What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-03 compared with 2024-02-22 · 83 added, 63 removed, 458 unchanged (24% of the section changed)

10 unchanged sentences

We are a rapidly growing personal lines independent insurance agency, reinventing the traditional approach to distributing personal lines products and services throughout the United States.

We were founded with one vision in mind—to provide consumers with superior insurance coverage at the best available price and in a timely manner.

We were founded with one vision in mind—to provide clients with superior insurance coverage at the best available price and in a timely manner.

By leveraging our differentiated business model and innovative technology platform, we are able to deliver a superior insurance experience to our clients.

9 unchanged sentences

• Policies in Force increased 13% from December 31, 2023 to 1,674,000 at December 31, 2024.

• Corporate sales headcount decreased 6% from December 31, 2022 to 300 at December 31, 2023.

• Corporate sales headcount increased 39% from December 31, 2023 to 417 at December 31, 2024.

◦ As of December 31, 2024, 253 of these corporate sales agents had less than one year of tenure and 164 had greater than one year of tenure.

15 unchanged sentences

• Continued retention of existing Book of Business.

We have made significant progress in recent years in Client Retention metrics, and maintaining these high levels of Client Retention is key to future profitability.

We have navigated macroeconomic challenges to maintain high levels of Client Retention.

Client Retention is key to future profitability.

• Increase in margins as business shifts from new to renewal.

13 unchanged sentences

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

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

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.

22 unchanged sentences

Total Written Premium growth, which is the best indicator of future revenue growth, increased 29% to $3.8 billion in 2024 from $3.0 billion in 2023.

Total Written Premiums Placed drive our current and future Core Revenue and gives us potential opportunities to earn Ancillary Revenue in the form of Contingent Commissions.

Total Written Premiums Placed drive our current and future Core Revenue and give us potential opportunities to earn Ancillary Revenue in the form of Contingent Commissions.

Our various revenue streams do not equally contribute to the long-term value of Goosehead.

58 unchanged sentences

All commissions received in corporate sales after the first term of the policy are recognized as Renewal Commissions, which are higher margin due to lower commissions and servicing costs.

For all policies that renew related to franchise sales, we receive as Renewal Royalty Fees 50% of the commissions received from the Carrier, creating a mechanical increase in revenue of 129% if we renew at historical rates.

Renewal Royalty Fees are higher margin compared to New Business Royalty Fees due to lower servicing costs on higher revenue.

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Most of our Contingent Commissions are earned in the year prior to when they are received.

For the year ended December 31, 2021, $9.9 million of Contingent Commissions were earned (above our historical average as a percentage of premium), of which $7.4 million was still receivable at December 31, 2021.

For the year ended December 31, 2022, $7.7 million of Contingent Commissions were earned (below our historical average as a percentage of premium), of which $7.4 million was still receivable at December 31, 2022.

For the year ended December 31, 2023, $13.7 million of Contingent Commissions were earned (below our historical average as a percentage of premium), of which $6.9 million was still receivable at December 31, 2023.

For the year ended December 31, 2024, $31.4 million of Contingent Commissions were earned (above our historical average as a percentage of premium), of which $25.5 million was still receivable at December 31, 2024.

Premium by line of business

We are a distributor of insurance policies in a range of primarily personal lines of business including homeowner’s insurance, automotive, dwelling property insurance, flood, wind and earthquake insurance, excess liability or umbrella insurance, specialty lines insurance (motorcycle, recreational vehicle, and other insurance), commercial lines insurance (general liability, property and auto insurance for small businesses) and life insurance.

We are a distributor of insurance policies in a range of primarily personal lines of business including homeowner’s insurance;

automotive insurance;

dwelling property insurance;

flood, wind and earthquake insurance;

excess liability or umbrella insurance;

specialty lines insurance (motorcycle, recreational vehicle, and other insurance);

commercial lines insurance (general liability, property and auto insurance for small businesses) and life insurance.

