• Goosehead Insurance, Inc. Announces Fourth Quarter 2022 Results

    المصدر: Nasdaq GlobeNewswire / 22 فبراير 2023 15:01:33   America/Chicago

    – Total Revenue Growth of 43% in the Fourth Quarter and 38% in the Full Year 2022 –
    – Core Revenue Growth of 49% in the Fourth Quarter and 41% in the Full Year 2022 –
    – Total Written Premium Growth of 44% in the Fourth Quarter and 42% for the Full Year –
    – Net Income Growth of 193% in the Fourth Quarter and Decline of 68% for the Full Year –
    – Adjusted EBITDA Growth of 123% in the Fourth Quarter and 76% for the Full Year 2022 –

    WESTLAKE, Texas, Feb. 22, 2023 (GLOBE NEWSWIRE) -- Goosehead Insurance, Inc. (“Goosehead” or the “Company”) (NASDAQ: GSHD), a rapidly growing independent personal lines insurance agency, today announced results for the fourth quarter ended December 31, 2022.

    Fourth Quarter 2022 Highlights

    • Total Revenues grew organically 43% over the prior-year period to $57.4 million in the fourth quarter of 2022
    • Fourth quarter Core Revenues* of $51.8 million increased 49% over the prior-year period
    • Fourth quarter net income of $2.6 million increased 193%, EPS of $0.02 per share increased 62% and adjusted EPS* of $0.11 per share increased 89%, over the prior-year period. Net income margin for the fourth quarter was 5%.
    • Adjusted EBITDA* grew 123% over the prior-year period to $11.9 million
    • Adjusted EBITDA Margin* increased 8 percentage points over the prior-year period to 21%.
    • Total written premiums placed for the fourth quarter increased 44% over the prior-year period to $585 million as pricing remains a tail-wind that will likely continue into 2023
    • Policies in force grew 27% from the prior-year period to approximately 1,284,000
    • Corporate sales headcount of 320 was down 37% year-over-year as we completed that unit’s revamp
    • Operating franchises grew 18% compared to the prior-year period to 1,413

    *Core Revenue, Adjusted EPS, Adjusted EBITDA, and Adjusted EBITDA Margin are non-GAAP measures. Reconciliations of Core Revenue to total revenues, Adjusted EBITDA to Net Income, Adjusted EBITDA Margin to Net Income Margin and Adjusted EPS to basic earnings per share, the most directly comparable financial measures presented in accordance with GAAP, are set forth in the reconciliation table accompanying this release.

    “We finished 2022 with an exceptional fourth quarter that demonstrates the strength, consistency and resilience of our incredible company. In the quarter, revenues increased 43%, core revenues grew 49% and adjusted EBITDA increased 123% with adjusted EBITDA margin up 8 percentage points,” stated Mark E. Jones, Chairman and CEO. “Premiums were up 44% and 42% for the quarter and full year, respectively, as we saw continued benefit from auto and home rates that will likely persist well into 2023 given personal lines carrier loss experience. 2022 was a year of substantial change that positions us for our next chapter of strong revenue and earnings growth. We have strengthened management, recruiting, and operations across the organization and significantly improved the overall quality of our franchise and corporate distribution. This has driven meaningful improvement in new business productivity in the fourth quarter, particularly among our less than one-year tenured agents and franchises. We expect to achieve further productivity gains and total producer growth as we progress through 2023. I couldn’t be more excited about our positioning and runway for growth in our core operations and the increased potential for newer sources of growth as we ramp up our technology and partnership execution.”

    Fourth Quarter 2022 Results
    For the fourth quarter of 2022, revenues were $57.4 million, an increase of 43% compared to the corresponding period in 2021. Core Revenues, a non-GAAP measure which excludes contingent commissions, initial franchise fees, interest income, and other income, were $51.8 million, a 49% increase from $34.8 million in the prior-year period. Core Revenues are the most reliable revenue stream for the Company, consisting of New Business Commissions, Agency Fees, New Business Royalty Fees, Renewal Commissions, and Renewal Royalty Fees. Core Revenue growth was driven by growth in operating franchises, rising premium rates, improved productivity and strong client retention of 88%. The Company grew total written premiums, which we consider to be the leading indicator of future revenue growth, by 44% in the fourth quarter.

