TWFG Inc.

03/10/2026 | Press release | Distributed by Public on 03/10/2026 04:01

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. 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 sections entitled Item 1A. "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements".
The following discussion provides commentary on the financial results derived from our audited financial statements for the years ended December 31, 2025 and 2024 prepared in accordance with GAAP. In addition, we regularly review the following non-GAAP measures when assessing performance: Organic Revenue, Organic Revenue Growth, Adjusted Net Income, Adjusted Net Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Diluted Earnings Per Share and Adjusted Free Cash Flow. See "Non-GAAP Financial Measures"for further information. Discussions of fiscal year 2023 items and year-to-year comparisons between fiscal 2024 and fiscal 2023 that are not included in this Form 10-K can be found in "Part II Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which was filed with the SEC on March 27, 2025 and is available on the SEC's website at www.sec.gov.
Overview
We are a leading, high-growth, independent distribution platform for personal and commercial insurance in the U.S. We are pioneers in the insurance industry, developing an agency model built on innovation and experience with what we believe is a more flexible approach than traditional distribution models. Our offerings are fulsome and flexible in that we offer all lines of insurance, multiple distribution contract options, M&A services, proprietary virtual assistants, proprietary technology, proprietary premium financing, unlimited continuing education, recognition programs, co-op funding, marketing support and overall lower costs to operate. Since our founding in 2001 by our Chief Executive Officer, Richard F. ("Gordy") Bunch III, we have established a track record of creating solutions for independent agents, insurance carriers and our Clients, with growth regardless of economic and P&C pricing cycles.
We embrace a simple philosophy: "Our Policy is Caring" which is more than a motto. This philosophy informs the way we interact with all of our stakeholders and the communities in which they live and work. We seek to attract partners who come in every day with the commitment to making a difference in the lives of the people and communities we interact with. We treat our Clients, employees and stakeholders like family.
Key Operational and Market Factors Impacting 2025 Results
Our results of operations for the year ended December 31, 2025 were influenced by a combination of operational execution, industry conditions, and strategic actions taken during the year. The most significant factors impacting our 2025 results, as compared to 2024, are discussed below.
Organic Revenue Growth Driven by Agent Productivity and Retention. A primary driver of our 2025 results was continued Organic Revenue Growth, which increased by 11.6% year-over-year. This growth was principally attributable to increases in Total Written Premium generated by existing TWFG Agencies, reflecting higher policy renewal rates, incremental cross-selling of additional lines of coverage, and overall growth in insured values across our personal and commercial lines portfolios.
Our ability to attract and retain experienced agents continued to support this growth. Many agents joining our platform during prior periods reached higher productivity levels in 2025 as their Books of Business started to mature. In addition, retention of existing agents remained strong, which contributed to stability in renewal business and predictable commission revenue streams. These factors collectively contributed to increased commission income without a commensurate increase in fixed operating costs.
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Insurance Market Pricing Environment and Commission Dynamics. The insurance pricing environment during 2025 continued to support revenue growth, although conditions varied by line of business and over the course of the year. In homeowners insurance, premium rates remained firm throughout the year, reflecting continued pressure from catastrophe losses, reinsurance costs, social inflation and higher insured values, which contributed to increased commission revenue on both new and renewal policies.
In personal auto insurance, the pricing environment began to moderate during the second half of 2025 following several years of significant rate increases. While premium growth slowed as carriers reduced the pace of rate actions and competitive dynamics began to normalize, commission revenue continued to benefit from the elevated premium base established in prior periods, particularly on renewal business.
Commission rates set by carriers remained generally stable during 2025. As a result, changes in commission revenue were driven primarily by movements in premiums rather than changes in commission percentages. Overall, pricing dynamics in 2025 contributed positively to average revenue per policy as compared to 2024, although management observed early signs of stabilization in certain personal lines toward the end of the year. Management continues to monitor carrier pricing actions and competitive conditions, as further shifts in market dynamics could influence future revenue growth rates.
Acquisitions and Expansion of Corporate Branches. During 2025, we completed seven acquisitions for total consideration of $51.0 million, which were added as Corporate Branches. In the second quarter of 2025, we also acquired a 50.1% equity interest in TWFG MGA FL for a total cash consideration of $9.7 million at closing. These acquisitions contributed incremental revenue during the year, reflecting the full economic benefit of retaining 100% of commission income generated by these operations, offset by the assumption of their operating expenses.
The acquired branches were generally profitable at the time of acquisition and were accretive to both net income and Adjusted EBITDA in 2025. As a result, acquisition-related growth contributed to total revenue growth in excess of organic growth alone. Comparability between periods is impacted by the timing of these acquisitions, as results for 2025 include partial-year contributions that were not present in 2024.
Expense Growth and Operating Leverage. Operating expenses increased in 2025 primarily due to higher compensation costs, technology costs, and incremental public company costs. Compensation-related expenses increased as we continued to invest in personnel to support agent growth, corporate branch integration, technology initiatives, and compliance requirements associated with being a public company.
Despite these increases, we achieved operating leverage in 2025, as revenue growth outpaced expense growth, resulting in improvements in Adjusted EBITDA and Adjusted EBITDA Margin. Management continues to focus on balancing investment in growth initiatives with disciplined expense management to support sustainable margin expansion over time.
Technology Investments and Platform Scalability. Ongoing investment in technology and operational infrastructure supported scalability across our platform in 2025. Enhancements to our agency management systems, data analytics capabilities, and back-office processes improved operational efficiency and supported higher transaction volumes without proportional increases in headcount.
These investments contributed to improved service levels for agents and clients, supporting organic growth, while also moderating the rate of growth in general and administrative expenses relative to revenue. Although technology investments increased operating expenses in the near term, management believes they enhance long-term scalability and margin performance.