The following table sets forth our Total Written Premium placed by line of business by amount and as a percentage of our Total Written Premium for the periods indicated ( in thousands ):

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Total Written Premium $ 3,811,992 100 % $ 2,963,985 100 % $ 2,217,023 100 %

Due to our organic-focused growth strategy, virtually all of our investments in future growth are in people and certain technologies.

Therefore, the majority of our investments are not capitalizable and are recognized immediately on our statement of operations.

Due to our organic-focused growth strategy, virtually all of our investments in future growth are in people and technology.

The majority of our investments are not capitalizable and are recognized immediately on our statement of operations, while investments in software are capitalized as intangible assets and recognized as expense over the useful life of the software.

Employee compensation and benefits.

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General and administrative expenses.

General and administrative expenses include technology, travel, accounting, legal and other professional fees, commissions, placement fees, office expenses, depreciation and other costs associated with our operations.

General and administrative expenses include technology, travel, accounting, legal and other professional fees, placement fees, office expenses, depreciation and other costs associated with our operations.

Our occupancy-related costs and professional services expenses, in particular, generally increase or decrease in relative proportion to the number of our employees and the overall size and scale of our business operations.

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NPS is a useful gauge of the loyalty of client relationships and can be compared across companies and industries.

NPS has increased modestly to 92 as of December 31, 2023 from 90 at December 31, 2022, primarily driven by the service team’s continued focus on delivering highly differentiated service levels.

NPS has decreased modestly to 89 as of December 31, 2024 from 92 at December 31, 2023, primarily driven by rapid premium increases offset by our service team's consistent delivery.

Client Retention

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We believe Client Retention is useful as a measure of how well Goosehead retains clients year-over-year and minimizes defections.

Client Retention decreased modestly to 86% at December 31, 2023 when compared to 88% at December 31, 2022, again driven by the service team’s continued focus on delivering highly differentiated service levels.

Our retention rate is even stronger on a premium basis.

In 2023, we retained 101% of the premiums we distributed in 2022, an increase from premium retention in 2022 of 100% primarily due to premium increases from our Carriers during the year.

Our premium retention rate is higher than our Client Retention rate as a result of both premiums increasing year over year and additional coverages sold by our sales and service teams.

Client Retention decreased modestly to 84% at December 31, 2024 when compared to 86% at December 31, 2023, impacted modestly by premium rate increases yet supported by the service team’s continued focus on delivering highly differentiated service levels.

Our retention rate is even stronger on a premium basis, driven from increases in premium taken by our Carriers and additional coverages sold by our sales agents.

In 2024, we retained 98% of the premiums we distributed in 2023, a decrease from premium retention in 2023 of 101%.

New Business Revenue

1 unchanged sentence

For the year ended December 31, 2024, New Business Revenue grew 9% to $59.9 million, from $54.8 million for the year ended December 31, 2023.

Growth in New Business Revenue is primarily attributable to an increase in agent productivity and rising premium rates.

Growth in New Business Revenue is primarily attributable to increases in the number of sales agents, increased New Business Production per Agency, and rising premium rates.

Any diminished capacity of Carriers to place new business (including as a result of the recent wildfires in Southern California and hurricanes in Florida) could slow the growth of our New Business Revenue in the future.

Renewal Revenue

Renewal Revenue is commissions received from the Carrier and Royalty Fees after the first term of a policy.

Renewal Revenue is commissions received from the Carrier and Royalty Fees from franchises after the first term of a policy.

For the year ended December 31, 2024, Renewal Revenue grew 20% to $213.9 million, from $178.3 million for the year ended December 31, 2023.

1 unchanged sentence

As our agent force matures, the policies they wrote in prior years begin to convert from New Business Revenue to more profitable Renewal Revenue.

Continued declines in client retention caused by increases in premium rates could slow the growth of our Renewal Revenue in the future.

Non-GAAP Financial Measures

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Core Revenue increased by $40.7 million, or 17%, to $273.7 million for the year ended December 31, 2024 from $233.0 million for the year ended December 31, 2023.