    Total operating expenses, excluding equity-based compensation, depreciation and amortization, for the fourth quarter of 2022 were $45.5 million, up 30% from $34.9 million in the prior-year period. The increase from the prior period was due to larger employee compensation and benefits expenses related to investments in franchise recruiters, service agents, and information systems. Equity-based compensation increased to $3.3 million for the period, compared to $1.6 million a year ago. The change in this non-cash item relates to the Black-Scholes valuation of newly issued options, which takes into account stock price on the grant date and historical volatility, among other inputs. Bad debt expense of $1.4 million increased from $1.2 million a year ago due to increased terminations of signed franchises that have yet to launch. General and Administrative expenses are also higher versus a year ago due to investments in technology, systems and marketing efforts to drive growth and continue to improve the client experience.

    Net income in the fourth quarter of 2022 was $2.6 million, with the increase due to strong client retention, driving high levels of profitable renewal commissions and royalty fees. Net income attributable to Goosehead Insurance, Inc. for the fourth quarter of 2022 was $0.5 million, or $0.02 per basic and $0.02 diluted share. Adjusted EPS for the fourth quarter of 2022, which excludes equity-based compensation, was $0.11 per share. Total Adjusted EBITDA was $11.9 million for the fourth quarter of 2022 compared to $5.3 million in the prior-year period. Adjusted EBITDA Margin of 21% was up 8 percentage points in the quarter.

    Liquidity and Capital Resources
    As of December 31, 2022, the Company had cash and cash equivalents of $28.7 million. We had an unused line of credit of $49.8 million as of December 31, 2022. Total outstanding term note payable balance was $94.4 million as of December 31, 2022.

    2023 Outlook
    The Company’s outlook for full year 2023 is as follows:

    • Total written premiums placed for 2023 are expected to be between $2.83 billion and $2.96 billion, representing organic growth of 28% on the low end of the range to 34% on the high end of the range.
    • Total revenues for 2023 are expected to be between $258 million and $267 million, representing organic growth of 23% on the low end of the range to 28% on the high end of the range.
    • Adjusted EBITDA Margin is expected to expand for the full year 2023. Adjusted EBITDA margin and a reconciliation to the most comparable GAAP metric are not provided because they cannot be calculated without unreasonable efforts.

    Conference Call Information
    Goosehead will host a conference call and webcast today at 4:30 PM ET to discuss these results.

    The dial-in number for the conference call is (855) 327-6837 (toll-free) or (631) 891-4304 (international). Please dial the number 10 minutes prior to the scheduled start time.

    In addition, a live webcast of the conference call will also be available on Goosehead’s investor relations website at http://ir.gooseheadinsurance.com.

    A webcast replay of the call will be available at http://ir.gooseheadinsurance.com for one year following the call.

    About Goosehead

    Goosehead (NASDAQ: GSHD) is a rapidly growing and innovative independent personal lines insurance agency that distributes its products and services throughout the United States. Goosehead was founded on the premise that the consumer should be at the center of our universe and that everything we do should be directed at providing extraordinary value by offering broad product choice and a world-class service experience. Goosehead represents approximately 150 insurance companies that underwrite personal lines and small commercial lines risks, and its operations include a network of 12 corporate sales offices and 2,125 operating and contracted franchise locations. For more information, please visit gooseheadinsurance.com.

    Forward-Looking Statements

    This press release may contain various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which represent Goosehead’s expectations or beliefs concerning future events. Forward-looking statements are statements other than historical facts and may include statements that address future operating, financial or business performance or Goosehead’s strategies or expectations. In some cases, you can identify these statements by forward-looking words such as “may”, “might”, “will”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “projects”, “potential”, “outlook” or “continue”, or the negative of these terms or other comparable terminology. Forward-looking statements are based on management’s current expectations and beliefs and involve significant risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by these statements.

    Factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include, but are not limited to, conditions impacting insurance carriers or other parties with which Goosehead does business, the economic effects of the COVID-19 pandemic, the loss of one or more key executives or an inability to attract and retain qualified personnel and the failure to attract and retain highly qualified franchisees. These risks and uncertainties also include, but are not limited to, those described under the captions “1A. Risk Factors” in Goosehead’s Annual Report on Form 10-K for the year ended December 31, 2021 and in Goosehead’s other filings with the SEC, which are available free of charge on the Securities Exchange Commission's website at: www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. All forward-looking statements and all subsequent written and oral forward-looking statements attributable to Goosehead or to persons acting on behalf of Goosehead are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made, and Goosehead does not undertake any obligation to update them in light of new information, future developments or otherwise, except as may be required under applicable law.