Our corporate structure
TWFG was incorporated on January 8, 2024 for the purpose of completing the Reorganization Transactions that were completed on July 19, 2024. Following our 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. All of our business is conducted through TWFG Holding and its consolidated subsidiaries, and the financial results of TWFG Holding and its consolidated subsidiaries are included in the consolidated financial statements of TWFG.
TWFG Holding is treated as a pass-through entity for U.S. federal and certain state income tax purposes and accordingly has not been subject to U.S. federal or applicable state income tax. Accordingly, because of our ownership of the LLC Units, we are subject to U.S. federal, state and local income taxes with respect to our
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allocable share of anynet taxable income of TWFG Holding and are taxed at the U.S. federal income tax rates applicable tocorporations.
In connection with our organizational structure, we entered into the Tax Receivable Agreement with certain pre-IPO owners. The Tax Receivable Agreement provides for the payment by the Company of a portion of the tax benefits realized as a result of increases in tax basis and other tax attributes resulting from exchanges of LLC units for shares of Class A Common Stock. No amounts are payable under the TRA, and no related liability is recorded, unless and until such exchanges occur. As of December 31, 2025, no exchanges had occurred, and accordingly, the Tax Receivable Agreement had no impact on our consolidated financial statements.
Certain income statement line items
Commission income.We derive commission income from the placement of insurance contracts between insurance carriers and Clients. Our commissions are established by the agency agreement between the Company and the insurance carrier and are calculated as a percentage of premiums for the underlying insurance contract. Commission rates vary across insurance carriers, states and lines of business and typically range from 7% to 30%. Our average commission rate for 2025 was approximately 12.8%.
Our main obligation under our agency agreements with the insurance carriers is selling insurance contracts to our Clients. Each underlying insurance contract is a separate and distinct contract between the Client and the insurance carrier. Our Clients are not obligated to keep the insurance contract for the full term or renew it with the insurance carrier beyond its initial term. We are required to try to resell the insurance contract to our Client at the expiration of each policy term or shop for alternatives if our Client decides to terminate its existing insurance contract. We recognize commission income when the performance obligation of placing the insurance contract between our Client and the insurance carrier has been met and the insurance contract is in effect, based on its effective date.
Our agency agreements with the insurance carriers are non-exclusive and can typically be terminated unilaterally by either party. Additionally, either party can agree to amend the provisions of the agency agreements, which may affect our future commission income.
Contingent income.We may earn contingent income from insurance carriers. Contingent income is highly variable and based primarily on underwriting results and, to a lesser extent, volume placed with the carrier.
Fee income.Fee income is comprised primarily of policy fees, branch fees, license fees and third-party administrator ("TPA") fees. The Company receives policy fees as compensation for administrative services performed in connection with the placement and issuance of certain policies that are in addition to and separate from commissions paid by the insurance carriers. Branch fees include the monthly recurring fees assessed for the ongoing Client service and back-office support provided to independent branches operating exclusively through the Company pursuant to an exclusive Branch agreement and a one-time branch onboarding fee. License fees are usage-based fees assessed by the Company for the use of its proprietary applications. TPA fees are related to services performed based on service agreements with the insurance carriers.
Other income.Other income is comprised primarily of income earned for facilitating premium financing arrangements, fees assessed for agent conventions, interest income on fiduciary funds, 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):
Years Ended December 31,
2025 2024
Amount % of Total Amount % of Total
Commission income
$ 220,968 89 % $ 183,158 90 %
Contingent income
13,111 5 8,722 4
Fee income
12,992 5 10,562 5
Other income
1,441 1 1,318 1
Total revenues
$ 248,512 100 % $ 203,760 100 %
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Commission expense.Commission expense is our largest expense, representing the consideration paid to our agents for producing and retaining business. We expect our commission expense to continue to increase corresponding with our expected business growth.
Salaries and employee benefits.Salaries and employee benefits consist of base compensation and any bonuses, equity compensation and benefits paid and payable to employees. We operate in competitive markets and expect to continue to experience a general rise in compensation and benefits expense commensurate with expected growth in headcount, geographic expansion and the creation of new products and services.
Other administrative expenses.Other administrative expenses include technology costs, legal and professional fees, office expenses, marketing expenses, survey expenses and other costs associated with our operations. Fluctuations in other administrative expenses are relative to the overall scale of our business operations.
Depreciation and amortization.Depreciation and amortization are primarily comprised of the amortization of finite-lived intangible assets recognized from our strategic asset acquisitions. As we continue to pursue strategic asset acquisitions, we expect our amortization expense to increase.
Interest expense. Interest expense consists of interest payable on indebtedness, commitment fees and imputed interest on Deferred Acquisition Payables.
Interest income.Interest income consists of interest earned on the Company's cash and cash equivalents which are not held in a fiduciary capacity.
Other non-operating income (expense), net. Other non-operating income (expense), net consists of gains and losses on the sale of assets.
Consolidated results of operations
The following is a discussion of our consolidated results of operations for the periods presented. This information is derived from our accompanying audited consolidated financial statements prepared in accordance with GAAP.
The following table summarizes our results of operations for the periods presented (in thousands):
Years Ended December 31,
2025 2024
Amount % of Total Amount % of Total
Revenues:
Commission income
$ 220,968 89 % $ 183,158 90 %
Contingent income
13,111 5 8,722 4
Fee income
12,992 5 10,562 5
Other income
1,441 1 1,318 1
Total revenues
248,512 100 % 203,760 100 %
Operating expenses:
Commission expense
133,518 63 % 118,086 67 %
Salaries and employee benefits
37,636 18 29,064 17
Other administrative expenses
22,020 10 16,665 9
Depreciation and amortization
18,353 9 12,020 7
Total operating expenses
211,527 100 % 175,835 100 %
Operating income
36,985 27,925
Other non-operating income (expense)
Interest expense
(287) (2,223)
Interest income 6,607 4,376
Other non-operating income (expense), net 1,140 9
Income before tax 44,445 30,087
Income tax expense 3,279 1,495
Net income
$ 41,166 $ 28,592
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Comparison of the Years Ended December 31, 2025 and 2024
Total revenues
Subsequent to issuing the Company's earnings release on February 25, 2026, the Company received additional information from certain insurance carrier partners related to contingent commission programs associated with 2025 underwriting performance. Based on this information, the Company recorded an adjustment of approximately $1.4 million to increase commission revenue for the year ended December 31, 2025. The financial results included in this Annual Report reflect this adjustment. The Company's previously issued earnings release for the year ended December 31, 2025 did not reflect this adjustment.