The primary drivers of the increase are increased agent productivity, growth in premiums, high levels of client and premium retention, and the number of policies in the renewal term from December 31, 2022 to December 31, 2023.

The primary drivers of the increase from December 31, 2023 to December 31, 2024 are more new policies written driven by increases in the number of sales agents and

increased New Business Production per Agency, an increase in policies in the renewal term assisted by client retention of 84%, and rising premium rates.

Cost Recovery Revenue

1 unchanged sentence

We believe that Cost Recovery Revenue is an appropriate measure of operating performance because it summarizes revenues that are viewed by management as cost recovery mechanisms.

Cost Recovery Revenue increased by $0.4 million, or 3%, to $12.7 million for the year ended December 31, 2023 from $12.3 million for the year ended December 31, 2022.

The primary driver of the increase was an increase in terminations of franchises, which accelerates recognition of initial franchise fee revenue.

Cost Recovery Revenue decreased by $5.1 million, or 40%, to $7.6 million for the year ended December 31, 2024 from $12.7 million for the year ended December 31, 2023.

The primary driver of the decrease was a decrease in terminations of franchises, which resulted in less accelerated recognition of initial franchise fee revenue.

Ancillary Revenue

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Ancillary Revenue increased by $17.6 million, or 113%, to $33.2 million for the year ended December 31, 2024 from $15.6 million for the year ended December 31, 2023.

The primary drivers of the increase from December 31, 2022 to December 31, 2023 were improved loss ratios as well as growth in Total Written Premiums.

The primary drivers of the increase from December 31, 2023 to December 31, 2024 were improved loss ratios as well as growth in Total Written Premiums leading to attaining higher Contingent Commissions.

Contingent Commissions are inherently volatile as they are based on carrier underwriting profitability and may be impacted by catastrophic losses resulting from natural or man-made disasters.

Adjusted EBITDA

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Adjusted EBITDA is defined as net income (the most directly comparable GAAP measure) before interest, income taxes, depreciation and amortization, adjusted to exclude equity-based compensation, impairment expense, and other non-operating items, including, among other things, certain non-cash charges and certain non-recurring or non-operating gains or losses.

Adjusted EBITDA increased by $33.2 million, or 90%, to $69.8 million for the year ended December 31, 2023, from $36.7 million for the year ended December 31, 2022, driven by a significant increase in core revenue and slower growth in both employee compensation and benefits and general and administrative expenses.

Adjusted EBITDA increased by $30.1 million, or 43%, to $99.9 million for the year ended December 31, 2024, from $69.8 million for the year ended December 31, 2023, driven by a 17% increase in Core Revenue with slower growth of 13% in employee compensation and benefits excluding equity-based compensation and of 14% in general and administrative expenses excluding impairment as well as a $17.6 million increase in high-margin Contingent Commissions.

Adjusted EBITDA Margin

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For the year ended December 31, 2024, Adjusted EBITDA Margin was 32% compared to 27% for the year ended December 31, 2023.

The Adjusted EBITDA margin increase came from a significant increase in Core Revenue and slower growth in both employee compensation and benefits and general and administrative expenses.

Adjusted EPS is a supplemental measure of our performance, defined as earnings per share (the most directly comparable GAAP measure) before non-recurring or non-operating income and expenses, adjusted to assume a single class of stock (Class A) and assuming non-controlling interest does not exist.

The Adjusted EBITDA margin increase came from a 17% increase in Core Revenue with slower growth of 13% in employee compensation and benefits excluding equity-based compensation and of 14% in general and administrative expenses excluding impairment as well as a $17.6 million increase in high-margin Contingent Commissions.

Adjusted EPS is a useful measure to management because it eliminates the impact of items that do not relate to business performance and helps compare companies that may not have a dual-share class structure.

Adjusted EPS increased by $0.78 to $1.33 for the year ended December 31, 2023, from $0.55 for the year ended December 31, 2022, driven by a significant increase in Core Revenue and slower growth in both employee compensation and benefits and general and administrative expenses.

