What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-13 compared with 2024-08-30 · 300 added, 271 removed, 519 unchanged (52% of the section changed)

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Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed below and in the IPO Prospectus particularly in the sections entitled “Risk factors” and “Special note regarding forward-looking statements”.

The following discussion contains commentary on the financial results derived from the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023 of our predecessor TWFG Holding Company, LLC and its subsidiaries.

The following discussion contains commentary on the financial results derived from the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2024 and 2023 of TWFG, Inc.

We are a leading, high-growth, independent distribution platform for personal and commercial insurance in the United States.

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We also prioritize a transparent and equitable transaction process to help ensure a good relationship and alignment from the beginning, and have implemented a systematic and disciplined integration playbook.

In 2023, we completed five asset acquisitions in excess of $0.5 million in annual revenue for a total purchase price of $19.4 million and acquisition-related expenses of $0.2 million.

In 2023, we completed five asset acquisitions with annual revenue in excess of $0.5 million for a total purchase price of $19.4 million and acquisition-related expenses of $0.2 million.

In January 2024, we acquired the assets of nine of our independent branches and converted them to Corporate Branches for a total purchase price of $40.8 million.

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Cost of being a public company.

To operate as a public company, we will be required to continue to implement changes in certain aspects of our business and develop, manage, and train management level and other employees to comply with ongoing public company requirements.

To operate as a public company, we are required to continue to implement changes in certain aspects of our business and develop, manage, and train management level and other employees to comply with ongoing public company requirements.

We will also incur new expenses as a public company, including public reporting obligations, proxy statements, stockholder meetings, stock exchange fees, transfer agent fees, SEC and FINRA filing fees, and offering expenses.

Our corporate structure

was incorporated on January 8, 2024 for the purpose of completing the IPO.

was incorporated on January 8, 2024 for the purpose of completing the IPO and other related reorganization transactions (the “Reorganization Transactions”) that were completed on July 19, 2024.

Following a reorganization into a holding company structure as part of the Reorganization Transactions, TWFG, Inc.

is a holding company and its sole material asset is a controlling ownership interest in TWFG Holding Company, LLC.

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federal income tax rates applicable to corporations.

In addition to tax expenses, we also will incur expenses related to our operations and we will be required to make payments under the Tax Receivable Agreement entered into in connection with the IPO (the “TRA”).

In addition to tax expenses, we also incur expenses related to our operations and we are required to make payments under the Tax Receivable Agreement entered into in connection with the IPO (the “TRA”).

We intend to cause TWFG Holding Company, LLC to make distributions in an amount sufficient to allow us to pay our tax obligations and operating expenses, including distributions to fund any ordinary course payments due under the TRA.

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Other income.

Other income is comprised primarily of income earned for facilitating premium financing arrangements, fees assessed for agent conventions, interest income and other miscellaneous income.

Other income is comprised primarily of interest income, income earned for facilitating premium financing arrangements, fees assessed for agent conventions and other miscellaneous income.

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

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The following table summarizes our results of operations for the periods presented (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

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Other non-operating income (expense), net

Income before tax 7,330 7,608 20,877 20,047

Income tax expense 437 — 437 —

Net income from continuing operations

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$ 6,893 $ 7,608 $ 20,440 $ 20,881

Comparison of the Three Months Ended June 30, 2024 and 2023

Comparison of the Three Months Ended September 30, 2024 and 2023

Total revenues

The following table presents the disaggregation of our revenues by offerings (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Amount % of Total Amount % of Total

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Agency-in-a-Box $ 34,000 63 % $ 35,895 75 %

$ 34,589 65 % 35,145 77 %

Corporate Branches 9,234 17 1,755 4

9,351 17 1,568 3

Total Insurance Services

43,234 80 37,650 79

8,884 17 7,953 18

TWFG MGA 9,490 17 9,538 20

Other 1,916 3 522 1

Total revenues

$ 54,640 100 % $ 47,710 100 %

Total revenues for the three months ended June 30, 2024 increased by $7.9 million, or 17.4%, compared to the same period in the prior year.

The increase was primarily due to a $6.9 million, or 16.5%, increase in commission income driven primarily by higher premium rates, business growth and continued rollout of commission income from our Book of Business acquisitions completed in 2023 into the current period.

Also contributing to the increase in total revenues were the $0.5 million, or 21.8%, increase in fee income, $0.3 million, or 25.4%, increase in

contingent income, and $0.3 million, or 66.8%, increase in other income.

Total revenues for the three months ended September 30, 2024 increased by $6.9 million, or 14.5%, compared to the same period in the prior year.

The increase was primarily due to a $4.2 million, or 9.7%, increase in commission income driven primarily by higher premium rates, new business growth and continued rollout of commission

income from our Book of Business acquisitions completed in 2023 into the current period.

Also contributing to the increase in total revenues were the $0.8 million, or 37.2%, increase in fee income, $0.3 million, or 33.6%, increase in contingent income, and $1.6 million, or 269.9%, increase in other income.

See discussions below for additional information about the changes in our revenues.

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The following table presents the disaggregation of our commission income by offerings (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Amount % of Total Amount % of Total

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Agency-in-a-Box $ 31,543 65 % $ 34,255 78 %

$ 32,259 66 % 33,787 81 %

Corporate Branches 9,300 19 1,770 4

9,412 19 1,566 4

Total Insurance Services

40,843 84 36,025 82

6,991 15 6,418 15

TWFG MGA 7,397 16 7,968 18

Total commission income

$ 48,240 100 % $ 43,993 100 %

Commission income for the three months ended June 30, 2024 increased by $6.9 million, or 16.5%, compared to the same period in the prior year.

Higher premium rates, business growth, and continued rollout of commission income from our Book of Business acquisitions in 2023 into the current period were the primary drivers of the increase in our commission income.

Commission income for Insurance Services grew by $6.3 million, or 17.9%, for the three months ended June 30, 2024 compared to the same period in the prior year.

Commission income for the three months ended September 30, 2024 increased by $4.2 million, or 9.7%, compared to the same period in the prior year.

Higher premium rates, new business growth, and continued rollout of commission income from our Book of Business acquisitions in 2023 into the current period were the primary drivers of the increase in our commission income.

Commission income for Insurance Services grew by $4.8 million, or 13.4%, for the three months ended September 30, 2024 compared to the same period in the prior year.

However, during the current period the components shifted between Agency-in-a-Box and Corporate Branches.

Agency-in-a-Box commission income for the three months ended June 30, 2024 decreased by $1.5 million, or 4.5%, compared to the same period in the prior year.

Agency-in-a-Box commission income for the three months ended September 30, 2024 decreased by $2.7 million, or 7.9%, compared to the same period in the prior year.

The decrease was mainly attributable to our acquisition of nine of our independent branches (which were previously operated as Agencies-in-a-Box) and their subsequent conversion to Corporate Branches in January 2024.

The branch conversions resulted in a $6.0 million decrease in the Agency-in-a-Box commission income during the second quarter of 2024.

Insurance Services Corporate Branches commission income for the three months ended June 30, 2024 increased by $7.8 million, or 501.0%, compared to the same period in the prior year.

The branch conversions resulted in a $5.9 million decrease in the Agency-in-a-Box commission income during the third quarter of 2024.

Insurance Services Corporate Branches commission income for the three months ended September 30, 2024 increased by $7.5 million, or 425.4%, compared to the same period in the prior year.

The increase was primarily driven by the aforementioned branch conversions.

In addition, Corporate Branches commission income for the three months ended June 30, 2024 included increases from our Book of Business acquisitions in 2023, while the same period in the prior year did not reflect the impact of the acquisitions completed in the second half of 2023.

TWFG MGA commission income for the three months ended June 30, 2024 increased by $0.6 million, or 8.9%, compared to the same period in the prior year.

The increase was primarily due to higher new business written premiums in our TWFG MGA offering driven by market activities, which created opportunities for us to gain new business.

The increase was partially offset by the amendment to the MGA agreement with one of our insurance carriers.

In addition, Corporate Branches commission income for the three months ended September 30, 2024 included increases from our Book of Business acquisitions in 2023, while the same period in the prior year did not reflect the impact of the acquisitions completed in the fourth quarter of 2023.

TWFG MGA commission income for the three months ended September 30, 2024 decreased by $0.6 million, or 7.2%, compared to the same period in the prior year.

A decrease of $1.0 million, or 65.6%, was due to the amendment to the MGA agreement with one of our insurance carriers.

Effective January 1, 2024, the MGA agreement with one of our insurance carriers was renegotiated and amended, which shifted our volume-based commission to a flat monthly fee.

The switch capped the income we earned at a maximum monthly amount.

The decrease was partially offset by an increase in commission income of $0.4 million, or 5.9%, driven by higher new business written premiums in our TWFG MGA offering driven by market activities, which created opportunities for us to gain new business.

See “—Key Performance Indicators” below for additional information related to our written premiums.

Contingent income

Contingent income for the three months ended June 30, 2024 was $1.3 million, reflecting a $0.3 million, or 25.4%, increase compared to the same period in the prior year.

Contingent income for the three months ended September 30, 2024 was $1.4 million, reflecting a $0.3 million, or 33.6%, increase compared to the same period in the prior year.

The increase in contingent income was primarily due to underlying carrier profitability and growth in our business.

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The following table presents the disaggregation of our fee income by major sources (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Amount % of Total Amount % of Total

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$ 2,890 100 % $ 2,107 100 %

Fee income for the three months ended June 30, 2024 increased by $0.5 million, or 21.8%, compared to the same period in the prior year.

Fee income for the three months ended September 30, 2024 increased by $0.8 million, or 37.2%, compared to the same period in the prior year.

Changes to individual components of fee income are discussed in detail below:

• Policy fees for the three months ended June 30, 2024 increased by $0.4 million, or 79.1%, compared to the same period in the prior year.

• Policy fees for the three months ended September 30, 2024 increased by $0.5 million, or 83.4%, compared to the same period in the prior year.

The increase in policy fees was primarily due to higher policy count in our TWFG MGA offering.

The increase in policy count was driven primarily by market activities, which created opportunities for us to gain new business.

• Branch fees for the three months ended June 30, 2024 increased by $0.4 million, or 44.7%, compared to the same period in the prior year.

The increase in branch fees was primarily due to increased branch fee rates and the impact of the reorganization of our corporate structure.

In May 2023, we distributed all of our equity interests in Evolution Agency Management LLC (“EVO”), a software services company, to our owners.

