Goosehead Insurance, Inc 10-Q for FY2023 Q2

Goosehead Insurance, Inc. (GSHD)

10-Q 2023-07-27 For: 2023-06-30

Added on April 04, 2026

About this 10-Q

Goosehead Insurance, Inc filed this 10-Q on July 27, 2023, covering the quarter ended June 30, 2023 (FY2023 Q2).

Headline figures

Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $69.28M; up 30.7% from $53.02M a year earlier
Net income: $3.67M; up 971.9% from net income of $342K a year earlier
Diluted EPS: $0.15; up 650.0% from $0.02 a year earlier

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


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



		Page
Part I
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36

Part II
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38

SIGNATURES		38


		Page
Condensed Consolidated Statements of Operations		6
Condensed Consolidated Balance Sheets		7
Condensed Consolidated Statements of Stockholders' Equity		8
Condensed Consolidated Statements of Cash Flows		10
Notes to the Condensed Consolidated Financial Statements		11
Note 1	Organization	11
Note 2	Summary of significant accounting policies	11
Note 3	Revenues	14
Note 4	Franchise fees receivable	16
Note 5	Allowance for uncollectible agency fees	16
Note 6	Property and equipment	17
Note 7	Debt	17
Note 8	Income taxes	18
Note 9	Stockholder's equity	19
Note 10	Non-controlling interest	20
Note 11	Equity-based compensation	21

Note 12	Litigation	21


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues:
Commissions and agency fees	$	31,173	$	26,265	$	56,657	$	46,274
Franchise revenues	37,687		26,427		69,761		47,377
Interest income	417		330		814		649
Total revenues	69,277		53,022		127,232		94,300
Operating Expenses:
Employee compensation and benefits	37,483		31,659		74,365		63,143
General and administrative expenses	17,332		12,378		33,188		25,902
Bad debts	900		1,660		2,555		2,456
Depreciation and amortization	2,372		1,658		4,465		3,234
Total operating expenses	58,087		47,355		114,573		94,735
Income (loss) from operations	11,190		5,667		12,659		(435)
Other Income (Expense):

Interest expense	(1,709)		(1,114)		(3,440)		(1,997)
Income (loss) before taxes	9,481		4,553		9,219		(2,432)
Tax expense	2,301		2,164		2,220		562
Net income (loss)	7,180		2,389		6,999		(2,994)
Less: net income (loss) attributable to non-controlling interests	3,514		2,047		3,414		(1,050)
Net income (loss) attributable to Goosehead Insurance, Inc.	$	3,666	$	342	$	3,585	$	(1,944)
Earnings per share:
Basic	$	0.15	$	0.02	$	0.15	$	(0.10)
Diluted	$	0.15	$	0.02	$	0.15	$	(0.10)
Weighted average shares of Class A common stock outstanding
Basic	23,689		20,454		23,448		20,348
Diluted	24,333		21,245		23,981		20,348


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	June 30,		December 31,
	2023		2022
Assets
Current Assets:
Cash and cash equivalents	$	19,131	$	28,743
Restricted cash	1,790		1,644

Commissions and agency fees receivable, net	10,459		14,440
Receivable from franchisees, net	9,489		4,932
Prepaid expenses	12,046		4,334

Total current assets	52,915		54,093
Receivable from franchisees, net of current portion	15,446		23,835
Property and equipment, net of accumulated depreciation	33,176		35,347
Right-of-use asset	41,177		44,080
Intangible assets, net of accumulated amortization	12,384		4,487
Deferred income taxes, net	164,549		155,318
Other assets	3,532		4,193
Total assets	$	323,179	$	321,353
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and accrued expenses	$	14,238	$	15,958
Premiums payable	1,790		1,644

Lease liability	8,468		6,627

Contract liabilities	5,207		6,031
Note payable	8,125		6,875
Total current liabilities	37,828		37,135
Lease liability, net of current portion	61,662		64,947

Note payable, net of current portion	72,449		86,711
Contract liabilities, net of current portion	30,992		40,522
Liabilities under tax receivable agreement	133,696		125,662
Total liabilities	336,627		354,977

Class A common stock, $0.01 par value per share - 300,000 shares authorized, 23,900 shares issued and outstanding as of June 30, 2023, 23,034 shares issued and outstanding as of December 31, 2022	237		228
Class B common stock, $0.01 par value per share - 50,000 shares authorized, 13,795 issued and outstanding as of June 30, 2023, 14,471 shares issued and outstanding as of December 31, 2022	139		146
Additional paid in capital	86,859		70,866
Accumulated deficit	(57,565)		(60,570)
Total stockholders' equity	29,670		10,670
Non-controlling interests	(43,118)		(44,294)
Total equity	(13,448)		(33,624)
Total liabilities and equity	$	323,179	$	321,353


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

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




Distributions	—	—	—		—		—		—		—		(5,206)		(5,206)
Net income	—	—	—		—		—		3,666		3,666		3,514		7,180
Exercise of stock options	167	—	2		—		3,516		—		3,518		—		3,518
Equity-based compensation	—	—	—		—		5,872		—		5,872		—		5,872
Activity under employee stock purchase plan	2	—	—		—		144		—		144		—		144
Redemption of LLC Units	352	(352)	4		(4)		(1,112)		—		(1,112)		1,112		—
Deferred tax adjustments related to Tax Receivable Agreement	—	—	—		—		870		—		870		157		1,027
Reallocation of Non-controlling interest	—	—	—		—		—		(477)		(477)		477		—
Balance June 30, 2023	23,900	13,795	$	237	$	139	$	86,859	$	(57,565)	$	29,670	$	(43,118)	$	(13,448)


Goosehead Insurance, Inc.
Notes to the Condensed Consolidated Financial Statements (Unaudited)