Adjusted EPS increased by $0.66 to $1.99 for the year ended December 31, 2024, from $1.33 for the year ended December 31, 2023, driven by a significant increase in income from operations driven by strong growth in Core Revenue and Contingent Commissions with slower growth in operating expenses and the repurchase of 1,045 thousand Class A shares as part of our share repurchase program.

GAAP to Non-GAAP Reconciliations

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(1) Calculated as equity-based compensation divided by the sum of the weighted average number of shares of Class A common stock and Class B common stock outstanding during the period 2024 - [$28.0 million / ( 24.7 million + 12.7 million )] 2023 - [ $24.0 million / ( 23.9 million + 13.8 million )] 2022 - [ $19.6 million / ( 21.0 million + 16.2 million )]

(2) Calculated as impairment expense divided by the sum of the weighted average number of shares of Class A common stock and Class B common stock [ $3.6 million / (23.9 million + 13.8 million )] for the year ended December 31, 2023.

No impairment was recorded for the years ended December 31, 2022 and December 31, 2021.

(2) Calculated as impairment expense divided by the sum of the weighted average number of shares of Class A common stock and Class B common stock [ $0.3 million / ( 24.7 million + 12.7 million )] for the year ended December 31, 2024 and [ $3.6 million / ( 23.9 million + 13.8 million )].

No impairment was recorded for the year ended December 31, 2022.

Consolidated results of operations

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Other Income:

Other income — — 185

Interest expense (7,339) (6,568) (4,999)

Other (expense) income, net (7,101) — —

Income before taxes 46,700 26,388 5,129

1 unchanged sentence

Net Income 49,113 23,696 2,630

net income attributable to non-controlling interests 9,556 2,065 2,893

net income attributable to noncontrolling interests 18,687 9,556 2,065

Net Income attributable to Goosehead Insurance, Inc.

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Commissions and agency fees

Commissions and agency fees consist of Core Revenue from New Business Commissions, Renewal Commissions, and Agency Fees, and Ancillary Revenue from Contingent Commissions generated from corporate sales and franchise sales and other income.

The following table sets forth our commissions and agency fees by amount and as a percentage of our revenues for the periods indicated ( in thousands ):

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Renewal Commissions increased by $4.2 million, or 6%, to $74.9 million for the year ended December 31, 2024 from $70.7 million for the year ended December 31, 2023.

This increase is primarily attributable to strong premium retention and more policies in the renewal term, offset by a slight decline in client retention to 86% at December 31, 2023 from 88% at December 31, 2022.

New Business Commissions decreased by $0.7 million, or 3%, to $23.4 million for the year ended December 31, 2023 from $24.1 million for the year ended December 31, 2022.

This increase is primarily attributable to an increase in the number of policies in the renewal term from December 31, 2023 to December 31, 2024, assisted by client retention of 84%, and premium rate increases.

New Business Commissions increased by $1.2 million, or 5%, to $24.6 million for the year ended December 31, 2024 from $23.4 million for the year ended December 31, 2023.

This increase in New Business Commissions was primarily attributable to an increase in total sales agent head count to 417 at December 31, 2024, from 300 at December 31, 2023, a 39% increase.

Revenue from Agency Fees decreased by $0.1 million, or 1%, to $8.1 million for the year ended December 31, 2024 from $8.2 million for the year ended December 31, 2023.

This decrease in New Business Commissions and Agency Fees was primarily attributable to a decrease in total sales agent head count to 300 at December 31, 2023, from 320 at December 31, 2022, a 6% decrease.

This decrease in Agency Fees was primarily attributable to slight decreases in both the percentage of policies written where an agency fee was charged and the average amount of an agency fee charge.

Revenue from Contingent Commissions increased by $17.6 million, or 128%, to $31.4 million for the year ended December 31, 2024, from $13.7 million for the year ended December 31, 2023.

1 unchanged sentence

Franchise Revenues

Franchise Revenues consist of Core Revenues from Royalty Fees, Cost Recovery Revenues from Initial Franchise Fees, and Ancillary Revenues from Interest Income.