Branch fees earned for the three months ended June 30, 2023 included the elimination of fees paid to EVO for the month of April, while the current period did not.

• License fees for the three months ended June 30, 2024 decreased by $0.2 million, or 32.7%, compared to the same period in the prior year.

The decrease in license fees was primarily due to the distribution of the EVO equity interests as previously discussed.

As a result, license fees earned for the current period excluded revenues from EVO’s operation, while license fees earned for the prior period included one month of EVO’s revenues.

In addition, effective January 1, 2024, the licensing agreement with one of our customers was amended to switch from usage-based fees to fixed monthly fees.

The increase in policy count was driven primarily by new business growth.

• Branch fees for the three months ended September 30, 2024 increased by $0.3 million, or 42.2%, compared to the same period in the prior year.

The increase in branch fees was primarily due to increased branch fee rates to cover technology-based user fees.

• License fees for the three months ended September 30, 2024 decreased by $0.1 million, or 10.8%, compared to the same period in the prior year.

The decrease in license fees was primarily due to the amendment to the licensing agreement with one of our customers effective January 1, 2024 to switch from usage-based fees to fixed monthly fees.

The switch capped the fees we earned at a maximum monthly amount.

• TPA fees for the three months ended June 30, 2024 decreased by $0.1 million, or 50.0%, compared to the same period in the prior year.

The decrease in TPA fees was primarily due to a lower level of TPA services provided by the Company for the three months ended June 30, 2024 compared to the same period in the prior year.

Other income for the three months ended June 30, 2024 was $0.7 million compared to $0.4 million in the same period in the prior year, reflecting an increase of $0.3 million, or 66.8%.

The increase in other income was primarily due to an increase in interest income on bank deposits, and gains on asset disposals.

• TPA fees for the three months ended September 30, 2024 was comparable to the same period in the prior year.

Other income for the three months ended September 30, 2024 was $2.1 million compared to $0.6 million in the same period in the prior year, reflecting an increase of $1.6 million, or 269.9%.

The increase in other income was primarily due to an increase in interest income on bank deposits, including the $192.9 million of net proceeds received from the IPO.

Commission expense

The following table presents the disaggregation of our commission expense by offerings (in thousands):

Three Months Ended June 30,

Three Months Ended September 30,

Amount % of Total Amount % of Total

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Agency-in-a-Box $ 25,092 82 % $ 27,297 84 %

$ 25,529 80 % 26,744 87 %

Corporate Branches 1,304 4 209 1

1,256 4 189 —

Total Insurance Services

26,396 86 27,506 85

5,158 16 3,951 13

TWFG MGA 4,346 14 4,937 15

Other 24 — 18 —

Total commission expense

$ 30,766 100 % $ 32,461 100 %

Commission expense for the three months ended June 30, 2024 increased by $1.1 million, or 3.5%, compared to the same period in the prior year.

The increase was primarily due to higher commission expenses driven by increased business in our TWFG MGA offering, partially offset by lower commission expenses in Insurance Services driven by the previously discussed branch conversions.

Commission expense for the three months ended September 30, 2024 decreased by $1.7 million, or 5.2%, compared to the same period in the prior year.

The decrease was primarily due to the lower commission expenses

in Insurance Services of $1.1 million, or 3.4%, of the total decrease, driven by the previously discussed branch conversions and a decrease in our TWFG MGA offering of $0.6 million, or 1.8%, of the total decrease in commission expense.

See commission income discussion above for additional information regarding the driver of changes.

Insurance Services Agency-in-a-Box commission expense for the three months ended June 30, 2024 decreased by $1.2 million, or 4.5%, compared to the same period in the prior year.

The decrease was primarily due to the branch conversions resulting in a decrease of $0.9 million in commission expense.

Insurance Services Agency-in-a-Box commission expense for the three months ended September 30, 2024 decreased by $2.2 million, or 8.1%, compared to the same period in the prior year.

The decrease was primarily due to the branch conversions resulting in a decrease of $4.8 million offset by an increase in commission expense related to the growth of the business of $2.6 million.

The expenses of our Branches are primarily commission expense, which is determined as a percentage of commission income.

The profitability of our Branches, as determined by the difference between commission income and commission expense, is consistent.

Insurance Services Corporate Branches commission expense for the three months ended June 30, 2024 increased by $1.1 million, or 564.6%, compared to the same period in the prior year.

Insurance Services Corporate Branches commission expense for the three months ended September 30, 2024 increased by $1.1 million, or 523.9%, compared to the same period in the prior year.

The increase was primarily due to the branch conversions, as previously discussed, and the Book of Business acquisitions in 2023.

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In addition, since the commission expense of our Corporate Branches represents a smaller percentage of their operating expenses, we expect revenue growth, both organic and through future acquisitions, to positively impact our operating income in the future.

TWFG MGA commission expense for the three months ended June 30, 2024 increased by $1.2 million, or 30.5%, compared to the same period in the prior year.

The increase was primarily due to higher new business written premiums, as previously discussed.

The higher percentage increase in TWFG MGA commission expense compared to the percentage increase in the related commission income was primarily driven by the shift in the business mix.

TWFG MGA commission expense for the three months ended September 30, 2024 decreased by $0.6 million, or 12.0%, compared to the same period in the prior year.

The higher percentage decrease in TWFG MGA commission expense compared to the percentage decrease in the related commission income was primarily driven by the shift in the business mix.

As discussed above, TWFG MGA commission income was impacted by the renegotiation of the MGA agreement with one of our insurance carriers.

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Salaries and employee benefits

Salaries and employee benefits for the three months ended June 30, 2024 was $6.8 million compared to $3.4 million in the same period in the prior year, reflecting an increase of $3.4 million, or 102.3%.

The increase was primarily due to the branch conversions contributing an increase of approximately $2.2 million, and a $1.0 million increase from the asset acquisitions in 2023.

Salaries and employee benefits for the three months ended September 30, 2024 was $8.3 million compared to $3.4 million in the same period in the prior year, reflecting an increase of $4.9 million, or 145.8%.

The increase was primarily due to the branch conversions contributing an increase of approximately $2.4 million, and a $1.0 million increase from the asset acquisitions in 2023, a $1.0 million increase in stock-based compensation from the issuance of restricted stock units in July 2024, and a $0.5 million increase due to our continued growth and new roles created in connection with our IPO.

Other administrative expenses

Other administrative expenses for the three months ended June 30, 2024 was $3.7 million compared to $2.7 million in the same period in the prior year, reflecting an increase of $1.0 million, or 36.8%.

The increase was primarily due to a $0.4 million increase in IT costs, a $0.3 million increase in underwriting expenses, and a $0.3 million increase in other expenses.

The increase in our IT costs was primarily due to additional cloud computing costs and 2024 included fees paid to EVO, while in 2023, fees paid to EVO were eliminated upon consolidation.

The increase in our underwriting expenses was driven primarily by the increased business in our MGA offering.

The increase in other expenses was due primarily to higher rent and office expenses driven by our Book of Business acquisitions in 2023 and branch conversions in 2024 and higher professional fees attributable to the increased ongoing costs of becoming a public company, partially offset by a reduction in administrative expenses related to the previously discussed distribution of our equity interest in EVO.

Other administrative expenses for the three months ended September 30, 2024 was $4.8 million compared to $2.8 million in the same period in the prior year, reflecting an increase of $2.0 million, or 71.2%.

The increase was primarily due to a $0.7 million increase in consultant and professional fees, a $0.3 million increase in IT costs, a $0.4 million increase in underwriting expenses, and a $0.6 million increase in other expenses.

The increase in consultant and professional fees was primarily attributable to the increased ongoing costs of becoming a public company.

The increase in our IT costs was primarily due to additional cloud computing costs.

The increase in our underwriting expenses was driven primarily by higher policy count in our TWFG MGA offering.

The increase in other expenses was due primarily to higher rent and office expenses driven by our Book of Business acquisitions in 2023 and branch conversions in 2024.

Depreciation and amortization

Depreciation and amortization for the three months ended June 30, 2024 was $3.0 million compared to $1.1 million in the same period in the prior year, reflecting an increase of $1.9 million, or 161.7%.

Depreciation and amortization for the three months ended September 30, 2024 was $3.0 million compared to $1.1 million in the same period in the prior year, reflecting an increase of $1.9 million, or 160.7%.

The increase was primarily due to the amortization of intangible assets from our recent asset acquisitions and branch conversions.

Other non-operating income (expenses)

Other non-operating expenses for the three months ended June 30, 2024 was $0.9 million compared to $0.2 million for the same period in the prior year, reflecting an increase of $0.7 million, or 396.0%.

The increase was primarily attributable to higher interest expense driven by higher debt.

In the second and fourth quarters of 2023, our debt increased by $10.0 million and $31.0 million, respectively.

The additional borrowings funded our asset acquisitions in 2023 and 2024.

Comparison of the Six Months Ended June 30, 2024 and 2023

Other non-operating income (expense)

Other non-operating expense for the three months ended September 30, 2024 was $0.4 million compared to $0.3 million for the same period in the prior year, reflecting an increase of $0.1 million, or 41.2%.

Income tax expense

Income tax expense for the three months ended September 30, 2024 was $0.4 million compared to zero for the same period in the prior year as after consummation of the Reorganization Transactions and IPO, the Company became subject to U.S.

federal, state, and local income taxes with respect to its allocable share of taxable income of TWFG Holding Company, LLC assessed at the prevailing corporate tax rates.

Comparison of the Nine Months Ended September 30, 2024 and 2023

Total revenues

The following table presents the disaggregation of our revenues by offerings (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Amount % of Total Amount % of Total

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Agency-in-a-Box $ 100,418 65 % $ 102,539 77 %

$ 66,418 66 % 66,644 78 %

Corporate Branches 25,861 17 4,259 3

16,627 17 2,504 3

Total Insurance Services

126,279 82 106,798 80

15,723 16 14,879 18

811 1 % 1,205 1 %

TWFG MGA 25,213 16 24,417 19

Other 2,727 2 1,727 1

Total revenues

$ 154,219 100 % $ 132,942 100 %

Total revenues for the six months ended June 30, 2024 increased by $14.3 million, or 16.8%, compared to the same period in the prior year.

The increase was primarily due to a $12.7 million, or 16.2%, increase in commission income driven primarily by higher premium rates, business growth and continued rollout of commission income from our Book of Business acquisitions completed in 2023 into the current period.

Total revenues for the nine months ended September 30, 2024 increased by $21.3 million, or 16.0%, compared to the same period in the prior year.