    Contacts
    Investor Contact:
    Dan Farrell
    Goosehead Insurance - VP Capital Markets
    Phone: (214) 838-5290
    Email: dan.farrell@goosehead.com; IR@goosehead.com;

    PR Contact:
    Mission North for Goosehead Insurance
    Email: goosehead@missionnorth.com; PR@goosehead.com
         

    Goosehead Insurance, Inc.
    Consolidated Statements of Operations
    (Unaudited)
    (In thousands, except per share amounts)

      Three Months
    Ended December 31,    		 Full Year
    Ended December 31,
       2022   2021   2022   2021 
    Revenues:        
    Commissions and agency fees $26,589  $21,644  $100,265  $82,651 
    Franchise revenues  30,423   18,274   107,722   67,508 
    Interest income  391   312   1,403   1,153 
    Total revenues  57,403   40,230   209,390   151,312 
    Operating Expenses:        
    Employee compensation and benefits  33,822   25,182   133,293   94,978 
    General and administrative expenses  13,529   10,174   52,887   39,789 
    Bad debts  1,436   1,174   6,198   2,999 
    Depreciation and amortization  1,841   1,553   6,884   4,873 
    Total operating expenses  50,628   38,083   199,262   142,639 
    Income from operations  6,775   2,147   10,128   8,673 
    Other Income (Expense):        
    Other income  —   39   —   185 
    Interest expense  (1,588)  (951)  (4,999)  (2,854)
    Income before taxes  5,187   1,235   5,129   6,004 
    Tax expense (benefit)  2,603   354   2,499   (2,292)
    Net income  2,584   881   2,630   8,296 
    Less: net income attributable to non-controlling interests  2,083   605   2,065   2,893 
    Net income attributable to Goosehead Insurance, Inc. $501  $276  $565  $5,403 
    Earnings per share:        
    Basic $0.02  $0.01  $0.03  $0.28 
    Diluted $0.02  $0.01  $0.03  $0.26 
    Weighted average shares of Class A common stock outstanding        
    Basic  22,373   19,995   20,995   19,181 
    Diluted  23,900   21,523   21,773   20,813 


    Goosehead Insurance, Inc.
    Condensed Consolidated Statements of Operations
    (Unaudited)
    (In thousands, except per share amounts)

      Three months ended December 31, Year Ended December 31,
       2022   2021   2022   2021 
    Revenues:        
    Core Revenue:        
    Renewal Commissions(1) $16,310  $10,075  $57,543  $39,111 
    Renewal Royalty Fees(2)  22,900   12,457   77,346   46,079 
    New Business Commissions(1)  5,814   5,535   24,126   22,108 
    New Business Royalty Fees(2)  4,402   3,776   18,244   14,616 
    Agency Fees(1)  2,421   2,927   10,912   11,506 
    Total Core Revenue  51,847   34,770   188,171   133,420 
    Cost Recovery Revenue:        
    Initial Franchise Fees(2)  2,910   1,946   10,853   6,516 
    Interest Income  391   312   1,403   1,153 
    Total Cost Recovery Revenue  3,301   2,258   12,256   7,669 
    Ancillary Revenue:        
    Contingent Commissions(1)  2,044   3,107   7,684   9,926 
    Other Franchise Revenues(2)  211   95   1,279   297 
    Total Ancillary Revenue  2,255   3,202   8,963   10,223 
    Total Revenues  57,403   40,230   209,390   151,312 
    Operating Expenses:        
    Employee compensation and benefits, excluding equity-based compensation  30,536   23,534   113,651   87,686 
    General and administrative expenses  13,529   10,174   52,887   39,789 
    Bad debts  1,436   1,174   6,198   2,999 
    Total  45,501   34,882   172,736   130,474 
    Adjusted EBITDA  11,902   5,348   36,654   20,838 
    Adjusted EBITDA Margin  21%  13%  18%  14%
             
    Interest expense  (1,588)  (951)  (4,999)  (2,854)
    Depreciation and amortization  (1,841)  (1,553)  (6,884)  (4,873)
    Tax (expense) benefit  (2,603)  (354)  (2,499)  2,292 
    Equity-based compensation  (3,286)  (1,648)  (19,642)  (7,292)
    Other Income  —   39   —   185 
    Net Income $2,584  $881  $2,630  $8,296 

    (1) Renewal Commissions, New Business Commissions, Agency Fees, and Contingent Commissions are included in "Commissions and agency fees" as shown on the Consolidated statements of operations within Goosehead’s Form 10-K for the three and twelve months ended December 31, 2022 and 2021.
    (2) Renewal Royalty Fees, New Business Royalty Fees, Initial Franchise Fees, and Other Franchise Revenues are included in "Franchise revenues" as shown on the Consolidated statements of operations within Goosehead’s Form 10-K for the three and twelve months ended December 31, 2022 and 2021.