The following table presents the disaggregation of our revenues by offerings (in thousands):
Years Ended December 31,
2025 2024
Amount % of Total Amount % of Total
Insurance Services
Agency-in-a-Box $ 152,831 62 % $ 135,166 66 %
Corporate Branches 43,230 17 33,367 16
Total Insurance Services 196,061 79 168,533 82
TWFG MGA 50,763 20 33,719 17
Other 1,688 1 1,508 1
Total revenues $ 248,512 100 % $ 203,760 100 %
Total revenues for the year ended December 31, 2025 increased by $44.8 million, or 22%, compared to the same period in the prior year. The increase was primarily due to a $37.8 million, or 21% increase in commission income driven primarily by continued organic business growth and the impact of acquisitions in 2025. Also contributing to the increase in total revenues were $4.4 million, or 50%, increase in contingent income, $2.4 million, or 23%, increase in fee income, and $0.1 million, or 9%, increase in other income, compared to the same period in the prior year. See discussions below for additional information about the changes in our revenues.
Commission income
The following table presents the disaggregation of our commission income by offerings (in thousands):
Years Ended December 31,
2025 2024
Amount % of Total Amount % of Total
Insurance Services
Agency-in-a-Box $ 137,937 62 % $ 122,651 67 %
Corporate Branches 41,562 19 33,468 18
Total Insurance Services 179,499 81 156,119 85
TWFG MGA 41,469 19 27,039 15
Total commission income $ 220,968 100 % $ 183,158 100 %
Commission income for the year ended December 31, 2025 increased by $37.8 million, or 21%, compared to the same period in the prior year due to the continued organic business growth and the impact of acquisitions made in 2025.
Commission income for Insurance Services grew by $23.4 million, or 15%, for the year ended December 31, 2025 compared to the same period in the prior year. Insurance Service Agency-in-a-Box commission income for the year ended December 31, 2025increased by $15.3 million, or 12%, compared to the same period in the prior year. The increasewas driven by written premium volume, mix in line of business, and acquisitions during the year.
Insurance Services Corporate Branches commission income for the year ended December 31, 2025 increased by $8.1 million, or 24%, compared to the same period in the prior year. The increase was primarily driven by
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$5.7 million of Corporate Branch acquisitions and $2.4 million of Organic Revenue Growth during the year ended December 31, 2025.
TWFG MGA commission income for theyear ended December 31, 2025 increasedby $14.4 million, or 53%, compared to the same period in the prior year. The increase in commission income was primarily driven by $12.0 million generated from the acquisition of TWFG MGA FL while the remaining $2.4 million increase was due to increases in written premium and commission rate increases of The Woodlands Insurance Company compared to the same period in the prior year.
Contingent income
Contingent income for the year ended December 31, 2025 increased by $4.4 million, or 50%, to $13.1 million from $8.7 million in the same period in the prior year. The increase in contingent income was driven by underlying carrier profitability, new carriers to our portfolio and growth in our business.Contingent income is unpredictable and dependent upon the target financial and performance metrics established by the insurance carriers.
Fee income
The following table presents the disaggregation of our fee income by major sources (in thousands):
Years Ended December 31,
2025 2024
Amount % of Total Amount % of Total
Policy fees $ 4,392 34 % $ 3,538 33 %
Branch fees 5,276 40 4,736 45
License fees 2,719 21 1,895 18
TPA fees 605 5 393 4
Total fee income $ 12,992 100 % $ 10,562 100 %
Fee income for theyear ended December 31, 2025 increased$2.4 million, or 23%, 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 year ended December 31, 2025 increasedby $0.9 million, or 24%, compared to the same period in the prior year. The increase in policy fees was primarily due to higher policy count and new business growth.
•Branch fees for the year ended December 31, 2025 increased by $0.5 million, or 11%, compared to the same period in the prior year. The increase in branch fees was primarily driven by increased agent count of the business.
•License fees for the year ended December 31, 2025 increased by $0.8 million, or 43%, compared to the same period in the prior year. The increasewas primarily driven by a one-time technology infrastructure project completed during the current year to support an affiliated entity's expansion into a new market. This item is non-recurring and not expected to have a continuing impact on future operating results.
•TPA fees for the year ended December 31, 2025 increased by $0.2 million, or 54%, compared to the same period in the prior year. The increasein TPA fees resulted from the increased volume in claims processed.
Other income
Other income for the year ended December 31, 2025 was $1.4 million, compared to $1.3 millionin the same period in the prior year. The increase was primarily comprised of interest earned on fiduciary funds and premium financing income.
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Expenses
Commission expense
The following table presents the disaggregation of our commission expense by offerings (in thousands):
Years Ended December 31,
2025 2024
Amount % of Total Amount % of Total
Insurance Services
Agency-in-a-Box $ 107,789 81 % $ 95,797 81 %
Corporate Branches 5,331 4 4,488 4
Total Insurance Services 113,120 85 100,285 85
TWFG MGA 20,295 15 17,716 15
Other 103 - 85 -
Total commission expense
$ 133,518 100 % $ 118,086 100 %
Total commission expense for the year ended December 31, 2025 increased by $15.4 million, or 13%, compared to the same period in the prior year. The increase was primarily due to business growth and overall shift in business mix. See commission income discussion above for additional information regarding the driver of change.