The increase was primarily due to a $17.0 million, or 13.9%, increase in commission income driven primarily by higher premium rates, new business growth and continued rollout of commission income from our Book of Business acquisitions completed in 2023 into the current period.

Also contributing to the increase in total revenues were the $1.5 million, or 23.1%, increase in fee income, $0.7 million, or 23.0%, increase in contingent income, and $2.1 million, or 188.4%, increase in other income.

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The following table presents the disaggregation of our commission income by offerings (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Amount % of Total Amount % of Total

1 unchanged sentence

Agency-in-a-Box $ 93,702 67 % $ 98,245 80 %

$ 62,159 68 % 63,990 82 %

Corporate Branches 25,962 19 4,255 4

16,662 18 2,485 3

Total Insurance Services

119,664 86 102,500 84

12,386 14 11,983 15

TWFG MGA 19,783 14 19,951 16

Total commission income

$ 139,447 100 % $ 122,451 100 %

Commission income for the six months ended June 30, 2024 increased by $12.7 million, or 16.2%, compared to the same period in the prior year.

The increase was primarily due to higher premium rates, business growth and continued rollout of commission income from our Book of Business acquisitions completed in 2023 into the current period.

Commission income for the nine months ended September 30, 2024 increased by $17.0 million, or 13.9%, compared to the same period in the prior year.

The increase was primarily due to higher premium rates, new business growth and continued rollout of commission income from our Book of Business acquisitions completed in 2023 into the current period.

See “—Key Performance Indicators—Total Written Premium” for additional information related to our written premiums.

Commission income for Insurance Services grew by $12.3 million, or 18.6%, for the six months ended June 30, 2024 compared to the same period in the prior year.

Commission income for Insurance Services grew by $17.2 million, or 16.7%, for the nine months ended September 30, 2024 compared to the same period in the prior year.

However, during the current period the components shifted between Agency-in-a-Box and Corporate Branches.

Agency-in-a-Box commission income for the six months ended June 30, 2024 decreased by $1.8 million, or 2.9%, compared to the same period in the prior year.

The decrease was mainly attributable to the acquisition of the assets of nine of our independent branches (which were previously operated as Agencies-in-a-Box) and their conversion to Corporate Branches in January 2024.

The branch conversions resulted in a $10.4 million decrease in the Agency-in-a-Box commission income during the second quarter of 2024.

Insurance Services Corporate Branches commission income for the six months ended June 30, 2024 increased by $14.2 million, or 570.5%, compared to the same period in the prior year.

Agency-in-a-Box commission income for the nine months ended September 30, 2024 decreased by $4.5 million, or 4.6%, compared to the same period in the prior year.

The decrease was mainly attributable to the acquisition of the assets of nine of our independent branches

(which were previously operated as Agencies-in-a-Box) and their conversion to Corporate Branches in January 2024.

The branch conversions resulted in a $16.3 million decrease in the Agency-in-a-Box commission income for the nine months ended September 30, 2024.

Insurance Services Corporate Branches commission income for the nine months ended September 30, 2024 increased by $21.7 million, or 510.2%, compared to the same period in the prior year.

The increase was primarily driven by the branch conversions as previously described.

In addition, Corporate Branches commission income for the six months ended June 30, 2024 included the full period increases from the Book of Business acquisitions in 2023, while the same period in the prior year reflected partial period increases.

TWFG MGA commission income for the six months ended June 30, 2024 increased by $0.4 million, or 3.4%, compared to the same period in the prior year.

The increase was primarily due to higher new business written premiums in our TWFG MGA offering, partially offset by reduced retention and the amendment to the MGA agreement with one of our insurance carriers, as previously discussed.

In addition, Corporate Branches commission income for the nine months ended September 30, 2024 included the full period increases from the Book of Business acquisitions in 2023, while the same period in the prior year reflected partial period increases.

TWFG MGA commission income for the nine months ended September 30, 2024 decreased by $0.2 million, or 0.8%, compared to the same period in the prior year.

A decrease of $2.2 million, or 59.2%, was due to the amendment to the MGA agreement with one of our insurance carriers, as previously discussed, offset by an increase in commission income of $2.0 million or 12.4% by higher new business written premiums in our TWFG MGA offering.

Contingent income

Contingent income increased by $0.3 million, or 17.4%, to $2.3 million for the six months ended June 30, 2024 from $2.0 million in the same period in the prior year.

Contingent income increased by $0.7 million, or 23.0%, to $3.7 million for the nine months ended September 30, 2024 from $3.0 million in the same period in the prior year.

The increase in contingent income was driven by underlying carrier profitability and growth in our business.

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The following table presents the disaggregation of our fee income by major sources (in thousands):

Six Months Ended June 30,

Nine Months Ended

September 30,

Amount % of Total Amount % of Total

5 unchanged sentences

$ 7,811 100 % $ 6,343 100 %

Fee income for the six months ended June 30, 2024 increased $0.7 million, or 16.2% compared to the same period in the prior year.

Fee income for the nine months ended September 30, 2024 increased $1.5 million, or 23.1% compared to the same period in the prior year.

Changes to individual components of fee income are discussed in detail below:

• Policy fees for the six months ended June 30, 2024 increased by $0.4 million, or 34.4%, compared to the same period in the prior year.

• Policy fees for the nine months ended September 30, 2024 increased by $0.9 million, or 51.6%, compared to the same period in the prior year.

The increase in policy fees was primarily due to higher policy count in our TWFG MGA offering.

The increase in policy count was driven primarily by market activities, which created opportunities for us to gain new business.

• Branch fees for the six months ended June 30, 2024 increased by $1.0 million, or 79.5%, compared to the same period in the prior year.

The increase in branch fees was primarily due to increased branch fee rates and the impact of the distribution of our equity interest in EVO in May 2023 to our owners.

Branch fees earned for the six months ended June 30, 2023 included the elimination of fees paid to EVO for the first four months of 2023, while the current period did not.

• License fees for the six months ended June 30, 2024 decreased by $0.6 million, or 37.5%, compared to the same period in the prior year.

• Branch fees for the nine months ended September 30, 2024 increased by $1.4 million, or 65.1%, compared to the same period in the prior year.

The increase in branch fees was primarily due to increased branch fee rates and the impact of the distribution of our equity interest in Evolution Agency Management LLC (“EVO”) in May 2023 to our owners.

Branch fees earned for the nine months ended September 30, 2023 included the elimination of fees paid to EVO for the first four months of 2023, while the current period did not.

• License fees for the nine months ended September 30, 2024 decreased by $0.6 million, or 30.4%, compared to the same period in the prior year.

The decrease in license fees was primarily due to the previously discussed distribution of EVO equity interests and the amendment to the licensing agreement.

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In addition, the amendment to the licensing agreement with one of our customers switched from usage-based fees to fixed monthly fees, which capped the fees we earned at a maximum monthly amount.

• TPA fees for the six months ended June 30, 2024 decreased by $0.2 million, or 47.6%, compared to the same period in the prior year.

The decrease in TPA fees was primarily due to a lower level of TPA services provided by the Company for the six months ended June 30, 2024 compared to the same period in the prior year.

Other income for the six months ended June 30, 2024 was $1.1 million, compared to $0.6 million in the same period in the prior year, reflecting an increase of $0.5 million, or 103.1%.

This increase was primarily due to an increase in interest income on bank deposits.

• TPA fees for the nine months ended September 30, 2024 decreased by $0.1 million, or 30.0%, compared to the same period in the prior year.

The decrease in TPA fees was primarily due to a lower level of TPA services provided by the Company for the nine months ended September 30, 2024 compared to the same period in the prior year.

Other income for the nine months ended September 30, 2024 was $3.2 million, compared to $1.1 million in the same period in the prior year, reflecting an increase of $2.1 million, or 188.4%.

This increase was primarily due to an increase in interest income on bank deposits, including the $192.9 million of net proceeds received from the IPO.

Commission expense

The following table presents the disaggregation of our commission expense by offerings (in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Amount % of Total Amount % of Total

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Agency-in-a-Box $ 72,649 81 % $ 77,873 85 %

$ 47,557 81 % 50,576 86 %

Corporate Branches 3,422 4 569 1

2,118 4 360 1

Total Insurance Services

76,071 85 78,442 86

8,693 15 7,426 13

TWFG MGA 13,039 15 12,363 14

Other 61 — 48 —

Total commission expense

$ 89,171 100 % $ 90,853 100 %

Commission expense for the six months ended June 30, 2024 was comparable to the same period in the prior year.

Insurance Services commission expense for the six months ended June 30, 2024 decreased by $1.3 million, or 2.5%, which was fully offset by a $1.3 million, or 17.1%, increase in the TWFG MGA commission expense.

Commission expense for the nine months ended September 30, 2024 decreased by $1.7 million, or 1.9%, compared to the same period in the prior year.

The decrease was primarily due to the lower commission expense in Insurance Services of $2.4 million, or 2.6%, of the total decrease driven by the previously discussed branch conversions, offset by an increase in our TWFG MGA offering of $0.7 million, or 0.7%, of the total decrease in commission expense.

See “—Consolidated Results of Operations—Commission Income” for additional information regarding the driver of the changes.

Insurance Services Agency-in-a-Box commission expense for the six months ended June 30, 2024 decreased by $3.0 million, or 6.0%, compared to the same period in the prior year.

The decrease was primarily due to the branch conversions resulting in a decrease of $1.5 million and the one-time favorable accrual adjustment related to the converted branches of $1.5 million.

Insurance Services Agency-in-a-Box commission expense for the nine months ended September 30, 2024 decreased by $5.2 million, or 6.7%, compared to the same period in the prior year.

The decrease was primarily due to the branch conversions resulting in a decrease of $11.6 million, and the one-time favorable accrual adjustment related to the converted branches of $1.5 million, offset by an increase in commission expense related to the growth of the business of $7.9 million.

In January 2024, nine of our Branches converted to Corporate Branches.

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As result, we released a portion of the unpaid commissions related to the converted branches that we no longer are required to settle, which resulted in the aforementioned one-time favorable accrual adjustment.

Insurance Services Corporate Branches commission expense for the six months ended June 30, 2024 increased by $1.8 million, or 488.3%, compared to the same period in the prior year.

Insurance Services Corporate Branches commission expense for the nine months ended September 30, 2024 increased by $2.9 million, or 501.4%, compared to the same period in the prior year.

The increase was primarily due to the branch conversions, as previously discussed, and the Book of Business acquisitions in 2023.