    Goosehead Insurance, Inc.
    Consolidated Supplemental Statements of Operations
    (Unaudited)
    (In thousands, except per share amounts)

      Three Months Ended December 31,
       2022   2021 
    Revenues:    
    Core Revenue:    
    Renewal Commissions(1) $16,310  $10,075 
    Renewal Royalty Fees(2)  22,900   12,457 
    New Business Commissions(1)  5,814   5,535 
    New Business Royalty Fees(2)  4,402   3,776 
    Agency Fees(1)  2,421   2,927 
    Total Core Revenue  51,847   34,770 
    Cost Recovery Revenue:    
    Initial Franchise Fees(2)  2,910   1,946 
    Interest Income  391   312 
    Total Cost Recovery Revenue  3,301   2,258 
    Ancillary Revenue:    
    Contingent Commissions(1)  2,044   3,107 
    Other Income(2)  211   95 
    Total Ancillary Revenue  2,255   3,202 
    Total Revenues  57,403   40,230 
    Operating Expenses:    
    Employee compensation and benefits  33,822   25,182 
    General and administrative expenses  13,529   10,174 
    Bad debts  1,436   1,174 
    Depreciation and amortization  1,841   1,553 
    Total operating expenses  50,628   38,083 
    Income from operations  6,775   2,147 
    Other Income (Expense):    
    Other income  —   39 
    Interest expense  (1,588)  (951)
    Income before taxes  5,187   1,235 
    Tax expense  2,603   354 
    Net Income  2,584   881 
    Less: net income attributable to non-controlling interests  2,083   605 
    Net Income attributable to Goosehead Insurance Inc. $501  $276 
         
    Earnings per share:    
    Basic $0.02  $0.01 
    Diluted $0.02  $0.01 
    Weighted average shares of Class A common stock outstanding    
    Basic  22,373   19,995 
    Diluted  23,900   21,523 

    (1) Renewal Commissions, New Business Commissions, Agency Fees, and Contingent Commissions are included in "Commissions and agency fees" as shown on the Consolidated statements of operations within Goosehead’s Form 10-K for the year ended December 31, 2022 and 2021.
    (2) Renewal Royalty Fees, New Business Royalty Fees, Initial Franchise Fees, and Other Income are included in "Franchise revenues" as shown on the Consolidated statements of operations within Goosehead’s Form 10-K for the year ended December 31, 2022 and 2021.

    Goosehead Insurance, Inc.
    Consolidated Supplemental Statements of Operations
    (Unaudited)
    (In thousands, except per share amounts)

      Full Year Ended December 31,
       2022   2021 
    Revenues:    
    Core Revenue:    
    Renewal Commissions(1) $57,543  $39,111 
    Renewal Royalty Fees(2)  77,346   46,079 
    New Business Commissions(1)  24,126   22,108 
    New Business Royalty Fees(2)  18,244   14,616 
    Agency Fees(1)  10,912   11,506 
    Total Core Revenue  188,171   133,420 
    Cost Recovery Revenue:    
    Initial Franchise Fees(2)  10,853   6,516 
    Interest Income  1,403   1,153 
    Total Cost Recovery Revenue  12,256   7,669 
    Ancillary Revenue:    
    Contingent Commissions(1)  7,684   9,926 
    Other Income(2)  1,279   297 
    Total Ancillary Revenue  8,963   10,223 
    Total Revenues  209,390   151,312 
    Operating Expenses:    
    Employee compensation and benefits  133,293   94,978 
    General and administrative expenses  52,887   39,789 
    Bad debts  6,198   2,999 
    Depreciation and amortization  6,884   4,873 
    Total operating expenses  199,262   142,639 
    Income from operations  10,128   8,673 
    Other Income (Expense):    
    Other income  —   185 
    Interest expense  (4,999)  (2,854)
    Income before taxes  5,129   6,004 
    Tax (benefit) expense  2,499   (2,292)
    Net Income  2,630   8,296 
    Less: net income attributable to non-controlling interests  2,065   2,893 
    Net Income attributable to Goosehead Insurance Inc. $565  $5,403 
         