Commission expense for total Insurance Services grewby $12.8 million, or 13%, for the year ended December 31, 2025 compared to the same period in the prior year. Insurance Services Agency-in-a-Box commission expense for the year ended December 31, 2025 increased by $12.0 million, or 13%, compared to the same period in the prior year. The increasewas primarily due to the growth in business, consistent with commission income and the absence of a one-time favorable adjustment of $1.5 millionin 2024. The expenses of our Branches are primarily commission expense, which is determined as a percentage of commission income.
Insurance Services Corporate Branches commission expense for the year ended December 31, 2025 increased by $0.8 million, or 19%, compared to the same period in the prior year. The increase in commission expense was driven by both organic business growth and acquisitions of Corporate Branches in the current period. The expenses of our Corporate Branches are primarily salaries and benefits, and are primarily fixed expenses, which are not directly correlated to commission income or written premium.
TWFG MGA commission expense for the year ended December 31, 2025 increased by $2.6 million, or 15%, compared to the same period in the prior year. The increase was primarily driven by the acquisition of TWFG MGA FL and geographical expansion of The Woodlands Insurance Company.
Salaries and employee benefits
Salaries and employee benefits for the year ended December 31, 2025 was $37.6 million, compared to $29.1 million in the same period in the prior year, reflecting an increase of $8.6 million, or 29%. This increase was primarily attributable to stock-based compensation of $2.4 million, Corporate Branch acquisitions of $3.5 million, and $2.7 million due to personnel increases to support agent growth, corporate branch integration, technology initiatives, and compliance requirements associated with being a public company.
Other administrative expenses
Other administrative expenses for the year ended December 31, 2025 was $22.0 million, compared to $16.7 million in the same period in the prior year, reflecting an increase of $5.4 million, or 32%. The increasewas primarily due to $1.7 million of information technology expenses, $0.6 million of rent, $0.6 million of professional fees, $0.5 million of insurance expense, and $1.9 million of other administrative expenses, all due primarily to business growth and increased costs as a public company.
Depreciation and amortization
Depreciation and amortization for the year ended December 31, 2025 was $18.3 million compared to $12.0 million in the same period in the prior year, reflecting an increase of $6.3 million, or 53%. This increase was primarily attributable to the amortization of intangible assets from our recent intangible asset acquisitions.
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Interest expense
Interest expense for the year ended December 31, 2025 decreased to $0.3 million compared to $2.2 million in the same period in the prior year, due to the repayment of the Revolving Facility (as defined in the section "Liquidity and capital resources") during August 2024.
Interest income
Interest income for the year ended December 31, 2025 increased to $6.6 million, compared to $4.4 million in the same period in the prior year, due to the increase in cash on hand for the full fiscal year 2025 related to IPO proceeds received on July 19, 2024.
Income tax expense
Income tax expense for the year ended December 31, 2025 was $3.3 million compared to $1.5 million in 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 assessed at the prevailing corporate tax rates.
Other non-operating income (expense), net
Other non-operating income (expense), net for the year ended December 31, 2025 increased by $1.1 million compared to the same period in the prior year due to selling of Books of Business.
Key Performance Indicators
Total Written Premium
Total Written Premium represents the total value of insurance policies placed through our platform and is an operating metric used by management to evaluate growth in our distribution activity. Total Written Premium does not represent revenue recognized by the Company. Revenue is primarily derived from commissions and fees earned from insurance carriers, which represent a percentage of premium and vary by carrier, product type and services provided. Accordingly, changes in Total Written Premium may not correspond directly to changes in reported revenue or commission rates from period to period.
Total Written Premium represents, for any reported period, the total amount of current premium (net of cancellations) placed with insurance carriers. We utilize Total Written Premium as a key performance indicator when planning, monitoring and evaluating our performance. We believe Total Written Premium is a useful metric because it is the underlying driver of the majority of our revenue.
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The following table presents the disaggregation of Total Written Premium by offerings, business mix and line of business (in thousands):
Years Ended December 31,
2025 2024
Amount % of Total Amount % of Total
Offerings:
Insurance Services
Agency-in-a-Box $ 1,119,536 65 % $ 982,815 66 %
Corporate Branches 343,922 20 275,331 19
Total Insurance Services 1,463,458 85 1,258,146 85
TWFG MGA 268,972 15 218,214 15
Total written premium $ 1,732,430 100 % $ 1,476,360 100 %
Business Mix:
Insurance Services
Renewal business $ 1,142,481 66 % $ 975,657 66 %
New business 320,977 19 282,489 19
Total Insurance Services 1,463,458 85 1,258,146 85
TWFG MGA
Renewal business 182,177 11 163,105 11
New business 86,795 4 55,109 4
Total TWFG MGA 268,972 15 218,214 15
Total written premium $ 1,732,430 100 % $ 1,476,360 100 %
Written Premium Retention:
Insurance Services 91 % 93 %
TWFG MGA 83 % 84 %
Consolidated 90 % 91 %
Line of Business:
Personal lines $ 1,415,201 82 % $ 1,197,122 81 %
Commercial lines 317,229 18 279,238 19
Total written premium $ 1,732,430 100 % $ 1,476,360 100 %
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The following table presents the dollar and percent change compared to the prior year for Total Written Premium by offerings and business mix (in thousands):
Years Ended December 31,
2025 2024
$ Change % Change $ Change % Change
Offerings:
Insurance Services
Agency-in-a-Box $ 136,721 14 % $ (16,123) (2) %
Corporate Branches 68,591 25 221,368 410
TWFG MGA 50,758 23 23,020 12
Total change in written premium $ 256,070 17 % $ 228,265 18 %
Business Mix:
Insurance Services
Renewal business $ 166,824 17 % $ 148,545 18 %
New business $ 38,488 14 % $ 56,700 25 %
TWFG MGA
Renewal business $ 19,072 12 % $ (2,243) (1) %
New business $ 31,686 57 % $ 25,263 85 %
Consolidated Business Mix:
Consolidated renewal business $ 185,896 13 % $ 146,302 12 %
Consolidated new business 70,174 5 81,963 7
Total change in written premium $ 256,070 17 % $ 228,265 18 %
Comparison of the Years Ended December 31, 2025and 2024
Total Written Premium for the year ended December 31, 2025 increased by $256.1 million, or 17%, compared to $228.3 million, or 18%, growth in the same period in the prior year. Within our Insurance Services offering, renewal business grew $166.8 million, or 17%, as compared to $148.5 million, or 18%, growth in the prior year period. As a large independent carrier entered the market in late 2024, we saw an influx of $53.1 million moving from other carriers which resulted in a lower premium base, however provided the ability to renew and retain customer premium. New business grew $38.5 million, or 14%, as compared to $56.7 million, or 25%, growth in the same period of the prior year due to the softening of the market in 2024. Within our MGA offering, we saw an uptick in renewal business growth of $19.1 million, or 12%, as well as new business growth of $31.7 million, or 57%, over the prior year period due mainly to the MGA FL acquisition.