TWFG MGA commission expense for the six months ended June 30, 2024 increased by $1.3 million, or 17.1%, compared to the same period in the prior year.

TWFG MGA commission expense for the nine months ended September 30, 2024 increased by $0.7 million, or 5.5%, compared to the same period in the prior year.

The increase was primarily due to higher new business written premiums, as previously discussed.

The higher percentage increase in TWFG MGA commission expense compared to the percentage increase in the related commission income was primarily driven by the shift in the business mix.

The higher percentage increase in TWFG MGA commission expense compared to the percentage decrease in the related commission income was primarily driven by the shift in the business mix.

As discussed above, TWFG MGA commission income was impacted by the renegotiation of the MGA agreement with one of our insurance carriers.

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Salaries and employee benefits

Salaries and employee benefits for the six months ended June 30, 2024 was $13.1 million, compared to $6.7 million in the same period in the prior year, reflecting an increase of $6.4 million, or 94.9%.

This increase was primarily attributable to the branch conversions contributing an increase of approximately $4.1 million, a $2.1 million increase from the asset acquisitions in 2023 and a $0.7 million increase due to our continued growth and new roles created in conjunction with our IPO.

Salaries and employee benefits for the nine months ended September 30, 2024 was $21.4 million, compared to $10.1 million in the same period in the prior year, reflecting an increase of $11.3 million, or 112.0%.

This increase was primarily attributable to the branch conversions contributing an increase of approximately $6.5 million, a $3.0 million increase from the asset acquisitions in 2023, a $1.0 million increase in stock-based compensation from the granting of restricted stock units in July 2024 and a $1.2 million increase due to our continued growth and new roles created in conjunction with our IPO.

Partially offsetting these increases was a decrease driven by the distribution of our equity interest in EVO in May 2023 to our owners.

Salaries and employee benefits for the six months ended June 30, 2023 included approximately $0.5 million compensation attributable to EVO’s operations, while the same period in 2024 did not.

Salaries and employee benefits for the nine months ended September 30, 2023 included approximately $0.5 million compensation attributable to EVO’s operations, while the same period in 2024 did not.

Other administrative expenses

Other administrative expenses for the six months ended June 30, 2024 was $6.9 million, compared to $5.2 million in the same period in the prior year, reflecting an increase of $1.6 million, or 31.4%.

This increase was primarily attributable to a $0.9 million increase in IT costs, a $0.3 million increase in underwriting expenses, and a $0.4 million increase in other expenses.

Other administrative expenses for the nine months ended September 30, 2024 was $11.7 million, compared to $8.0 million in the same period in the prior year, reflecting an increase of $3.6 million, or 45.3%.

This increase was primarily attributable to a $1.2 million increase in IT costs, a $1.0 million increase in consultant and professional fees, a $0.7 million increase in underwriting expenses, and a $0.7 million increase in other expenses.

The increase in our IT costs was primarily due to additional cloud computing costs, and 2024 included fees paid to EVO, while in 2023, fees paid to EVO were eliminated upon consolidation.

The increase in our underwriting expenses was driven primarily by the increased business in our MGA offering.

The increase in consultant and professional fees was primarily attributable to the increased ongoing costs of becoming a public company.

The increase in other expenses was due primarily to higher rent and office expenses driven by our Book of Business acquisitions in 2023 and branch conversions in 2024, partially offset by a reduction in administrative expenses related to the previously discussed distribution of our equity interest in EVO.

Depreciation and amortization

Depreciation and amortization for the six months ended June 30, 2024 was $6.0 million compared to $2.2 million in the same period in the prior year, reflecting an increase of $3.8 million, or 172.5%.

This increase was primarily attributable to the amortization of intangible assets from our recent intangible asset acquisitions.

Other non-operating income (expenses)

Other non-operating expenses for the six months ended June 30, 2024 was $1.7 million compared to $0.3 million in the same period in the prior year, reflecting an increase of $1.4 million or 532.7%.

The increase was primarily attributable to higher interest expense driven by the increase in our total debts.

Depreciation and amortization for the nine months ended September 30, 2024 was $9.0 million compared to $3.3 million in the same period in the prior year, reflecting an increase of $5.6 million, or 168.4%.

This increase was primarily attributable to the amortization of intangible assets from our recent intangible asset acquisitions and branch conversions.

Other non-operating income (expense)

Other non-operating expense for the nine months ended September 30, 2024 was $2.1 million compared to $0.6 million in the same period in the prior year, reflecting an increase of $1.6 million or 276.0%.

The increase was primarily attributable to higher interest expense driven by the increase in our total debt.

In 2023, we increased our borrowings to fund our asset acquisitions in 2023 and branch conversions in 2024.

The increase was partially offset by the repayment of the outstanding balances under the Term Loan B as defined in the section - “ Liquidity and capital resources ” and the Revolving Facility in July 2024 and August 2024, respectively.

Income tax expense

Income tax expense for the nine months ended September 30, 2024 was $0.4 million compared to zero for the same period in the prior year as after consummation of the Reorganization Transactions and IPO, the Company became subject to U.S.

federal, state, and local income taxes with respect to its allocable share of taxable income of TWFG Holding Company, LLC assessed at the prevailing corporate tax rates.

Key Performance Indicators

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The following table presents the disaggregation of Total Written Premium by offerings, business mix and line of business (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

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Agency-in-a-Box $ 261,560 65 % $ 284,442 80 % $ 736,699 66 % $ 761,260 80 %

$ 256,203 65 % $ 263,436 80 % $ 475,139 66 % $ 476,818 80 %

Corporate Branches 77,636 20 14,286 4 213,689 19 35,156 4

78,169 20 12,482 4 136,053 19 20,870 4

Total Insurance Services

339,196 85 298,728 84 950,388 85 796,416 84

59,263 15 51,258 16 103,709 15 94,872 16

TWFG MGA 60,903 15 55,361 16 164,612 15 150,233 16

Total written premium $ 400,099 100 % $ 354,089 100 % $ 1,115,000 100 % $ 946,649 100 %

$ 393,635 100 % $ 327,176 100 % $ 714,901 100 % $ 592,560 100 %

Business Mix:

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Renewal business $ 265,026 66 % $ 242,258 68 % $ 739,624 66 % $ 623,773 66 %

$ 260,121 66 % $ 214,964 66 % $ 474,598 66 % $ 381,515 64 %

74,251 19 60,954 19 136,594 19 116,173 20

New business 74,170 19 56,470 16 210,764 19 172,643 18

Total Insurance Services 339,196 85 298,728 84 950,388 85 796,416 84

Renewal business 46,075 11 47,818 14 125,364 11 127,552 14

43,825 11 43,672 13 79,289 11 79,734 13

15,438 4 7,586 2 24,420 4 15,138 3

New business 14,828 4 7,543 2 39,248 4 22,681 2

Total TWFG MGA

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Total written premium $ 400,099 100 % $ 354,089 100 % $ 1,115,000 100 % $ 946,649 100 %

$ 393,635 100 % $ 327,176 100 % $ 714,901 100 % $ 592,560 100 %

Written Premium Retention:

Insurance Services 89 % 98 % 93 % 96 %

94 % 96 % 95 % 95 %

TWFG MGA 83 88 83 90

Consolidated 88 97 91 95

Line of Business:

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Total written premium $ 400,099 100 % $ 354,089 100 % $ 1,115,000 100 % $ 946,649 100 %

$ 393,635 100 % $ 327,176 100 % $ 714,901 100 % $ 592,560 100 %

Comparison of the Three Months Ended June 30, 2024 and 2023

Total Written Premium for the three months ended June 30, 2024 increased by $66.5 million, or 20.3%, compared to the same period in the prior year.

Higher premium rates, written premiums from our acquisitions in 2023 rolling into the current period, and growing Books of Business drove the increase in our Insurance Services offering.

As previously discussed, in January 2024, nine of our independent branches converted to Corporate Branches, which shifted approximately $50.6 million of written premiums for the three months ended June 30, 2024 from Agency-in-a-Box to Corporate Branches.

The increase in Total Written Premium in our TWFG MGA offering was primarily attributable to new business growth and higher premium rates, partially offset by reduced policy retention due to continued non-renewal of business and certain insurance carriers not accepting new business in locations that have experienced catastrophes.

The new business growth in our TWFG MGA offering was driven by market activities, which created opportunities for us to gain new business.

Written premium across our offerings benefited from the rising trend in premium rates over the recent periods.

For the three months ended June 30, 2024 and 2023, our consolidated written premium retention was 93% and 94%, respectively.

The decrease in our premium retention was primarily due to lower renewals in our TWFG MGA offering.

Comparison of the Six Months Ended June 30, 2024 and 2023

Total Written Premium for the six months ended June 30, 2024 increased by $122.3 million, or 20.6%, compared to the same period in the prior year.

Higher premium rates, written premiums from our acquisitions in 2023 rolling into the current period, and growing Books of Business drove the increase in our Insurance Services offering.

As previously discussed, the branch conversions shifted approximately $86.2 million of written premiums for the six months ended June 30, 2024 from Agency-in-a-Box to Corporate Branches.

The new business growth in our TWFG MGA offering was driven by market activities, which created opportunities for us to gain new business.

Written premium across our offerings benefited from the rising trend in premium rates over the recent periods.

For the six months ended June 30, 2024 and 2023, our consolidated written premium retention was 93% and 94%, respectively.

The decrease in our premium retention was primarily due to lower renewals in our TWFG MGA offering.

Comparison of the Three Months Ended September 30, 2024 and 2023

Total Written Premium for the three months ended September 30, 2024 increased by $46.0 million, or 13.0%, compared to the same period in the prior year.

Drivers of the increase in our Insurance Services offering include higher premium rates, written premiums from our 2023 acquisitions rolling into the current period, and new business growth.

This increase was offset by a decline in retention as carriers are now opening up for new business after a period of restricting capacity, which had the effect in the prior year of increased retention and slowing new business growth.

As previously discussed, in January 2024, nine of our independent branches converted to Corporate Branches, which shifted approximately $49.8 million of written premiums for the three months ended September 30, 2024 from Agency-in-a-Box to Corporate Branches.

The increase in our TWFG MGA offering was primarily attributable to new business growth and higher premium rates, partially offset by lower premium retention as carriers have opened up for new business which allows agents to shop favorable pricing for our Clients.

For the three months ended September 30, 2024 and 2023, our consolidated written premium retention was 88% and 97%, respectively.