    Earnings per share:    
    Basic  0.03   0.28 
    Diluted  0.03   0.26 
    Weighted average shares of Class A common stock outstanding    
    Basic  20,995   19,181 
    Diluted  21,773   20,813 

    (1) Renewal Commissions, New Business Commissions, Agency Fees, and Contingent Commissions are included in "Commissions and agency fees" as shown on the Consolidated statements of operations within Goosehead’s Form 10-K for the year ended December 31, 2022 and 2021.
    (2) Renewal Royalty Fees, New Business Royalty Fees, Initial Franchise Fees, and Other Income are included in "Franchise revenues" as shown on the Consolidated statements of operations within Goosehead’s Form 10-K for the year ended December 31, 2022 and 2021.

    Goosehead Insurance, Inc.
    Consolidated Balance Sheets
    (Unaudited)
    (In thousands, except per share amounts)

      December 31,
       2022   2021 
    Assets    
    Current Assets:    
    Cash and cash equivalents $28,743  $28,526 
    Restricted cash  1,644   1,953 
    Commissions and agency fees receivable, net  14,440   12,056 
    Receivable from franchisees, net  5,012   2,986 
    Prepaid expenses  4,334   4,785 
    Total current assets  54,173   50,306 
    Receivable from franchisees, net of current portion  23,755   29,180 
    Property and equipment, net of accumulated depreciation  35,347   24,933 
    Right-of use asset  44,080   32,656 
    Intangible assets, net of accumulated amortization  4,487   2,798 
    Deferred income taxes, net  155,318   125,676 
    Other assets  4,193   4,742 
    Total assets $321,353  $270,291 
    Liabilities and Stockholders’ Equity    
    Current Liabilities:    
    Accounts payable and accrued expenses $15,958  $12,995 
    Premiums payable  1,644   1,953 
    Lease liability  6,627   4,893 
    Contract liabilities  6,031   6,054 
    Note payable  6,875   4,375 
    Total current liabilities  37,135   30,270 
    Lease liability, net of current portion  64,947   47,335 
    Note payable, net of current portion  86,711   118,361 
    Contract liabilities, net of current portion  40,522   42,554 
    Liabilities under tax receivable agreement, net of current portion  125,662   100,959 
    Total liabilities  354,977   339,479 
    Commitments and contingencies (see notes 9, 15, and 17)    
    Class A common stock, $0.01 par value per share 300,000,000 shares authorized, 22,977,154 shares issued and outstanding as of December 31, 2022, 20,198,005 issued and outstanding as of December 31, 2021  228   200 
    Class B common stock, $0.01 par value per share - 50,000,000 shares authorized, 14,470,623 issued and outstanding as of December 31, 2022, 16,909,343 issued and outstanding as of December 31, 2021  146   170 
    Additional paid in capital  70,866   46,281 
    Accumulated deficit  (60,570)  (60,671)
    Total stockholders' equity and members' deficit  10,670   (14,020)
    Non-controlling interests  (44,294)  (55,168)
    Total equity  (33,624)  (69,188)
    Total liabilities and equity $321,353  $270,291 

    Goosehead Insurance, Inc.
    Reconciliation Non-GAAP Measures to GAAP

    This release includes Core Revenue, Cost Recovery Revenue, Ancillary Revenue, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EPS that are not required by, nor presented in accordance with, generally accepted accounting principles in the United States (“GAAP”). The Company refers to these measures as “non-GAAP financial measures.” The Company uses these non-GAAP financial measures when planning, monitoring and evaluating its performance and considers these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures, tax position, depreciation, amortization and certain other items that the Company believes are not representative of its core business. The Company uses Core Revenue, Cost Recovery Revenue, Ancillary Revenue, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted EPS for business planning purposes and in measuring its performance relative to that of its competitors.