	June 30, 2023		December 31, 2022		Increase/(decrease)
Cost to obtain franchise contracts(1)	$	2,904	$	3,255	$	(351)
Commissions and agency fees receivable, net(2)	10,459		14,440		(3,981)
Receivable from franchisees(2)	24,935		28,767		(3,832)
Contract liabilities(2)(3)	36,199		46,553		(10,354)



Contract liabilities at December 31, 2022	$	46,553
Revenue recognized during the period	(6,350)
New deferrals(1)	2,780
Write offs(2)	(6,784)
Contract liabilities at June 30, 2023	$	36,199


	June 30, 2023		December 31, 2022
Franchise fees receivable(1)	$	24,324	$	35,606
Less: Unamortized discount(1)	(7,067)		(9,896)
Less: Allowance for uncollectible franchise fees(1)	(421)		(487)
Net franchise fees receivable(1)	$	16,836	$	25,223


Balance at December 31, 2022	$	487
Charges to bad debts	823
Write offs	(889)
Balance at June 30, 2023	$	421

Balance at December 31, 2021	$	303
Charges to bad debts	1,341
Write offs	(1,217)
Balance at June 30, 2022	$	427


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Type of revenue stream:
Commissions and agency fees
Renewal Commissions	$	18,541	$	14,541	$	34,359	$	24,748
New Business Commissions	6,257		6,730		11,774		12,097
Agency Fees	2,404		3,114		4,634		5,751
Contingent Commissions	3,971		1,880		5,890		3,678
Franchise revenues
Renewal Royalty Fees	27,552		18,870		50,304		32,872
New Business Royalty Fees	6,267		4,821		11,909		9,113
Initial Franchise Fees	3,287		2,591		6,350		4,887
Other Franchise Revenues	581		145		1,198		505
Interest Income	417		330		814		649
Total Revenues	$	69,277	$	53,022	$	127,232	$	94,300

Timing of revenue recognition:
Transferred at a point in time	$	27,202	$	24,385	$	50,767	$	42,596
Transferred over time	42,075		28,637		76,465		51,704
Total Revenues	$	69,277	$	53,022	$	127,232	$	94,300


	June 30, 2023		December 31, 2022
Furniture & fixtures	$	11,090	$	9,772
Computer equipment	4,069		4,041
Network equipment	426		423
Phone system	326		326
Leasehold improvements	36,297		36,009
Total	52,208		50,571
Less accumulated depreciation	(19,032)		(15,224)
Property and equipment, net	$	33,176	$	35,347


Leverage Ratio			Interest Rate
< 1.50x			SOFR + 175 bps
> 1.50x			SOFR + 200 bps
> 2.50x			SOFR + 225 bps
> 3.50x			SOFR + 250 bps


	Amount
2023	$	3,750
2024	9,375
2025	10,000
2026	58,125
2027	—
Total	$	81,250


	June 30, 2023
	LLC Units	Ownership %
Number of LLC Units held by GSHD	23,900	63.4%
Number of LLC Units held by non-controlling interest holders	13,795	36.6%
Number of LLC Units outstanding	37,695	100.0%


	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2023			2022			2023			2022
Core Revenue:
Renewal Commissions(1)	$18,541	27	%	$14,541	27	%	$34,359	27	%	$24,748	26	%
Renewal Royalty Fees(2)	27,552	40	%	18,870	36	%	50,304	40	%	32,872	35	%
New Business Commissions(1)	6,257	9	%	6,730	13	%	11,774	9	%	12,097	13	%
New Business Royalty Fees(2)	6,267	9	%	4,821	9	%	11,909	9	%	9,113	10	%
Agency Fees(1)	2,404	3	%	3,114	6	%	4,634	4	%	5,751	6	%
Total Core Revenue	61,021	88	%	48,076	91	%	112,980	89	%	84,581	90	%
Cost Recovery Revenue:
Initial Franchise Fees(2)	3,287	5	%	2,591	5	%	6,350	5	%	4,887	5	%
Interest Income	417	1	%	330	1	%	814	1	%	649	1	%
Total Cost Recovery Revenue	3,704	5	%	2,921	6	%	7,164	6	%	5,536	6	%
Ancillary Revenue:
Contingent Commissions(1)	3,971	6	%	1,880	4	%	5,890	5	%	3,678	4	%
Other Franchise Revenues(2)	581	1	%	145	—	%	1,198	1	%	505	1	%
Total Ancillary Revenue	4,552	7	%	2,025	4	%	7,088	6	%	4,183	4	%
Total Revenues	$69,277	100	%	$53,022	100	%	$127,232	100	%	$94,300	100	%


	Three Months Ended June 30,				% Change
	2023		2022
Corporate sales Total Written Premium	$	179,638	$	146,844	22	%
Franchise sales Total Written Premium	587,614		419,117		40	%
Total Written Premium	$	767,252	$	565,961	36	%


	Contractual obligations, commitments and contingencies
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Operating leases(1)	$	80,528	$	10,843	$	23,054	$	22,846	$	23,785
Debt obligations payable(2)	81,250		8,125		17,500		55,625		—
Interest expense(3)	14,923		5,649		8,272		1,002		—
Liabilities under the tax receivable agreement(4)	134,159		463		32,806		16,076		84,814
Total	$	310,860	$	25,080	$	81,632	$	95,549	$	108,599


Exhibit 10.1			Agreement, dated April 26, 2023, between Goosehead Insurance and P. Ryan Langston (incorporated by reference to exhibit 10.1 to Goosehead Insurance Inc.'s Quarterly Report on Form 10-Q filed with the Commission on April 28, 2023)
Exhibit 31.1			Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2			Certifications of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32			Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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