For the three months ended September 30, 2024, the composition of our renewal and new business mix shifted under our two product offerings as follows:

Insurance Services renewal business as a percentage of the total written premium, decreased to 66% compared to 68% in the same period of the prior year.

As a result, premium retention decreased to 89% from 98%, resulting in renewal premium growth of 9.4%, or $22.8 million, compared to the same period of the prior year.

Insurance Services new business, as a percentage of total written premium, increased to 19% from 16%, resulting in a new business growth of 31.3%, or $17.7 million, compared to the same period in the prior year.

The shift in Insurance Services new and renewal business

reflects more carriers seeking new business growth after a period of retrenchment designed to restore carrier profitability.

As carriers look to grow after a period of reducing capacity by raising rates and slowing new business growth, consumers and their agents have more choices in terms of carriers and coverage.

TWFG MGA renewal business, as a percentage of the total written premium, decreased to 11% compared to 14% in the same period of the prior year.

As a result, premium retention decreased to 83% from 88%, resulting in a decrease in renewal business of 3.6%, or $1.7 million, compared to the same period in the prior year.

TWFG MGA new business, as a percentage of total written premium, increased to 4% from 2%, resulting in a new business growth of 96.6%, or $7.3 million, compared to the same period in the prior year.

The shift in TWFG MGA new and renewal business reflects more carriers seeking new business growth after a period of retrenchment designed to restore carrier profitability.

Comparison of the Nine Months Ended September 30, 2024 and 2023

Total Written Premium for the nine months ended September 30, 2024 increased by $168.4 million, or 17.8%, compared to the same period in the prior year.

Drivers of the increase in our Insurance Services offering are attributable to higher premium rates, written premiums from our 2023 acquisitions rolling into the current period, and new business growth.

As previously discussed, in January 2024, the branch conversions shifted approximately $136.1 million of written premiums for the nine months ended September 30, 2024 from Agency-in-a-Box to Corporate Branches.

For the nine months ended September 30, 2024 and 2023, our consolidated written premium retention was 91% and 95%, respectively.

For the nine months ended September 30, 2024, the composition of our renewal and new business mix shifted under our two product offerings as follows:

Insurance Services renewal business, as a percentage of the total written premium, was 66% which was consistent with the same period of the prior year and premium retention decreased to 93% from 96%, resulting in renewal premium growth of 18.6%, or $115.9 million, compared to the same period of the prior year.

Insurance Services new business, as a percentage of total written premium, increased to 19% from 18%, resulting in a new business growth of 22.1%, or $38.1 million, compared to the same period in the prior year.

The shift in Insurance Services new and renewal business reflects more carriers seeking new business growth after a period of retrenchment designed to restore carrier profitability.

As carriers look to grow after a period of reducing capacity by raising rates and slowing new business growth, consumers and their agents have more choices in terms of carriers and coverage.

TWFG MGA renewal business, as a percentage of the total written premium, decreased to 11% compared to 14% in the same period of the prior year.

As a result, premium retention decreased to 83% from 90%, resulting in a decrease in renewal business of 1.7%, or $2.2 million, compared to the same period in the prior year.

TWFG MGA new business, as a percentage of total written premium, increased to 4% from 2%, resulting in a new business growth of 73.0%, or $16.6 million, compared to the same period in the prior year.

The shift in TWFG MGA new and renewal business reflects more carriers seeking new business growth after a period of retrenchment designed to restore carrier profitability.

Non-GAAP Financial Measures

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We believe Organic Revenue Growth is an appropriate measure of operating performance because it eliminates the impact of acquisitions, which affects the comparability of results from period to period.

A reconciliation of Organic Revenue and Organic Revenue Growth Rate to Total Revenue and Total Revenue Growth Rate, the most directly comparable GAAP measures, for each of the periods indicated is as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Total revenues $ 54,640 $ 47,710 $ 154,219 $ 132,942

$ 53,266 $ 45,376 $ 99,579 $ 85,232

Acquisition adjustments (1)

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Contingent income (1,383) (1,035) (3,717) (3,023)

(1,258) (1,003) (2,334) (1,988)

(2,689) (2,208) (4,921) (4,236)

(657) (394) (1,117) (550)

Fee income (2,890) (2,107) (7,811) (6,343)

Other income (2,127) (575) (3,244) (1,125)

Organic Revenue $ 47,342 $ 42,840 $ 135,865 $ 119,803

$ 47,445 $ 40,707 $ 88,523 $ 76,963

Organic Revenue Growth (2)

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(1) Represents revenues generated from the acquired businesses during the first 12 months following an acquisition.

(2) Organic Revenue for the three months ended June 30, 2023 and 2022, and for the six months ended June 30, 2023 and 2022, used to calculate Organic Revenue Growth for the three months ended June 30, 2024 and 2023, and for the six months ended June 30, 2024 and 2023, was $41.7 million, $37.5 million, $78.1 million and $69.0 million, respectively, which is adjusted to reflect revenues from acquired businesses with over $0.5 million in annualized revenue that reached the twelve-month owned mark during the year ended December 31, 2023 and 2022, respectively.

Organic Revenue Growth represents the period-to-period change in Organic Revenue divided by the total adjusted Organic Revenue in the prior period.

(2) Organic Revenue for the three months ended September 30, 2023 and 2022, and for the nine months ended September 30, 2023 and 2022, used to calculate Organic Revenue Growth for the three months ended September 30, 2024 and 2023, and for the nine months ended September 30, 2024 and 2023, was $44.0 million, $37.8 million, $121.7 million and $106.8 million, respectively, which is adjusted to reflect revenues from acquired businesses with over $0.5 million in annualized revenue that reached the twelve-month owned mark during the year ended December 31, 2023 and 2022, respectively.

Organic Revenue Growth Rate represents the period-to-period change in Organic Revenue divided by the total adjusted Organic Revenue in the prior period.

(3) Represents the period-to-period change in total revenues divided by the total revenues in the prior period.

Comparison of the Three Months Ended June 30, 2024 and 2023

Revenue growth, representing the year-over-year change in total revenues, was 17.4% for the three months ended June 30, 2024 compared to the same period in 2023 and 8.7% for the three months ended June 30, 2023 compared to the same period in 2022.

Comparison of the Three Months Ended September 30, 2024 and 2023

Revenue growth rate, representing the year-over-year change in total revenues, was 14.5% for the three months ended September 30, 2024 compared to the same period in 2023 and 16.5% for the three months ended September 30, 2023 compared to the same period in 2022.

Revenue growth for both periods reflected the impact of higher premium rates, growing Books of Business and the mix of the new and renewal businesses.

Revenue growth for the three months ended June 30, 2024 compared to the same period in 2023 included the impact of the continued rollout of commission income from our Book of Business acquisitions in 2023 into the current period, higher fee income and higher interest income on bank deposits.

Revenue growth for the three months ended September 30, 2024 compared to the same period in 2023 included the impact of the continued rollout of commission income from our Book of Business acquisitions in 2023 into the current period, higher fee income and higher interest income on bank deposits, including the $192.9 million of net proceeds received from the IPO.

See “—Consolidated Results of Operations” for additional discussions regarding the changes in our revenues.

Organic Revenue Growth was 13.8% for the three months ended June 30, 2024 compared to the same period in 2023 and 8.6% for the three months ended June 30, 2023 compared to the same period in 2022.

Organic Revenue Growth for both periods reflected the impact of higher premium rates, growing Books of Business and the mix of the new and renewal businesses.

Organic Revenue Growth Rate was 7.6% for the three months ended September 30, 2024 compared to the same period in 2023 and 13.4% for the three months ended September 30, 2023 compared to the same period in 2022.

Organic Revenue Growth for both periods reflects ongoing, but normalizing rate increases being implemented by carriers, the underlying growth of our business, and healthy economic growth offset by a decrease in commission income in our MGA offering.

Effective January 1, 2024, the MGA agreement with one of our insurance carriers was renegotiated and amended, which shifted our volume based commission to a flat monthly fee.

The switch capped the income we earned at a maximum monthly amount.

See “—Consolidated Results of Operations—Commission Income” for additional discussions regarding the changes in our commission income.

In addition, revenue growth and Organic Revenue Growth for the three months ended June 30, 2023 compared to the same period in 2022 reflected the impact of enhanced data collected from external sources, which improved our assumptions for estimating revenues starting in 2022.

Applying the use of enhanced data consistently throughout the prior periods, revenue growth for the three months ended June 30, 2023 compared to the same period in 2022 would have been 12.0%, and Organic Revenue Growth for the three months ended June 30, 2023 compared to the same period in 2022 would have been 12.3%.

Comparison of the Six Months Ended June 30, 2024 and 2023

Revenue growth, representing the year-over-year change in total revenues, was 16.8% for the six months ended June 30, 2024 compared to the same period in 2023 and 12.0% for the six months ended June 30, 2023 compared to the same period in 2022.

In addition, revenue growth and Organic Revenue Growth for the three months ended September 30, 2023 compared to the same period in 2022 reflected the impact of enhanced data collected from external sources, which improved our assumptions for estimating revenues starting in 2022.

Applying the use of enhanced data consistently throughout the prior periods, revenue growth rate for the three months ended September 30, 2023 compared to the same period in 2022 would have been 17.4%, and Organic Revenue Growth Rate for the three months ended September 30, 2023 compared to the same period in 2022 would have been 14.3%.

Comparison of the Nine Months Ended September 30, 2024 and 2023

Revenue growth rate, representing the year-over-year change in total revenues, was 16.0% for the nine months ended September 30, 2024 compared to the same period in 2023 and 13.6% for the nine months ended September 30, 2023 compared to the same period in 2022.

Revenue growth for both periods reflected the impact of higher premium rates, growing Books of Business and the mix of the new and renewal businesses.

Revenue growth for the six months ended June 30, 2024 compared to the same period in 2023 included the impact of the continued rollout of commission income from our Book of Business acquisitions in 2023 into the current period, higher fee income and higher interest income on bank deposits.

Organic Revenue Growth was 13.3% for the six months ended June 30, 2024 compared to the same period in 2023 and 11.5% for the six months ended June 30, 2023 compared to the same period in 2022.

Organic Revenue Growth for both periods reflected the impact of higher premium rates, growing Books of Business and the mix of the new and renewal businesses.

Applying the use of enhanced data consistently throughout the prior periods, revenue growth for the six months ended June 30, 2023 compared to the same period in 2022 would have been 12.0%, and Organic Revenue Growth for the three months ended June 30, 2023 compared to the same period in 2022 would have been 16.5%.