For the years ended December 31, 2025 and 2024, our consolidated written premium retention was 90% and 91%, respectively. For the year ended December 31, 2025, the composition of our renewal and new business under our two product offerings are as follows: Insurance Services renewal business, as a percentage of the total written premium, was 66% which was consistent with the prior year and premium retention decreased to 91% from 93%, resulting in renewal premium growth of 17%, or $166.8 million, compared to 2024. Insurance Services new business, as a percentage of total written premium, was 19%, consistent with prior year, resulting in new business growth of 14%, or $38.5 million. TWFG MGA renewal and new business as a percentage of written premium was 11% and 4% for the years ended December 31, 2025 and 2024.
Non-GAAP Financial Measures
Organic Revenue. Since the first quarter of 2025, we have utilized the revised calculation methodology for Organic Revenue to include policy fee income as it is directly correlated to MGA commission income. Our legacy calculation methodology removed policy fee income from Organic Revenue. Organic Revenue is total revenue (the most directly comparable GAAP measure) for the relevant period, excluding contingent income, non-policy fee
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income, other income and those revenues generated from acquired businesses with over $0.5 million in annualized revenue that have not reached the twelve-month owned mark.
Organic Revenue Growth.Organic Revenue Growth is the change in Organic Revenue period-to-period, with prior period results adjusted to include revenues that were excluded in the prior period because the relevant acquired businesses had not reached the twelve-month-owned milestone, but have reached the twelve-month owned milestone in the current period. 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 (in thousands):
Revised Calculation Methodology Applied to Current Period
Years Ended December 31,
2025 2024
Total Revenues $ 248,512 $ 203,760
Acquisition adjustments(1)
(17,986) (3,687)
Contingent income (13,111) (8,722)
Fee income (12,992) (10,562)
Other income (1,441) (1,318)
Policy fee income 4,392 3,538
Organic Revenue $ 207,374 $ 183,009
Prior year Organic Revenue reported $ 179,471 $ 154,627
Commission income at 12-month post acquisitions 3,687 2,098
Prior year policy fees 3,538 2,100
Other adjustments(2)
(904) -
Organic Revenue denominator $ 185,792 $ 158,825
Organic Revenue $ 207,374 $ 183,009
Organic Revenue denominator 185,792 158,825
Organic Revenue Growth $ 21,582 $ 24,184
Total Revenue Growth Rate(3)
22.0 % 18.4 %
Organic Revenue Growth Rate(4)
11.6 % 15.2 %
(1)Represents revenues generated from the acquired businesses during the first 12 months following an acquisition.
(2)Other adjustments reflect immaterial prior-period and comparability items consistent with management's non-GAAP presentation policy.
(3)Represents the period-to-period change in total revenues divided by the total revenues in the prior period.
(4)Represents Organic Revenue Growth divided by the Organic Revenue denominator.
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Legacy Calculation Methodology Applied to Current Period
Years Ended December 31,
2025 2024
Total Revenues $ 248,512 $ 203,760
Acquisition adjustments(1)
(17,986) (3,687)
Contingent income (13,111) (8,722)
Fee income (12,992) (10,562)
Other income (1,441) (1,318)
Organic Revenue $ 202,982 $ 179,471
Prior year Organic Revenue reported $ 179,471 $ 154,627
Commission income at 12-month post acquisitions 3,687 2,098
Other adjustments(2)
(904) -
Organic Revenue denominator $ 182,254 $ 156,725
Organic Revenue $ 202,982 $ 179,471
Organic Revenue denominator 182,254 156,725
Organic Revenue Growth $ 20,728 $ 22,746
Total Revenue Growth Rate(3)
22.0 % 18.4 %
Organic Revenue Growth Rate(4)
11.4 % 14.5 %
(1)Represents revenues generated from the acquired businesses during the first 12 months following an acquisition.
(2)Other adjustments reflect immaterial prior-period and comparability items consistent with management's non-GAAP presentation policy.
(3)Represents the period-to-period change in total revenues divided by the total revenues in the prior period.
(4)Represents Organic Revenue Growth divided by the Organic Revenue denominator.
Comparison of the Years Ended December 31, 2025 and 2024
Revenue growth rate, representing the year-over-year change in total revenues, was 22.0% for the year ended December 31, 2025 compared to the 18.4% Revenue growth rate for the year ended December 31, 2024. Revenue growth for the periods reflected the growth in our Books of Business and the mix of the new and renewal businesses. Revenue growth for the year ended December 31, 2025 compared to the same period in 2024 included the continued growth of commission and fee income during the period.
