many other risks.

Moreover, any loss incurred could exceed policy limits or the Franchisee could lack the required insurance at the time the claim arises, in breach of the insurance requirement, and policy payments made to Franchisees may not be made on a timely basis.

Moreover, any loss incurred could exceed policy limits or the Franchisee could lack the required insurance at the time the claim arises, in breach of the

insurance requirement, and policy payments made to Franchisees may not be made on a timely basis.

Any such loss or delay in payment could have a material and adverse effect on a Franchisee’s ability to satisfy its obligations under its Franchise Agreement, including its ability to make payments for contractual fees or to indemnify us.

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If the Franchise Agreement is renewed, such renewal is generally contingent on the Franchisee’s execution of the then-current form of Franchise Agreement (which may include terms the Franchisee deems to be more onerous than the prior Franchise Agreement), the satisfaction of certain conditions and the payment of a renewal fee.

If a Franchisee is unable or unwilling to satisfy any of the foregoing conditions, the expiring Franchise Agreement will terminate upon

expiration of the term of the Franchise Agreement.

If a Franchisee is unable or unwilling to satisfy any of the foregoing conditions, the expiring Franchise Agreement will terminate upon expiration of the term of the Franchise Agreement.

If Franchisees choose not to renew their Franchise Agreements, then this could have a material impact on our financial condition.

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Effectively managing our potential growth could require significant capital expenditures and place increasing demands on our management.

We may not be successful in managing or expanding our operations or in maintaining adequate

financial and operating systems and controls.

We may not be successful in managing or expanding our operations or in maintaining adequate financial and operating systems and controls.

If we do not successfully manage these processes, our brand and results of operations could be adversely affected.

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Maintaining, protecting and enhancing the “Goosehead Insurance” brand is critical to growing our business, particularly in new markets where we have limited brand recognition.

If we do not successfully build and maintain a strong brand, our business could be materially harmed.

Maintaining and enhancing the quality of our brand may require us to make substantial investments in areas such as marketing, community relations, outreach and employee training.

We actively engage in advertisements, targeted promotional mailings and email communications, and engage on a regular basis in public relations and sponsorship activities.

These investments may be substantial and may fail to encompass the optimal range of traditional, online and social advertising media to achieve maximum exposure and benefit to the brand.

Moreover, our brand promotion activities may not generate brand awareness or yield increased revenue and, even if they do, any increased revenue may not offset the expenses we incur in building our brand.

If we fail to successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract new clients or retain our existing clients to the extent necessary to realize a sufficient return on our brand-building efforts.

If we do not successfully build and maintain a strong brand, our business could be materially harmed or result in an inability to grow or maintain our brand.

Infringement, misappropriation, dilution or other violation of our intellectual property by third parties could harm our business.

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Moreover, cybersecurity threats are constantly evolving, which makes it more difficult to detect cybersecurity incidents, assess their severity or impact in a timely manner, and successfully defend against them.

The ongoing COVID-19 pandemic has increased the attack surface available to criminals, with more companies and individuals working remotely and otherwise working online.

Consequently, the risk of a cybersecurity incident has increased, and as cybersecurity threats evolve, we may be

required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate or remediate any information security vulnerabilities, security breaches, cyberattacks or other similar incidents.

The Cybersecurity threats also may see their frequency increased, and effectiveness enhanced, by the use of AI.

The ongoing COVID-19 pandemic has increased the attack surface available to criminals, with more companies and individuals working remotely and otherwise working

Consequently, the risk of a cybersecurity incident has increased, and as cybersecurity threats evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate or remediate any information security vulnerabilities, security breaches, cyberattacks or other similar incidents.

We cannot provide assurances that our preventative efforts, or those of our vendors or service providers, will be successful, and we may not be able to anticipate all security breaches, cyberattacks or other similar incidents, detect or react to such incidents in a timely manner, implement guaranteed preventive measures against such incidents, or adequately remediate any such incident.