Revenue growth for the nine months ended September 30, 2024 compared to the same period in 2023 included the impact of the continued rollout of commission income from our Book of Business acquisitions in 2023 into the current period, higher fee income and higher interest income on bank deposits, including the $192.9 million of net proceeds received from the IPO.

Organic Revenue Growth Rate was 11.7% for the nine months ended September 30, 2024 compared to the same period in 2023 and 12.2% for the nine months ended September 30, 2023 compared to the same period in 2022.

Organic Revenue Growth for both periods reflects ongoing, but normalizing, rate increases being implemented by carriers, the underlying growth of our business, and healthy economic growth offset by a decrease in commission income in our MGA offering.

Effective January 1, 2024, the MGA agreement with one of our insurance carriers was renegotiated and amended, which shifted our volume based commission to a flat monthly fee.

The switch capped the income we earned at a maximum monthly amount.

Applying the use of enhanced data consistently throughout the prior periods, revenue growth rate for the nine months ended September 30, 2023 compared to the same period in 2022 would have been 16.4%, and Organic Revenue Growth Rate for the nine months ended September 30, 2023 compared to the same period in 2022 would have been 15.7%.

Adjusted Net Income.

In the second quarter of 2024, we revised the calculation of Adjusted Net Income to include amortization expenses among the add-back adjustments to our net income when calculating our Adjusted Net Income.

Since the second quarter of 2024, we have used the revised calculation methodology for Adjusted Net Income, which includes amortization expenses among the add-back adjustments to our net income when calculating our Adjusted Net Income.

Our legacy calculation methodology reflected the impact of intangible asset amortization as a reduction to our Adjusted Net Income.

The revised calculation methodology excluded the effect of the intangible asset amortization when calculating our Adjusted Net Income by reflecting it among the add-back adjustments to our net income.

The revised calculation methodology excludes the effect of the intangible asset amortization when calculating our Adjusted Net Income by reflecting it among the add-back adjustments to our net income.

We believe that the revised calculation of Adjusted Net Income is more consistent with the method and presentation used by most of our peers and will allow management to better evaluate our performance relative to our peer companies.

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Adjusted Net Income is a supplemental measure of our performance and is defined as net income (the most directly comparable GAAP measure) before amortization, non-recurring or non-operating income and expenses, including equity-based compensation, adjusted to assume a single class of stock (Class A) and assuming noncontrolling interests do not exist.

We believe Adjusted Net Income is a useful measure because it adjusts for the after-tax

impact of significant one-time, non-recurring items and eliminates the impact of any transactions that do not directly affect what management considers to be our ongoing operating performance in the period.

We believe Adjusted Net Income is a useful measure because it adjusts for the after-tax impact of significant one-time, non-recurring items and eliminates the impact of any transactions that do not directly affect what management considers to be our ongoing operating performance in the period.

These adjustments generally eliminate the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.

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We believe that Adjusted Net Income Margin is a useful measurement of operating profitability for the same reasons we find Adjusted Net Income useful and also because it provides a period-to-period comparison of our after-tax operating performance.

A reconciliation of Adjusted Net Income and Adjusted Net Income Margin to Net income and Net income margin, the most directly comparable GAAP measures, for each of the periods indicated is as follows:

Revised Calculation Methodology Applied to Current Period

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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Discontinued operation income — — — (834)

Equity-based compensation 1,012 — 1,012 —

Other non-recurring items (1)

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Amortization expense 2,920 1,078 8,771 3,143

Adjusted income before income taxes

10,825 8,686 28,746 23,375

Adjusted income tax expense (2)

(2,482) — (6,591) —

Adjusted Net Income $ 8,343 $ 8,686 $ 22,155 $ 23,375

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Total revenues

$ 54,640 $ 47,710 $ 154,219 $ 132,942

Net income $ 6,893 $ 7,608 $ 20,440 $ 20,881

Acquisition-related expenses

— — — — — 168

Restructuring and related expenses

Discontinued operation income — — — — — (834)

Other non-recurring items (1)

— — (1,477) —

Adjusted Net Income $ 6,918 $ 7,245 $ 12,070 $ 12,624

Net Income Margin 13.0 % 15.6 % 13.6 % 15.6 %

Adjusted Net Income Margin 13.0 % 16.0 % 12.1 % 14.8 %

Revised Calculation Methodology Applied to Historical Period

Three Months Ended

Equity-based compensation

1,012 — — 1,012 — —

Total revenues $ 46,313 $ 39,856 $ 172,934 $ 153,921

Net income $ 6,629 $ 6,206 $ 26,096 $ 20,614

Acquisition-related expenses — — 204 —

Restructuring and related expenses — 7 17 —

Discontinued operation (income) loss — (834) (834) 2,733

Other non-recurring items (1)

— — — (1,477) — —

Amortization expense 2,947 995 4,594 3,019

Adjusted Net Income $ 8,099 $ 6,374 $ 30,077 $ 26,366

Net Income Margin 14.3 % 15.6 % 15.1 % 13.4 %

Adjusted Net Income Margin 17.5 % 16.0 % 17.4 % 17.1 %

Legacy Calculation Methodology Applied to Historical Period

Three Months Ended

2024 2023 2023 2022

Total revenues $ 46,313 $ 39,856 $ 172,934 $ 153,921

Net income $ 6,629 $ 6,206 $ 26,096 $ 20,614

Acquisition-related expenses — — 204 —

Restructuring and related expenses — 7 17 —

Discontinued operation (income) loss — (834) (834) 2,733

Other non-recurring items (1)

Adjusted income before income taxes 7,905 7,608 19,975 20,232

Adjusted income tax expense (2)

(1,813) — (4,580) —

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As a result, we released a portion of the unpaid commissions related to the converted branches that we no longer are required to settle.

(2) Post-IPO, we are subject to United States federal income taxes, in addition to state, local, and foreign taxes, with respect to our allocable share of any net taxable income of TWFG Holding Company, LLC.

For the three and nine months ended September 30, 2024, the calculation of adjusted income tax expense is based on a federal statutory rate of 21% and a blended state income tax rate of 1.93% on 100% of our adjusted income before income taxes as if we owned 100% of the TWFG Holding Company, LLC.

Adjusted Diluted Earnings Per Share.

Adjusted Diluted Earnings Per Share is Adjusted Net Income divided by diluted shares outstanding after adjusting for the effect of (i) the exchange of 100% of the outstanding Class B common stock of the Company (the “Class B Common Stock”) and Class C common stock of the Company (the “Class C Common Stock”) (together with the related LLC Units) into shares of Class A common stock of the Company (“Class A Common Stock”) and (ii) the vesting of 100% of the unvested equity awards and exchange

into shares of Class A Common Stock.

This measure does not deduct earnings related to the noncontrolling interests in TWFG Holding Company, LLC for the period of time prior to July 19, 2024 when we did not own 100% of the business.

The most directly comparable GAAP financial metric is diluted earnings per share.

We believe Adjusted Diluted Earnings Per Share may be useful to an investor in evaluating our operating performance and efficiency because this measure is widely used by investors to measure a company’s operating performance without regard to items excluded from the calculation of such measure, which can vary substantially from company to company depending upon acquisition activity and capital structure.

This measure also eliminates the impact of expenses that do not relate to core business performance, among other factors.

A reconciliation of Adjusted Diluted Earnings Per Share to diluted earnings per share, the most directly comparable GAAP measure, for each of the periods indicated is as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Earnings per share of common stock – diluted $ 0.08 $ 0.08

Impact of all LLC Units exchanged for Class A Common Stock (1)

Adjustments to Adjusted net income (2)

Adjusted Diluted Earnings Per Share $ 0.15 $ 0.40

Weighted average common stock outstanding – diluted 14,890,382 14,890,382

Impact of all LLC Units exchanged for Class A Common Stock (1)

41,171,461 41,171,461

Adjusted Diluted Earnings Per Share diluted share count 56,061,843 56,061,843

(1) For comparability purposes, this calculation incorporates the net income that would be distributable if all shares of Class B Common Stock and Class C Common Stock, together with the related LLC Units, were exchanged for shares of Class A Common Stock.

For the three and nine months ended September 30, 2024, this includes $5.7 million and $19.3 million of net income, respectively, on 56,061,843 weighted-average shares of common stock outstanding - diluted, for both the three and nine months ended September 30, 2024.

For both the three and nine months ended September 30, 2024, 41,171,461 weighted average outstanding Class B Common Stock and Class C Common Stock were considered dilutive and included in the 56,061,843 weighted-average shares of common stock outstanding - diluted within diluted earnings per share calculation.

See Note 13, “Earnings Per Share” to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information about the earnings per share.

(2) Adjustments to Adjusted Net Income are described in the footnotes of the reconciliation of Adjusted Net Income to Net Income in “Adjusted Net Income and Adjusted Net Income Margin”, which represent the difference between Net Income of $6.9 million and $20.4 million and Adjusted Net Income of $8.3 million and $22.1 million for the three and nine months ended September 30, 2024, respectively.

For the three and nine months ended September 30, 2024, Adjusted Diluted Earnings Per Share include adjustments of $1.4 million and $1.7 million to Adjusted Net Income, respectively, on 56,061,843 weighted-average shares of common stock outstanding - diluted for both periods presented.

Adjusted EBITDA.

Adjusted EBITDA is a supplemental measure of our performance and is defined as EBITDA adjusted to exclude equity-based compensation and other non-operating items, including, certain nonrecurring or non-operating gains or losses.

EBITDA is defined as net income (the most directly comparable GAAP measure) before interest, income taxes, depreciation and amortization.

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We believe that Adjusted EBITDA Margin is a useful measurement of operating profitability for the same reasons we find Adjusted EBITDA useful and also because it provides a period-to-period comparison of our operating performance.

A reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin to Net income and Net income margin, the most directly comparable GAAP measures, for each of the periods indicated is as follows:

A reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin to Net income and Net income margin, the most directly comparable GAAP measures, for each of the periods indicated is as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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Depreciation and amortization 2,985 1,145 8,966 3,340

Income tax expense 437 — 437 —

EBITDA 10,726 9,048 31,968 24,774

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Restructuring and related expenses — — — 17

Equity-based compensation 1,012 — 1,012 —

Discontinued operation income — — — (834)

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We believe Adjusted Free Cash Flow is a useful measure of operating performance because it represents the cash flow from the business that is within our discretion to direct to activities including investments, debt repayment, and returning capital to stockholders.