    These non-GAAP financial measures are defined by the Company as follows:

    • "Core Revenue" is a supplemental measure of our performance and includes Renewal Commissions, Renewal Royalty Fees, New Business Commissions, New Business Royalty Fees, and Agency Fees. We believe that Core Revenue is an appropriate measure of operating performance because it summarizes all of our revenues from sales of individual insurance policies.
    • "Cost Recovery Revenue" is a supplemental measure of our performance and includes Initial Franchise Fees and Interest Income. We believe that Cost Recovery Revenue is an appropriate measure of operating performance because it summarizes revenues that are viewed by management as cost recovery mechanisms.
    • "Ancillary Revenue" is a supplemental measure of our performance and includes Contingent Commissions and Other Income. We believe that Ancillary Revenue is an appropriate measure of operating performance because it summarizes revenues that are ancillary to our core business.
    • "Adjusted EBITDA" is a supplemental measure of the Company's performance. We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of items that do not relate to business performance. Adjusted EBITDA is defined as net income (the most directly comparable GAAP measure) before interest, income taxes, depreciation and amortization, adjusted to exclude equity-based compensation and other non-operating items, including, among other things, certain non-cash charges and certain non-recurring or non-operating gains or losses.
    • "Adjusted EBITDA Margin" is Adjusted EBITDA as defined above, divided by total revenue excluding other non-operating items. Adjusted EBITDA Margin is helpful in measuring profitability of operations on a consolidated level.
    • "Adjusted EPS" is a supplemental measure of our performance, defined as earnings per share (the most directly comparable GAAP measure) before non-recurring or non-operating income and expenses. Adjusted EPS is a useful measure to management because it eliminates the impact of items that do not relate to business performance and helps measure our profitability on a consolidated level.

    While the Company believes that these non-GAAP financial measures are useful in evaluating its business, this information should be considered as supplemental in nature and is not meant as a substitute for revenues, net income, or earnings per share, in each case as recognized in accordance with GAAP. In addition, other companies, including companies in the Company’s industry, may calculate such measures differently, which reduces their usefulness as comparative measures.

    The following tables show a reconciliation from total revenues to Core Revenue, Cost Recovery Revenue, and Ancillary Revenue (non-GAAP basis) for the years ended December 31, 2022 and 2021 (in thousands):

     Full Year Ended December 31,
     2022 2021
    Total Revenues$209,390 $151,312
        
    Core Revenue:   
    Renewal Commissions(1)$57,543 $39,111
    Renewal Royalty Fees(2) 77,346  46,079
    New Business Commissions(1) 24,126  22,108
    New Business Royalty Fees(2) 18,244  14,616
    Agency Fees(1) 10,912  11,506
    Total Core Revenue 188,171  133,420
    Cost Recovery Revenue:   
    Initial Franchise Fees(2) 10,853  6,516
    Interest Income 1,403  1,153
    Total Cost Recovery Revenue 12,256  7,669
    Ancillary Revenue:   
    Contingent Commissions(1) 7,684  9,926
    Other Income(2) 1,279  297
    Total Ancillary Revenue 8,963  10,223
    Total Revenues$209,390 $151,312

    (1) Renewal Commissions, New Business Commissions, Agency Fees, and Contingent Commissions are included in "Commissions and agency fees" as shown on the Consolidated statements of operations.

    (2) Renewal Royalty Fees, New Business Royalty Fees, Initial Franchise Fees, and Other Income are included in "Franchise revenues" as shown on the Consolidated statements of operations.

    The following tables show a reconciliation from total revenues to Core Revenue, Cost Recovery Revenue, and Ancillary Revenue (non-GAAP basis) for the three months ended December 31, 2022 and 2021 (in thousands):

     Three Months Ended December 31,
     2022 2021
    Total Revenues$57,403 $40,230
        
    Core Revenue:   
    Renewal Commissions(1)$16,310 $10,075
    Renewal Royalty Fees(2) 22,900  12,457
    New Business Commissions(1) 5,814  5,535
    New Business Royalty Fees(2) 4,402  3,776
    Agency Fees(1) 2,421  2,927
    Total Core Revenue 51,847  34,770
    Cost Recovery Revenue:   
    Initial Franchise Fees(2) 2,910  1,946
    Interest Income 391  312
    Total Cost Recovery Revenue 3,301  2,258
    Ancillary Revenue:   
    Contingent Commissions(1) 2,044  3,107
    Other Income(2) 211  95
    Total Ancillary Revenue 2,255  3,202
    Total Revenues$57,403 $40,230

    (1) Renewal Commissions, New Business Commissions, Agency Fees, and Contingent Commissions are included in "Commissions and agency fees" as shown on the Consolidated statements of operations.