Organic Revenue Growth Rate was 11.6% for the year ended December 31, 2025 compared to 15.2% Organic Revenue Growth Rate for the year ended December 31, 2024. Organic Revenue Growth for both periods reflects ongoing, but normalizing, rate increases being implemented by carriers, the underlying growth of our business, healthy economic growth and an increase in commission income in our MGA offering.See "Consolidated Results of Operations-Commission Income"for additional discussions regarding the changes in our commission income.
Adjusted Net Income. 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 while excluding the impact of the sale of non-current assets. 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.
Beginning in the year ended December 31, 2025, we updated our definition of Adjusted Net Income to exclude the impact of the sale of non-current assets. The impact of this change on our Adjusted Net Income for the year ended December 31, 2025, as well as on previously reported periods, was not material. As a result, prior-period amounts have not been recast. We believe this minor refinement to our definition provides improved alignment with how management evaluates operating performance and enhances the measure's usefulness for investors while maintaining comparability with prior periods.
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We are subject to U.S. federal income taxes, in addition to state, and local taxes, with respect to our allocable share of any net taxable income of TWFG Holding. Adjusted Net Income pre-IPO did not reflect adjustments for income taxes since TWFG Holding is a limited liability company and is classified as a partnership for U.S. federal income tax purposes. Post-IPO, the calculation incorporates the impact of federal and state statutory tax rates on 100% of our adjusted pre-tax income as if the Company owned 100% of TWFG Holding.
Adjusted Net Income Margin. Adjusted Net Income Margin is Adjusted Net Income divided by total revenues. 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 in addition, it also 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 (in thousands):
Years Ended December 31,
2025 2024
Total Revenues $ 248,512 $ 203,760
Net Income $ 41,166 $ 28,592
Income tax expense 3,279 1,495
Acquisition-related expenses
292 20
Equity-based compensation
4,578 2,219
Other non-recurring items (1)
10 (1,220)
Gain on sale of non-current assets, net(2)
(1,119) -
Amortization expense 17,812 11,721
Adjusted income before income taxes 66,018 42,827
Adjusted income tax expense (3)
(15,118) (9,802)
Adjusted Net Income $ 50,900 $ 33,025
Net Income Margin 16.6 % 14.0 %
Adjusted Net Income Margin 20.5 % 16.2 %
(1)For the year ended December 31, 2024, nine of our Branches converted to Corporate Branches. Upon conversion, agents of the newly converted Corporate Branches became employees and received salaries, employee benefits, and bonuses for services rendered instead of commissions. 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)During the second quarter of 2025, a gain related to the sale of non-current assets was not excluded from Adjusted Net Income consistent with the Company's stated definition. The presentation has been corrected in the fourth quarter and full-year 2025 results to conform to the Company's definition of Adjusted Net Income. This correction impacts only non-GAAP measures and had no effect on previously reported GAAP results.
(3)Post-IPO, we are subject to U.S. 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. For the year ended December 31, 2025, the calculation of adjusted income tax expense is based on a federal statutory rate of 21% and a blended state income tax rate of 1.89% on 100% of our adjusted income before income taxes as if we owned 100% of TWFG Holding.
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 and Class C Common Stock (together with the related LLC Units) into shares of 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 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.
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A reconciliation of Adjusted Diluted Earnings Per Share to diluted earnings per share, the most directly comparable GAAP measure, for the year ended December 31, 2025 indicated is as follows:
Years Ended December 31,
2025 2024
Earnings per share of common stock - diluted $ 0.53 $ 0.19
Plus: Impact of all LLC Units exchanged for Class A Common Stock(1)
0.20 0.32
Plus: Adjustments to Adjusted net income(2)
0.17 0.08
Adjusted Diluted Earnings Per Share $ 0.90 $ 0.59
Weighted average common stock outstanding - diluted 15,100,190 14,982,409
Plus: 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 56,271,651 56,153,870
(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 year ended December 31, 2025, this includes $33.2 million of net income on 56,271,651 weighted-average shares of common stock outstanding - diluted, for the year ended December 31, 2025. For the year ended December 31, 2025, 41,171,461 weighted average outstanding Class B Common Stock and Class C Common Stock were considered anti-dilutive and included in the 56,271,651 weighted-average shares of common stock outstanding - diluted within diluted earnings per share calculation.See Note 15, "Earnings Per Share" to our consolidated financial statements included elsewhere in this Annual Report 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 $41.2 million and Adjusted Net Income of $50.9 million for the year ended December 31, 2025. For the year ended December 31, 2025, Adjusted Diluted Earnings Per Share include adjustments of $9.7 million to Adjusted Net Income on 56,271,651 weighted-average shares of common stock outstanding - diluted.
Adjusted EBITDA. Adjusted EBITDA is a supplemental measure of our performance and is defined as EBITDA adjusted to reflect items such as equity-based compensation, interest income, other non-operating and certain nonrecurring items, while excluding the impact of the sale of non-current assets. EBITDA is defined as net income (the most directly comparable GAAP measure) before interest, income taxes, depreciation and amortization. We believe that Adjusted EBITDA is an appropriate measure of operating performance because it adjusts for significant one-time, non-recurring items and eliminates the ongoing accounting effects of certain capital spending and acquisitions, such as depreciation and amortization, that do not directly affect what management considers to be our ongoing operating performance in the period. These adjustments eliminate the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance. Our measure of Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation.
Beginning in the year ended December 31, 2025, we updated our definition of Adjusted EBITDA to exclude the impact of the sale of non-current assets. The impact of this change on our Adjusted EBITDA for the year ended December 31, 2025, as well as on previously reported periods, was not material. As a result, prior-period amounts have not been recast. We believe this minor refinement to our definition provides improved alignment with how management evaluates operating performance and enhances the measure's usefulness for investors while maintaining comparability with prior periods.
Adjusted EBITDA Margin. Adjusted EBITDA Margin is Adjusted EBITDA divided by total revenues. 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.