A reconciliation of Adjusted Free Cash Flows to Cash flow from Operating Activities, the most directly comparable GAAP measures, for each of the periods indicated is as follows:

A reconciliation of Adjusted Free Cash Flows to Cash flow from Operating Activities, the most directly comparable GAAP measures, for each of the periods indicated is as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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(1) Tax distributions to members represents the amount distributed to the members of TWFG Holding Company, LLC in respect of their income tax liability related to the net income of TWFG Holding Company, LLC allocated to its members.

Organic Revenue, Organic Revenue Growth, Adjusted Net Income, Adjusted Net Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow are not measures of financial performance under GAAP and should not be considered substitutes for GAAP measures, including revenues (for Organic Revenue and Organic Revenue Growth), net income (for Adjusted Net Income, Adjusted Net Income Margin, Adjusted EBITDA and Adjusted EBITDA Margin), and cash flow from operating activities (for Adjusted Free Cash Flow) which we consider to be the most directly comparable GAAP measures.

These non-GAAP financial measures have limitations as analytical tools, and when assessing our operating performance, you should not consider these non-GAAP financial

measures in isolation or as substitutes for revenues, net income, operating cash flow or other consolidated financial statement data prepared in accordance with GAAP.

Organic Revenue, Organic Revenue Growth, Adjusted Net Income, Adjusted Net Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Free Cash Flow and Adjusted Diluted Earnings Per Share are not measures of financial performance under GAAP and should not be considered substitutes for GAAP measures, including revenues (for Organic Revenue and Organic Revenue Growth), net income (for Adjusted Net Income, Adjusted Net

Income Margin, Adjusted EBITDA and Adjusted EBITDA Margin), cash flow from operating activities (for Adjusted Free Cash Flow) and diluted earnings per share (for Adjusted Diluted Earnings Per Share), which we consider to be the most directly comparable GAAP measures.

These non-GAAP financial measures have limitations as analytical tools, and when assessing our operating performance, you should not consider these non-GAAP financial measures in isolation or as substitutes for revenues, net income, operating cash flow or other consolidated financial statement data prepared in accordance with GAAP.

Other companies may calculate any or all of these non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.

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We have managed our historical liquidity and capital requirements primarily through the receipt of revenues from our operations.

Our primary cash flow activities involve:

Prior to the IPO, our primary cash flow activities involved:

(1) generating cash flow from our operations;

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

As of June 30, 2024, and December 31, 2023, our cash and cash equivalents were $25.8 million, and $39.3 million, respectively.

On July 19, 2024, we completed the IPO of 11,000,000 shares of Class A Common Stock at an IPO price of $17.00 per share.

On July 23, 2024, the underwriters purchased an additional 1,650,000 shares of Class A Common Stock in connection with the underwriters’ full exercise of their option to purchase additional shares.

We received approximately $192.9 million of net proceeds from the IPO, including from the full exercise of the underwriters’ option, after deducting underwriting discounts and commissions and related offering expenses.

As of September 30, 2024, and December 31, 2023, our cash and cash equivalents were $191.2 million , and $39.3 million, respectively.

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

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On May 23, 2023, TWFG Holding Company, LLC entered into a ninth amendment to the Term Loan Credit Agreement to, among other things, provide additional flexibility under the covenants contained therein.

The aggregate principal amounts of the Term Loan B and Term Loan C as of June 30, 2024 are $0.1 million and $6.9 million, respectively, as follows (in thousands):

The Term Loan B was fully repaid by its maturity on July 30, 2024.

The aggregate principal amounts of the Term Loan C as of September 30, 2024 is $6.4 million as follows (in thousands):

Remainder of 2024 $ 469

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The proceeds from borrowings under the Revolving Facility have been used for permitted acquisitions, and may in the future be used for acquisitions, working capital and general corporate purposes.

As of June 30, 2024, $41.0 million was outstanding under the Revolving Facility.

On August 5, 2024, we repaid the outstanding balance of the Revolving Facility amounting to $41.0 million using a portion of the net proceeds from the IPO.

As of September 30, 2024, there was no outstanding balance under the Revolving Facility.

The Credit Agreements contain covenants that, among other things and subject to certain exceptions, restrict our ability to make restricted payments, incur additional debt, engage in asset sales, mergers, acquisitions or similar transactions, create liens on assets, engage in transactions with affiliates, change our business or make investments.

We may voluntarily prepay in whole or in part the outstanding principal under our Term Loans at any time prior to the maturity date.

In addition, the Credit Agreements contain financial covenants that require us, subject to certain exceptions, to maintain a Consolidated Debt Service Coverage Ratio (as defined in the Credit Agreement) of at least 1.50 to 1.00 and a Consolidated Leverage Ratio (as defined in the Credit Agreement) of not more than 2.00 to 1.00, in each case, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, and as of June 30, 2024, we are in compliance with each such covenant.

In addition, the Credit Agreements contain financial covenants that require us, subject to certain exceptions, to maintain a Consolidated Debt Service Coverage Ratio (as defined in the Credit Agreement) of at least 1.50 to 1.00 and a Consolidated Leverage Ratio (as defined in the Credit Agreement) of not more than 2.00 to 1.00, in each case, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, and as of September 30, 2024, we are in compliance with each such covenant.

Pursuant to the Credit Agreements, a change of control default will be triggered if:

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

1 unchanged sentence

Net cash used in investing activities from continuing operations (366) (766) (21,589) (6,006)

Net cash (used in) provided by financing activities from continuing operations (2,063) 2,324 (5,886) (3,435)

Net cash provided by (used in) financing activities from continuing operations 153,033 (2,651) 147,147 (6,086)

Net change in cash, cash equivalents and restricted cash from continuing operations 164,392 3,977 154,437 11,172

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Cash, cash equivalents and restricted cash from continuing operations, end of period $ 200,905 $ 41,434 $ 200,905 $ 41,434

Cash paid during the year for interest $ 924 $ 82 $ 1,893 $ 169

Comparison of the Three Months Ended June 30, 2024 and 2023

Cash paid during the period for interest $ 405 $ 159 $ 2,298 $ 328

Comparison of the Three Months Ended September 30, 2024 and 2023

Operating activities

Operating activities from continuing operations provided $7.4 million and $6.9 million of cash for the three months ended June 30, 2024 and 2023, respectively.

The increase in net cash provided by operating activities from continuing operations was primarily attributable to the $7.9 million increase in total revenues, partially offset by the increases in commission expenses, salaries and employee benefits, other administrative expenses and interest expense amounting to $1.1 million, $3.4 million, $1.0 million and $0.7 million, respectively, and approximately $1.2 million in net outflows from the changes in our net working capital between periods.

Operating activities from continuing operations provided $11.7 million and $7.4 million of cash for the three months ended September 30, 2024 and 2023, respectively.

The increase in net cash provided by operating activities from continuing operations was primarily attributable to the $6.9 million increase in total revenues, decrease in commission expense amounting to $1.7 million, and approximately $2.1 million in net inflows from the changes in our net working capital between periods, partially offset by the increases in salaries and employee benefits and

other administrative expenses amounting to $4.9 million and $2.0 million, respectively.

See “—Consolidated Results of Operations” above for additional information regarding the results of our operations.

Investing activities

Investing activities from continuing operations used $0.2 million and $4.9 million of cash for the three months ended June 30, 2024 and 2023, respectively.

Our net investing outflows decreased primarily due to the lower level of asset acquisitions in the current period of $0.3 million compared to $5.4 million in the prior period.

The prior period included three customer list acquisition transactions with annualized revenues greater than $0.5 million.

This decrease was partially offset by a decrease in intangible asset disposals of $0.5 million in the current period compared to the prior period.

See Note 4, “Intangible Assets” to our unaudited condensed consolidated

financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding our asset acquisitions.

Investing activities from continuing operations used $0.4 million and $0.8 million of cash for the three months ended September 30, 2024 and 2023, respectively.

Our net investing outflows decreased primarily due to the lower level of intangible asset acquisitions in the current period of $0.2 million compared to $0.6 million in the prior period.

See Note 4, “Intangible Assets” to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding our asset acquisitions.

Financing activities

Financing activities from continuing operations used $2.1 million of cash for the three months ended June 30, 2024 and provided $2.3 million of cash for the three months ended June 30, 2023.

The change from net financing inflows in the prior period to outflows in the current period was primarily due to the $10.0 million in proceeds from the drawdown of the Revolving Facility in the prior period while the current period has none and the $1.3 million payment of deferred offering costs in the current period while the prior period had none.

These changes were partially offset by the $2.7 million lower cash distributions in the current period compared to the prior period and $4.3 million in higher net inflows from the change in carrier liabilities in the current period compared to the prior period.

Comparison of the Six Months Ended June 30, 2024 and 2023

Financing activities from continuing operations provided $153.0 million of cash for the three months ended September 30, 2024 and used $2.7 million of cash for the three months ended September 30, 2023.

Our net financing inflows increased primarily due to $200.7 million in proceeds from the IPO, net of underwriting costs, and no cash distributions in the current period compared to $2.6 million cash distributions the prior period.

These changes were partially offset by the repayment of the outstanding balance of the Revolving Facility amounting to $41.0 million using a portion of the net proceeds from the IPO and repayment of the term loans amounting to $0.6 million in the current period while the prior period had repayment of $0.7 million, $1.9 million in net outflows from the change in carrier liabilities in the current period compared to $0.7 million inflows in the prior period, and the $3.9 million and $0.2 million in payments of deferred offering costs and deferred acquisition payable, respectively, in the current period while the prior period had $0.1 million and none, respectively.

Comparison of the Nine Months Ended September 30, 2024 and 2023

Operating activities

Operating activities from continuing operations provided $17.2 million and $15.9 million of cash for the six months ended June 30, 2024 and 2023, respectively.

The increase in net cash provided by operating activities from continuing operations was primarily attributable to the $14.3 million increase in total revenues, partially offset by the increases in salaries and employee benefits, other administrative expenses and interest expense amounting to $6.4 million, $1.6 million and $1.5 million, respectively, and approximately $3.7 million in net outflows from the changes in our net working capital between periods.

Operating activities from continuing operations provided $28.9 million and $23.3 million of cash for the nine months ended September 30, 2024 and 2023, respectively.

The increase in net cash provided by operating activities from continuing operations was primarily attributable to the $21.3 million increase in total revenues and the decrease in commission expense amounting to $1.7 million, partially offset by the increases in salaries and employee benefits, other administrative expenses and interest expense amounting to $11.3 million, $3.6 million, $1.6 million, respectively, and approximately $1.6 million in net outflows from the changes in our net working capital between periods.