Franchise Revenues consist of Core Revenues from Royalty Fees, Cost Recovery Revenues from Initial Franchise Fees, and Ancillary Revenues from Other Franchise Revenues.

The following table sets forth our franchise revenues by amount and as a percentage of our revenues for the periods indicated ( in thousands ):

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Revenue from Renewal Royalty Fees increased by $31.4 million, or 29%, to $138.9 million, for the year ended December 31, 2024 from $107.5 million for the year ended December 31, 2023.

The increase in revenue from Renewal Royalty Fees was primarily attributable to strong premium retention rate and more policies in the renewal term, offset by a slight decline in client retention to 86% at December 31, 2023 from 88% at December 31, 2022.

The increase in revenue from Renewal Royalty Fees was primarily attributable to an increase in the number of policies in the renewal term from December 31, 2023 to December 31, 2024, assisted by client retention of 84%, and premium rate increases.

Revenue from New Business Royalty Fees increased by $4.0 million, or 17%, to $27.1 million for the year ended December 31, 2024 from $23.2 million for the year ended December 31, 2023.

The increase in revenue from New Business Royalty Fees was driven primarily by an increase in agency productivity and rising premium rates.

Initial Franchise Fee revenue increased approximately $0.4 million, or 4%, to $11.2 million for the year ended December 31, 2023 from $10.9 million for the year ended December 31, 2022.

The primary driver of the increase in Initial Franchise Fees was the acceleration of Initial Franchise Fee revenue from terminations of existing agencies.

The increase in revenue from New Business Royalty Fees was driven primarily by an increase in New Business Production per Agency and rising premium rates.

Initial Franchise Fee revenue decreased approximately $4.6 million, or 41%, to $6.6 million for the year ended December 31, 2024 from $11.2 million for the year ended December 31, 2023.

The primary driver of the decrease in Initial Franchise Fees was a decrease in terminations of franchises, which reduced the accelerated recognition of initial franchise fee revenue.

Interest Income

Interest Income remained stable at $1.4 million for 2023 compared to $1.4 million for 2022, driven by a similar number of franchises on a payment plan in both periods.

Interest Income decreased to $0.9 million for 2024 compared to $1.4 million for 2023, driven by fewer franchises on a payment plan in the current period.

Employee compensation and benefits

Employee compensation and benefits expenses increased by $20.3 million, or 13%, to $172.9 million for 2024 from $152.6 million for 2023.

This was primarily attributable to the hiring of more experienced team members, particularly at the leadership level, and an increase in equity-based compensation of 22% related to additional stock options granted during 2023.

This was primarily related to investments in corporate producers and technology functions, and increases in equity-based compensation of 17% related to additional stock options granted during 2024.

General and administrative expenses

General and administrative expenses increased by $5.0 million, or 8%, to $67.1 million for 2024 from $62.1 million for 2023.

This increase was primarily attributable to $3.6 million asset impairment charges related to internally developed software and impairment of two office locations the Company determined to sublease, increased spend on rent-related costs due to expansion of our corporate office space, and increased spending on software and professional services

This increase was primarily attributable to increased spending on software offset by a decrease in asset impairment charges.

Bad debts decreased by $1.5 million, or 33%, to $2.9 million for 2024 from $4.4 million for 2023.

This decrease was primarily attributable to an increase in average cash collections relative to revenue recognized for terminated franchises on the payment plan.

This decrease was primarily attributable to lower franchise turnover and an increase in average cash collections relative to revenue recognized for terminated franchises on the payment plan.

Depreciation and amortization

Depreciation and amortization increased by $1.2 million, or 13%, to $10.5 million for 2024 from $9.2 million for 2023.

This increase was primarily attributable to the increase in fixed assets due to the expansion of office space, additional investments in software development, and purchases of books of business.

This increase was primarily attributable to the increase in investments in software development during 2024.

Interest expense

Interest expenses increased by $0.8 million, or 12%, to $7.3 million for 2024 from $6.6 million for 2023.