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At the federal level, we are subject to, among other laws, rules and regulations, the Gramm-Leach-Bliley Act ("GLBA"), which requires financial institutions, including insurers, to, among other things, periodically disclose their privacy policies and practices relating to sharing personal information and, in some cases, enables retail customers to opt out of the sharing of certain personal information with unaffiliated third parties.

The GLBA also requires financial institutions to implement an information security program that includes administrative, technical and physical safeguards to ensure the security and confidentiality of customer records and information.

subject to the rules and regulations promulgated under the authority of the FTC, which regulates unfair or deceptive acts or practices, including with respect to data privacy and cybersecurity.

The GLBA also requires financial institutions to implement an information security program that includes administrative, technical and

physical safeguards to ensure the security and confidentiality of customer records and information.

We are also subject to the rules and regulations promulgated under the authority of the FTC, which regulates unfair or deceptive acts or practices, including with respect to data privacy and cybersecurity.

Moreover, the United States Congress has recently considered, and is currently considering, various proposals for more comprehensive data privacy and cybersecurity legislation, to which we may be subject if passed.

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The CCPA contains several exemptions, including an exemption applicable to personal information that is collected, processed, sold or disclosed pursuant to the GLBA.

Other states where we do business, or may in the future do business, or from which we otherwise collect, or may in the future otherwise collect, personal information of residents have enacted or are considering enacting comprehensive data privacy laws that share similarities with the CCPA, with at least four such laws (in Virginia, Colorado, Connecticut and

Utah) having taken effect, or scheduled to take effect, in 2023.

Numerous other states where we do business, or may in the future do business, or from which we otherwise collect, or may in the future otherwise collect, personal information of residents also have enacted or are considering enacting comprehensive data privacy and cybersecurity laws that share similarities with the CCPA.

In addition, laws in all 50 U.S.

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and Goosehead Financial, LLC’s business, any acquisition or disposition of any asset or business having consideration in excess of 15% of our total assets and the hiring and termination of our Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, General Counsel or Controller (including terms of compensation).

Furthermore, the Stockholders Agreement will provide that, until the Substantial Ownership Requirement is no longer met, the Pre-IPO LLC Members may designate a majority of the nominees for election to our board of directors, including the nominee for election to serve as Chairman of our board of directors.

Furthermore, the Stockholders Agreement provides that, until the Substantial Ownership Requirement is no longer met, the Pre-IPO LLC Members may designate a majority of the nominees for election to our board of directors, including the nominee for election to serve as Chairman of our board of directors.

This concentration of ownership and voting power may also delay, defer or even prevent an acquisition by a third party or other change of control of our company which could deprive you of an opportunity to receive a premium for your shares of Class A common stock and may make some transactions more difficult or impossible without the support of the Pre-IPO LLC Members, even if such events are in the best interests of minority stockholders.

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In addition, because the Pre-IPO LLC Members will have the ability to designate a majority of the nominees for election to our board of directors, including the nominee for election to serve as Chairman of our board of directors until the Substantial Ownership Requirement is no longer met, the Pre-IPO LLC Members will be able to control us as long as they hold at least 10% of the aggregate number of outstanding shares of our common stock.

The Pre-IPO LLC Members may not be inclined to permit us to issue

additional shares of Class A common stock, including for the facilitation of acquisitions, if it would dilute their holdings below the 10% threshold.

The Pre-IPO LLC Members may not be inclined to permit us to issue additional shares of

Class A common stock, including for the facilitation of acquisitions, if it would dilute their holdings below the 10% threshold.

We cannot predict whether our dual class structure, combined with the concentrated control of the Pre-IPO LLC Members, will result in a lower or more volatile market price of our Class A common stock or in adverse publicity or other adverse consequences.

For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indexes.

In July 2017, FTSE Russell announced that it plans to require new constituents of its indexes to have greater than 5% of the company’s voting rights in the hands of public stockholders, and S&P Dow Jones announced that it will no longer admit companies with multiple-class share structures to certain of its indexes.

FTSE Russell requires new constituents of its indexes to have greater than 5% of the company’s voting rights in the hands of public stockholders.