See “—Consolidated Results of Operations” for additional information regarding the results of our operations.

Investing activities

Investing activities from continuing operations used $21.2 million and $5.2 million of cash for the six months ended June 30, 2024 and 2023, respectively.

Our net investing outflows increased primarily due to the higher level of asset acquisitions in the current period of $21.2 million compared to $5.7 million in the prior period.

Investing activities from continuing operations used $21.6 million and $6.0 million of cash for the nine months ended September 30, 2024 and 2023, respectively.

Our net investing outflows increased primarily due to the higher level of intangible asset acquisitions in the current period of $21.4 million compared to $6.3 million in the prior period.

In January 2024, we acquired the assets of nine of our independent branches for a total purchase price of $40.8 million, of which approximately $20.4 million was paid in cash, with the remainder settled through the issuance of Class A common units.

In addition, during the first half of 2024, we acquired customer lists intangible assets with annualized revenue of less than $0.5 million for a total purchase price of $0.8 million, of which approximately $0.4 million was paid in cash.

The prior period included three customer list acquisition transactions with annualized revenues greater than $0.5 million.

In addition, the Company purchased customer lists intangible assets totaling $0.9 million, of which approximately $0.4 million was paid in cash, for the nine months ended September 30, 2024 representing purchases of assets with annualized revenues less than $0.5 million.

The prior period included three customer list acquisition transactions representing purchases of assets with annualized revenues greater than $0.5 million.

Financing activities

Financing activities from continuing operations used $5.9 million and $3.4 million of cash for the six months ended June 30, 2024 and 2023, respectively.

Our net financing outflows increased primarily due to the $10.0 million in proceeds from the drawdown of the Revolving Facility in the prior period while the current period has none and the $3.2 million and $0.6 million in payments of deferred offering costs and deferred acquisition payable, respectively, in the current period while the prior period had none.

These changes were partially offset by the $5.7 million lower cash distributions in the current period compared to the prior period, and $5.8 million in higher net inflows from the change in carrier liabilities in the current period compared to the prior period.

Financing activities from continuing operations provided $147.1 million and used $6.1 million of cash for the nine months ended September 30, 2024 and 2023, respectively.

Our net financing inflows increased primarily due to $200.7 million in proceeds from the IPO, net of underwriting costs, the $8.3 million lower cash distributions in the current period compared to the prior period, and $3.1 million in higher net inflows from the change in carrier liabilities in the current period compared to the prior period.

These changes were partially offset by the decrease of $10.0 million in proceeds from the drawdown of the Revolving Facility in the prior period while the current period has none, repayment of the outstanding balance of the Revolving Facility amounting to $41.0 million using a

portion of the net proceeds from the IPO and repayment of the term loans amounting to $2.0 million in the current period while the prior period had repayment of $2.0 million, and the $7.1 million and $0.8 million in payments of deferred offering costs and deferred acquisition payable, respectively, in the current period while the prior period had $0.1 million and none, respectively.

Future sources and uses of liquidity

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We expect to have sufficient financial resources to meet our business requirements in the next 12 months and in the long term, including the ability to service our debt and contractual obligations, finance capital expenditures and make distributions, including tax distributions, to our stockholders.

Although cash from operations is expected to be sufficient to service these activities, we have the ability to borrow under our Credit Agreements to accommodate

any timing differences in cash flows.

Although cash from operations is expected to be sufficient to service these activities, we have the ability to borrow under our Credit Agreements to accommodate any timing differences in cash flows.

Additionally, we may in the future access the capital markets to obtain equity or debt financing, if needed, including to pursue acquisition opportunities.

We have certain obligations related to debt maturities and operating leases.

As of June 30, 2024, we had $1.0 million of non-cancelable operating lease obligations for the next 12 months.

As of September 30, 2024, we had $1.1 million of non-cancelable operating lease obligations for the next 12 months.

For the periods following the next 12 months, we have an additional $1.4 million of non-cancelable operating lease obligations.

See Note 5, “Operating Leases,” to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information .

In addition, as of June 30, 2024, we had $2.6 million of debt maturities for the next 12 months comprised of $0.1 million of the remaining balance on our Term B loan and $1.9 million under the Term C loan, and $0.6 million in Acquisition-related notes.

For the periods following the next 12 months, we have an additional $47.0 million of debt maturities representing $5.0 million under the Term C loan, $41.0 million under the Revolving Facility, and $1.0 million in Acquisition-related notes.

Any outstanding balances under our Revolving Facility will become due and payable during 2028.

Annual interest on the Acquisition-related notes are 3.75% and 5.0%, and our effective interest rates on the Term B loan, Term C loan and Revolving Facility for the three and six months ended June 30, 2024 were 4.15%, 3.06% and 7.66%, respectively.

We have interest rate swap agreements associated with the Term B loan and the Term C loan, which converted the floating interest rates on these loans to fixed interest rates.

In addition, as of September 30, 2024, we had $2.4 million of debt maturities for the next 12 months comprised of $1.9 million of the remaining balance under the Term Loan C, and $0.5 million in acquisition-related notes.

For the periods following the next 12 months, we have an additional $5.4 million of debt maturities representing $4.5 million under the Term Loan C, and $0.9 million in acquisition-related notes.

As of September 30, 2024, there was no outstanding balances under our Revolving Facility.

Any outstanding balances under our Revolving Facility, if any, will become due and payable during 2028.

Annual interest rates on the acquisition-related notes are 3.75% and 5.0%, and our effective interest rates on the Term Loan C for the three and nine months ended September 30, 2024 were both 3.06%.

As of September 30, 2024, we have an interest rate swap agreement associated with the Term Loan C, which converted the floating interest rates on these loans to fixed interest rates.

See Note 6 “Derivatives” and Note 8, “Debt” to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

Tax receivable agreement

As a result of its ownership of LLC Units in TWFG Holding Company, LLC, we are now subject to U.S.

As a result of our ownership of LLC Units in TWFG Holding Company, LLC, we are now subject to U.S.

federal, state and local income taxes with respect to our allocable share of any taxable income of TWFG Holding Company, LLC and are taxed at the prevailing U.S.

federal income tax rates applicable to corporations.

In addition to tax expenses, we also will incur expenses related to our operations and we will be required to make payments under the TRA.

In addition to tax expenses, we also incur expenses related to our operations and we are required to make payments under the TRA.

Due to the uncertainty of various factors, we cannot precisely quantify the likely tax benefits we will realize as a result of LLC Unit exchanges and the resulting amounts we are likely to pay out to holders of LLC Units pursuant to the TRA;

however, we estimate that such tax benefits and the related TRA payments may be substantial.

We expect that, as a result of the increases in the tax basis of the tangible and intangible assets of TWFG Holding Company, LLC attributable to taxable redemptions, exchanges or purchases of LLC Units from any of the Pre-IPO LLC Members, the payments that we may make to the Pre-IPO LLC Members could be substantial.

For example, if we acquired all of the LLC Units of the Pre-IPO LLC Members in taxable transactions as of the IPO, at the IPO price of $17.00 per share based on certain assumptions, including that (i) there are no material changes in relevant tax law and (ii) we earn sufficient taxable income in each year to realize on a current basis all tax benefits that are subject to the TRA, we expect that the resulting reduction in tax payments for us, as determined for purposes of the TRA, would aggregate to approximately $182.4 million, substantially all of which would be realized over the next 15 years, and we would be required to pay the Pre-IPO LLC Members 85% of such amount, or $155.1 million, over the same period.

The actual increases in tax basis with respect to future taxable redemptions, exchanges or purchases of LLC Units, as well as the amount and timing of any payments we are required to make under the TRA in respect of future taxable redemptions, exchanges or purchases of LLC Units, may differ materially from the amounts set forth above because the potential future reductions in our tax payments, as determined for purposes of the TRA, and the payments we will be required to make under the TRA, will each depend on a number of factors, including the market value of our Class A common stock at the time of purchase, redemption or exchange, the prevailing U.S.

For example, if we acquired all of the LLC Units of the Continuing Pre-IPO LLC Members in taxable transactions as of the IPO, at the IPO price of $17.00 per share based on certain assumptions, including that (i) there are no material changes in relevant tax law and (ii) we earn sufficient taxable income in each year to realize on a current basis all tax benefits that are subject to the TRA, we expect that the resulting reduction in tax payments for us, as determined for purposes of the TRA, would aggregate to approximately $182.4 million, substantially all of which would be realized over the next 15 years, and we would be required to pay the Continuing Pre-IPO LLC Members 85% of such amount, or $155.1 million, over the same period.

TRA, will each depend on a number of factors, including the market value of our Class A Common Stock at the time of purchase, redemption or exchange, the prevailing U.S.

federal income tax rates applicable to us over the life of the TRA (as well as the assumed combined state and local tax rate), the amount and timing of the taxable income that we generate in the future and the extent to which future redemptions, exchanges or purchases of LLC Units are taxable transactions.

Payments under the TRA are not conditioned on the Pre-IPO LLC Members’ continued ownership of us.

Payments under the TRA are not conditioned on the Continuing Pre-IPO LLC Members’ continued ownership of us.

There may be a material negative effect on our liquidity if, as described below, the payments under the TRA exceed the actual benefits we receive in respect of the tax attributes subject to the TRA and/or distributions to us by TWFG Holding Company, LLC are not sufficient to permit us to make payments under the TRA.

The TRA acceleration event provisions in the TRA may result in situations where the Pre-IPO LLC Members have interests that differ from or are in addition to those of our other stockholders.

The TRA acceleration event provisions in the TRA may result in situations where the Continuing Pre-IPO LLC Members have interests that differ from or are in addition to those of our other stockholders.

Finally, because we are a holding company with no operations of our own, our ability to make payments under the TRA depends on the ability of TWFG Holding Company, LLC to make distributions to us.

To the extent that we are unable to make payments under the TRA for any reason, such payments will be deferred and will accrue interest

until paid, which could negatively impact our results of operations and could also affect our liquidity in periods in which such payments are made.

To the extent that we are unable to make payments under the TRA for any reason, such payments will be deferred and will accrue interest until paid, which could negatively impact our results of operations and could also affect our liquidity in periods in which such payments are made.

Off-balance sheet arrangements

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We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may remain an emerging growth company for up to five years following the IPO.

For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved.

requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until such time as those standards apply to private companies.

2 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-Q

Item 2. Management’s Discussion and Analysis