This increase is attributable to a rising interest rate environment during the year, partially offset by a decrease in total borrowings outstanding.

Tax expenses increased by $0.2 million, or 8%, to $2.7 million for 2023 from $2.5 million for 2022.

This increase is attributable to an increase in income before taxes offset by a decrease in state and local deferred taxes.

This increase is attributable to an increase in total borrowings outstanding.

Other income (expense)

Other income (expense) consists of remeasurements of our tax receivable agreement liability and interest income.

Other income (expense) decreased by $7.1 million for 2024 to $(7.1) million, primarily due to remeasurements of our tax receivable agreement liability due to an increase in the effective tax rate resulting from changes in state apportionment and related state filing requirements, offset by interest income generated by cash held in interest-bearing checking accounts.

Tax expense (benefit)

Tax expense (benefit) decreased by $5.1 million, or 190%, to $(2.4) million for 2024 from $2.7 million for 2023.

This decrease is primarily attributable to the deferred tax impact of changes in state apportionment and related state filing requirements.

Liquidity and capital resources

2 unchanged sentences

Our primary cash flow activities involve:

(1) generating cash flow from corporate sales, which largely includes Renewal Revenue (Corporate) and New Business Revenue (Corporate);

(2) generating cash flow from franchise sales, which largely includes Royalty Fees and Initial Franchise Fees;

(3) making distributions to the Goosehead Management Holders and Texas Wasatch Holders;

and (4) borrowings, interest payments and repayments under our Credit Agreement.

(1) generating cash flow from Commissions and Fees, which largely includes New Business Commissions, Renewal Commissions and Agency Fees;

(2) generating cash flow from Franchise Revenue operations, which largely includes Royalty Fees and Initial Franchise Fees;

(3) borrowings, interest payments and repayments under our credit agreement;

(4) issuing shares of Class A common stock.

As of December 31, 2024, our unrestricted cash and cash equivalents, and restricted cash was $58.0 million.

We have used cash flow from operations primarily to pay compensation and related expenses, general, administrative and other expenses, and debt service.

We have used cash flow from operations primarily to pay compensation and related expenses;

general, administrative and other expenses;

and debt service.

Credit agreement

12 unchanged sentences

Net cash provided by operating activities was $71.5 million for 2024 as compared to net cash provided by operating activities of $50.8 million for 2023.

This increase in net cash provided by operating activities was primarily attributable to a $21.1 million increase in net income, an $8.4 million increase in cash provided by receivables from franchisees, a $4.5 million increase in cash provided by commissions and agency fees, and a $4.3 million increase in stock compensation expense offset by a $17.4 million decrease in cash provided by contract liabilities and a $4.0 million increase in prepaid expenses.

This increase in net cash provided by operating activities was primarily attributable to a $25.4 million increase in net income, with an $(15.0) million adjustment due to a non-cash loss on the remeasurement of our tax receivable agreement liability, and a $10.8 million lower decrease in our contract liabilities driven by fewer franchise terminations in 2024.

These increases were partially offset by a $19.9 million increase in commissions and agency fees receivable, which is primarily related to an increase in contingent commissions receivable.

Investing activities

Net cash used for business investment activities was $12.4 million for 2024 as compared to net cash used for business investment activities of $19.2 million for 2023.

This increase in net cash used in business investment activities was primarily attributable to $6.9 million for purchases of books of business in 2023 and a $5.2 million increase in cash paid for software development offset by $5.7 million decrease in the purchase of property and equipment.

This decrease in net cash used in business investment activities was primarily attributable to a $6.9 million decrease in purchases of books of business and a $3.5 million decrease in cash purchases of property and equipment offset by a $3.5 million increase in cash paid for software development.

Financing activities

Net cash used for financing activities was $45.2 million for 2024 as compared to net cash used for financing activities of $18.0 million for 2023.