Because of our dual class structure, we will likely be excluded from these indexes and, in the event we are included in one of such indexes, we may be subsequently removed.

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Therefore, the Pre-IPO LLC Members are able to transfer control of us to a third party by transferring their shares of our common stock (subject to certain restrictions and limitations), which would not require the approval of our board of directors or our other stockholders.

Our certificate of incorporation and Stockholders Agreement will provide that, to the fullest extent permitted by law, the doctrine of “corporate opportunity” under Delaware law will only apply against our directors and officers and their respective affiliates for competing activities related to insurance brokerage activities.

Our certificate of incorporation and Stockholders Agreement provide that, to the fullest extent permitted by law, the doctrine of “corporate opportunity” under Delaware law will only apply against our directors and officers and their respective affiliates for competing activities related to insurance brokerage activities.

This doctrine will not apply to any business activity other than insurance brokerage activities.

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These past and future tax basis adjustments have reduced and are expected to reduce the amount of tax that we have paid and would otherwise be required to pay in the future.

We entered into a tax receivable agreement with the Pre-IPO LLC Members that will provide for the payment by us to the Pre-IPO LLC Members of 85% of the amount of cash savings, if any, in U.S.

federal, state and local income tax or franchise tax that we actually realize as a result of (i) any increase in tax basis in Goosehead Insurance, Inc.’s assets resulting from (a) the purchase of LLC Units from any of the Pre-IPO LLC Members using the net proceeds

from any future offering, (b) redemptions or exchanges by the Pre-IPO LLC Members of LLC Units for shares of our Class A common stock or (c) payments under the tax receivable agreement and (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the tax receivable agreement.

We entered into a tax receivable agreement with the Pre-IPO LLC Members that provides for the payment by us to the Pre-IPO LLC Members of 85% of the amount of cash savings, if any, in U.S.

Class A common stock or (c) payments under the tax receivable agreement and (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the tax receivable agreement.

This is a payment of obligation of Goosehead Insurance, Inc.

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This market volatility, as well as general economic, market or political conditions, could reduce the market price of our Class A common stock regardless of our results of operations.

The trading price of our Class A common stock is likely to be volatile and subject to wide price fluctuations in response to various factors, including:

• market conditions in the broader stock market in general, or in our industry in particular;

• actual or anticipated fluctuations in our quarterly financial and operating results;

• introduction of new products and services by us or our competitors;

• issuance of new or changed securities analysts’ reports or recommendations;

• investor perceptions of us and the industries in which we or our clients operate;

• low trading volumes or sales, or anticipated sales, of large blocks of our stock, including those by our existing investors;

• concentration of Class A common stock ownership;

• additions or departures of key personnel;

• regulatory or political developments;

• litigation and governmental investigations;

• changing economic and political conditions.

• the perceived adequacy of our ESG efforts;

• announced or completed acquisitions of businesses or technologies by us or our competitors;

• new laws or regulations or new interpretations of existing laws or regulations applicable to our business.

The trading price of our Class A common stock is likely to be volatile and subject to wide price fluctuations in response to various factors and risks, including those outlined in "Item 1A.

Risk Factors".

These and other factors may cause the market price and demand for shares of our Class A common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of Class A common stock and may otherwise negatively affect the liquidity of our Class A common stock.

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Management’s discussion and analysis of financial condition and results of operations — Liquidity and capital resources — Dividend Policy".

If securities analysts do not publish research or reports about our business or if they publish negative evaluations of our Class A common stock, the price of our Class A common stock could decline.

The trading market for our Class A common stock will rely in part on the research and reports that industry or securities analysts publish about us or our business.

We currently have research coverage by industry and securities analysts.

If no or few analysts continue coverage of us, the trading price of our Class A common stock would likely decrease.

If one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our Class A common stock could decline.

If one or more of these analysts cease to cover our Class A common stock, we could lose visibility in the market for our stock, which in turn could cause our Class A common stock price to decline.

Unresolved staff comments

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 1A. Risk Factors