    (2) Renewal Royalty Fees, New Business Royalty Fees, Initial Franchise Fees, and Other Income are included in "Franchise revenues" as shown on the Consolidated statements of operations.

    The following tables show a reconciliation from net income to Adjusted EBITDA and Adjusted EBITDA Margin (non-GAAP basis) for the years ended December 31, 2022 and 2021 (in thousands):

      Full Year Ended December 31,
      2022
    		 2021
    Net income $2,630  $8,296 
    Interest expense  4,999   2,854 
    Depreciation and amortization  6,884   4,873 
    Tax expense (benefit)  2,499   (2,292)
    Equity-based compensation  19,642   7,292 
    Other income (expense, including state franchise tax)  —   (185)
    Adjusted EBITDA $36,654  $20,838 
    Net Income Margin(1)  1%  5%
    Adjusted EBITDA Margin(2)  18%  14%

    (1) Net Income Margin is calculated as Net Income divided by Total Revenue ($2,630 / $209,390) and ($8,296 /$151,312) for the years ended December 31, 2022 and 2021.

    (2) Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by Total Revenue ($36,654 / $209,390) and ($20,838 /$151,312) for the years ended December 31, 2022 and 2021.

    The following tables show a reconciliation from net income to Adjusted EBITDA and Adjusted EBITDA Margin (non-GAAP basis) for the three months ended December 31, 2022 and 2021 (in thousands):

      Three Months Ended December 31,
      2022
    		 2021
    Net income $2,584  $881 
    Interest expense  1,588   951 
    Depreciation and amortization  1,841   1,553 
    Tax expense  2,603   354 
    Equity-based compensation  3,286   1,648 
    Other income (expense, including state franchise tax)  —   (39)
    Adjusted EBITDA $11,902  $5,348 
    Net Income Margin(1)  5%  2%
    Adjusted EBITDA Margin(2)  21%  13%

    (1) Net Income Margin is calculated as Net Income divided by Total Revenue ($2,584 / $57,403) and ($881 / $40,230) for the three months ended December 31, 2022 and 2021.

    (2) Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by Total Revenue ($11,902 / $57,403) and ($5,348 / $40,230) for the three months ended December 31, 2022 and 2021.

    The following tables show a reconciliation from basic earnings per share to Adjusted EPS (non-GAAP basis) for the years ended December 31, 2022 and 2021 (in thousands, except per share amounts). Note that totals may not sum due to rounding:

      Full Year Ended December 31,
      2022 2021
    Earnings per share - basic (GAAP) $0.03 $0.28
    Add: equity-based compensation(1)  0.52  0.20
    Adjusted EPS (non-GAAP) $0.55 $0.48

    (1) Calculated as equity-based compensation divided by sum of weighted average outstanding Class A and Class B shares [ $19.6 million / ( 21.0 million + 16.2 million )] for the year ended December 31, 2022 and [ $7.3 million / ( 19.2 million + 17.7 million )] for the year ended December 31, 2021.

    The following tables show a reconciliation from basic earnings per share to Adjusted EPS (non-GAAP basis) for the three months ended December 31, 2022 and 2021 (in thousands, except per share amounts). Note that totals may not sum due to rounding:

      Three Months Ended December 31,
      2022 2021
    Earnings per share - basic (GAAP) $0.02 $0.01
    Add: equity-based compensation(1)  0.09  0.04
    Adjusted EPS (non-GAAP) $0.11 $0.06

    (1) Calculated as equity-based compensation divided by sum of weighted average outstanding Class A and Class B shares [ $3.3 million / ( 22.4 million + 15.0 million )] for the three months ended December 31, 2022 and [ $1.6 million / ( 20.0 million + 17.1 million )] for the three months ended December 31, 2021.

    Goosehead Insurance, Inc.
    Key Performance Indicators

      December 31, 2022 December 31, 2021
    Corporate sales agents < 1 year tenured 165  293 
    Corporate sales agents > 1 year tenured 155  213 
    Operating franchises < 1 year tenured (TX) 71  57 
    Operating franchises > 1 year tenured (TX) 236  214 
    Operating franchises < 1 year tenured (Non-TX) 401  333 
    Operating franchises > 1 year tenured (Non-TX) 705  594 
    Policies in Force (in thousands) 1,284  1,011 
    Client Retention 88% 89%
    Premium Retention 100% 93%
    QTD Written Premium (in thousands) 584,575  407,291 
    Net Promoter Score ("NPS") 90  91 

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