This decrease in net cash used for financing activities is due to the net repayment of $25.0 million of the revolving credit facility in 2022 and a $3.8 million increase in cash received from stock options exercises, offset by a $12.5 million increase in principal payments on notes payable, due primarily to an additional $10.0 million principal payment made in 2023, and a $10.9 million increase in member distributions paid during 2023.

This increase in net cash used for financing activities was primarily driven by repurchases of our Class A common stock for $63.2 million and a $5.4 million increase in tax receivable agreement payments, offset by new borrowings under our term loan of $25.0 million, a $7.5 million decrease in payments on our term loan due to an additional $10 million principal payment made in 2023 offset by higher quarterly payments in 2024, and a $6.1 million decrease in member distributions.

Future sources and uses of liquidity

1 unchanged sentence

Based on our current expectations, we believe that these sources of liquidity will be sufficient to fund our working capital requirements and to meet our commitments in the foreseeable future.

Our primary liquidity needs comprise cash to (1) provide capital to facilitate the organic growth of our business, (2) pay operating expenses, including cash compensation to our employees, (3) make payments under the tax receivable agreement, (4) pay interest and principal due on borrowings under our Credit Agreement and (5) pay income taxes.

Dividend policy

Assuming Goosehead Financial, LLC makes distributions to its members in any given year, the determination to pay dividends, if any, to our Class A common stockholders out of the portion, if any, of such distributions remaining after our payment of taxes, tax receivable agreement payments and expenses (any such portion, an “excess distribution”) will be made at the sole discretion of our board of directors.

Assuming Goosehead Financial, LLC makes distributions to its members in any given year, the determination to pay dividends, if any, to our Class A common stockholders out of the portion, if any, of such distributions remaining after our payment of taxes and tax receivable agreement payments (any such portion, an “excess distribution”) will be made at the sole discretion of our board of directors.

Our board of directors may change our dividend policy at any time.

Market for Registrant’s Common Equity, Related Stockholder Matters and

Issuer Purchases of Equity Securities — Dividend policy".

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Dividend policy".

Tax receivable agreement

We entered into a tax receivable agreement with the Pre-IPO LLC Members on May 1, 2018 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.

We entered into the tax receivable agreement with the Pre-IPO LLC Members on May 1, 2018 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.

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 and (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the tax receivable agreement.

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Certain relationships and related transactions, and director independence".

We historically accounted, and anticipate that we will continue to account for the effects of these increases in tax basis and associated payments under the tax receivable agreement arising from redemptions or exchanges as follows:

We historically accounted, and anticipate that

we will continue to account for the effects of these increases in tax basis and associated payments under the tax receivable agreement arising from redemptions or exchanges as follows:

• we will record an increase in deferred tax assets for the estimated income tax effects of the increases in tax basis based on enacted federal and state tax rates at the date of the redemption or exchange;

18 unchanged sentences

In addition to monthly lease payments, the lease agreements require the Company to reimburse the lessors for its portion of operating costs each year.

Rent expense was $7.8 million, $7.0 million, and $4.8 million for year ending December 31, 2023, 2022, and 2021.

(2) The Company refinanced its credit facilities on July 21, 2021 in the form of a $100 million term loan and $50 million revolving credit facility, of which nothing was drawn on the revolving credit facility as of December 31, 2023.

Rent expense was $7.5 million, $7.8 million, and $7.0 million for years ending December 31, 2024, 2023, and 2022.

(2) The Company further amended its credit facilities on April 24, 2024 increasing term loan borrowings by $25 million and increasing the revolving credit facility by $25 million to $75 million, of which nothing was drawn on the revolving credit facility as of December 31, 2024.

(3) Interest payments on our outstanding debt obligations under our Credit Agreement.

1 unchanged sentence

We have calculated future interest obligations based on the interest rate for our debt obligations as of December 31, 2024.

(4) On January 8, 2025, the Company closed on a $300 million term loan and retired our existing $93 million term loan.

Debt" in the consolidated financial statements.

(5) See "Item 7.

28 unchanged sentences

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 7. Management’s Discussion and Analysis