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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):
Years Ended December 31,
2025 2024
Total Revenues $ 248,512 $ 203,760
Net income
$ 41,166 $ 28,592
Interest expense 287 2,223
Interest income(1)
(6,607) (4,376)
Depreciation and amortization 18,353 12,020
Income tax expense 3,279 1,495
EBITDA 56,478 39,954
Acquisition-related expenses 292 20
Equity-based compensation 4,578 2,219
Interest income(1)
6,607 4,376
Gain on sale of non-current assets, net(2)
(1,119) -
Other non-recurring items(3)
10 (1,220)
Adjusted EBITDA $ 66,846 $ 45,349
Net Income Margin 16.6 % 14.0 %
Adjusted EBITDA Margin 26.9 % 22.3 %
(1)Interest income reflects interest and other earnings on cash balances held by the Company. This income is included in Adjusted EBITDA as we view our total interest and investment income as an integral part of our business model and earnings stream until deployed.
(2)During the second quarter of 2025, a gain related to the sale of non-current assets was not excluded from Adjusted EBITDA consistent with the Company's stated definition. The presentation has been corrected in the fourth quarter and full-year 2025 results to conform to the Company's definition of Adjusted EBITDA. This correction impacts only non-GAAP measures and had no effect on previously reported GAAP results.
(3)Represents one-time adjustments of office relocation cost and the branch conversions impacts. The branch conversions adjustment is reducing commission expense. In January 2024, nine of our Branches converted to Corporate Branches. Upon conversion, agents of the newly converted Corporate Branches became employees and received salaries, employee benefits, and bonuses for services rendered instead of commissions. As a result, we released a portion of the unpaid commissions related to the converted branches that we no longer are required to settle.
Adjusted Free Cash Flow.Adjusted Free Cash Flow is a supplemental measure of our performance. We define Adjusted Free Cash Flow as cash flow from operating activities (the most directly comparable GAAP measure) less cash payments for tax distributions, purchases of property, plant, and equipment and acquisition-related costs. 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 Flow to Cash flow from Operating Activities, the most directly comparable GAAP measures, for each of the periods indicated is as follows (in thousands):
Years Ended December 31,
2025 2024
Cash Flow from Operating Activities $ 53,501 $ 40,479
Purchase of property and equipment (356) (3,201)
Tax distribution to members(1)
(11,350) (9,106)
Acquisition-related expenses
292 20
Adjusted Free Cash Flow $ 42,087 $ 28,192
(1)Tax distributions to members represents the amount distributed to the members of TWFG Holding in respect of their income tax liability related to the net income of TWFG Holding allocated to its members.
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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.
Liquidity and capital resources
Historical liquidity context
Our liquidity position and capital resources have evolved over time primarily as a result of organic growth, acquisitions, and financing activities, including the completion of IPO and related reorganization transactions in 2024. Historical cash flows and financing activities provide context for period-to-period changes in our liquidity; however, management's assessment of liquidity and capital resources is focused on our current financial position, expected cash flows from operations, and anticipated capital requirements. Accordingly, the discussion below emphasizes our liquidity and capital resources as of December 31, 2025 and our ability to meet our obligations and fund our operations for the foreseeable future.
As of December 31, 2025, the Company had $155.9 million in cash and cash equivalents and $12.0 million in restricted cash, compared to $195.8 million and $9.6 million, respectively, as of December 31, 2024. Thedecreasein cash and cash equivalents for the year ended December 31, 2025 was primarily attributable to $61.9 million of cash paid for acquisitions, $15.9 million in member distributions, $10.0 million in other investments, and $3.1 million in tax withholding on equity vesting, partially offset by positive cash flows from operations of $53.5 million.
The Company maintains access to the $50.0 million Revolving Facility, of which zero was outstanding at December 31, 2025, all of which remained available for future borrowings as of December 31, 2025. We were in compliance with all financial covenants under our debt agreements as of the end of the reporting period. Management believes existing liquidity sources, together with cash generated from operations, will be sufficient to meet working capital, capital expenditure, and acquisition-related needs for at least the next 12 months.
On February 23, 2026, our Board approved a share repurchase program that authorizes the Company to repurchase up to $50 million of its outstanding Class A common stock. Share repurchases may be made from time to time on the open market, in privately negotiated transactions, using Rule 10b5-1 trading plans, or in any other manner that complies with the applicable securities law. The timing of purchases and number of shares repurchased under the program will depend upon a variety of factors including the Company's stock price, trading volume, working capital or other liquidity requirements, and market conditions. The Company is not obligated to purchase any shares under the program and the program may be suspended or discontinued at any time without notice.
Credit agreements
On June 5, 2017, TWFG Holding, as borrower, entered into a credit agreement (as subsequently amended, the "Term Loan Credit Agreement") with PNC Bank, National Association, as lender. On July 30, 2019, TWFG Holding entered into a third amendment to the Term Loan Credit Agreement pursuant to which it borrowed $4.0 million pursuant to a Term Loan B and used these proceeds for permitted acquisitions. On December 4, 2020, TWFG Holding entered into a fifth amendment to the Term Loan Credit Agreement pursuant to which it borrowed an additional $13.0 million pursuant to a Term Loan C and used these proceeds for permitted acquisitions (such amount, together with the amount borrowed on July 30, 2019, the "Term Loans"). On May 23, 2023, TWFG Holding entered into a ninth amendment to the Term Loan Credit Agreement to, among other provisions, provide additional flexibility under the covenants contained therein. 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 December 31, 2025is $4.0 million as follows (in thousands):
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Year ending December 31, 2026
$ 1,972
Year ending December 31, 2027
2,035
Total $ 4,007
The Revolving Credit Agreement (the "Revolving Credit Agreement") with PNC Bank National Association, dated as of May 23, 2023 and as amended on June 20, 2024, provides a revolving credit facility to the Company, with commitments in an aggregate principal amount not to exceed $50.0 million (as so amended, the "Revolving Facility," and together with the Term Loan Credit Agreement, the "Credit Agreements"). Borrowings constituting revolving loans under the Revolving Credit Agreement incur interest at the Term SOFR Rate (as defined therein) for the applicable interest period plus a margin based on the consolidated leverage ratio of the Company between 2% and 2.75%, and a 0.10% adjustment. The borrowings under the Revolving Facility may be used by the Company for permitted acquisitions, working capital and general corporate purposes. The Company pays a commitment fee on unutilized amounts under the Revolving Facility of 0.20% up to 0.35% based on the consolidated leverage ratio. As of December 31, 2025and December 31, 2024, the Revolving Facility had an unutilized capacity of $50.0 millionand $50.0 million, respectively.
Each of the Revolving Facility and the term loans requires the Company to maintain a consolidated leverage ratio of no greater than 2.00 to 1.00(or, after the occurrence of certain acquisitions, 2.50 to 1.00). The Credit Agreements also contain covenants that, among other provisions and subject to certain exceptions, restrict our ability to pay dividends or other distributions, 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. As of December 31, 2025 and December 31, 2024, the Company was in compliance with these covenants. The carrying amount of the Company's variable rate debt as of December 31, 2025 and December 31, 2024 approximates fair value due to the short-term reset of the interest rate based on SOFR and the absence of a credit spread.
Interest on the Term Loan C accrues at Daily Simple Secured Overnight Financing Rate ("SOFR") plus the Benchmark Replacement Adjustment of 0.11448%, 0.26161%, or 0.42826% for the one-month, three-month, or six-month borrowing periods, respectively. At our option, the revolving credit facility under the Revolving Facility accrues interest on amounts drawn at the Term SOFR Rate or Daily SOFR plus the SOFR Adjustment of 0.10% and Applicable Margin of 2.00% to 2.75%, each as defined in the Revolving Facility. The Term Loans and the Revolving Facility are collateralized by substantially all the Company's assets, which includes rights to future commissions.
Comparative cash flows
The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated (in thousands):
Years Ended
December 31,
2025 2024 Variance
Net cash provided by operating activities from continuing operations $ 53,501 $ 40,479 $ 13,022
Net cash (used in) investing activities from continuing operations (70,378) (25,055) (45,323)
Net cash (used in) provided by financing activities from continuing operations (20,546) 143,431 (163,977)
Net change in cash, cash equivalents and restricted cash from continuing operations (37,423) 158,855 (196,278)
Cash, cash equivalents and restricted cash from continuing operations, beginning of period 205,323 46,468 158,855
Cash, cash equivalents and restricted cash from continuing operations, end of period $ 167,900 $ 205,323 $ (37,423)
Cash paid during the period for interest $ 194 $ 2,298 $ (2,104)
Cash paid during the period for taxes $ 3,268 $ - $ 3,268
Comparison of the Years Ended December 31, 2025and 2024
Operating activities
Operating activities from continuing operations provided $53.5 million and $40.5 million of cash for the years ended December 31, 2025 and 2024, respectively. The increase in net cash provided by operating activities was driven by a $12.6 million increase in net income, $7.4 million outflow from the change in working capital between
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periods, which was primarily attributable to timing of receivables and payables, and $7.9 million in net change of non-cash adjustments in the period which include amortization, stock-based compensation, gain on sale of intangibles and non-cash lease expense. See "-Consolidated Results of Operations" for additional information regarding the results of our operations.
Investing activities
Investing activities from continuing operations used $70.4 million and $25.1 million of cash for the years ended December 31, 2025and 2024, respectively. Our net investing outflows increased primarily due to the higher level of intangible asset acquisitions in 2025 of $61.9 millioncompared to $21.9 millionin 2024, partially offset by $1.8 millioninflow from proceeds on the sale of intangible assets and other net decrease in investing outflows of $2.9 million. In addition, the Company made a $10.0 millionother investment held by a third-party to facilitate premium financing arrangements during the period ended December 31, 2025. See Note 4, "Intangible Assets and Acquisitions" to our consolidated financial statements included elsewhere in this Annual Report for additional information regarding our asset acquisitions.
Financing activities
Financing activities from continuing operations used $20.5 million and provided $143.4 million of cash for the years ended December 31, 2025and 2024, respectively. The change in our net financing outflows was primarily due to the absence of the $193.6 millionnet IPO proceeds received in the prior year, $41.5 milliondecrease in repayment of borrowings, $6.6 millionincrease in distributions to members, $3.1 million payment related to tax withholding on vesting of equity awards, and $2.1 millionnet decrease in carrier liabilities during the year ended December 31, 2025.
Future sources and uses of liquidity
Our sources of liquidity include (1) cash on hand, (2) net working capital, (3) cash flows from operations and (4) borrowings on our Credit Agreements. We expect that our primary liquidity needs will comprise of cash needed to (1) provide capital to facilitate the organic growth of our business, (2) pay operating expenses, including cash compensation to our independent agents and our employees, (3) potential future payments under the Tax Receivable Agreement, if exchanges of LLC Units occur (no such payments were required during 2025), (4) fund acquisitions, (5) pay interest and principal due on borrowings under our Credit Agreements, (6) pay income taxes and (7) make potential future payments of dividends, if and when declared by our board of directors. We expect to have sufficient financial resources to meet our business requirements over the next 12 months and for the long-term, including the ability to service our debt and contractual obligations, finance capital expenditures and make distributions, including tax distributions. 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 December 31, 2025, we had $1.3 million of non-cancelable operating lease obligations for the next 12 months. For the periods following the next 12 months, we have an additional $2.9 million of non-cancellable operating lease obligations. See Note 5, "Operating Leases," to our consolidated financial statements included elsewhere in this Annual Report for additional information. In addition, as of December 31, 2025, we had$3.5 million of debt maturities for the next 12 months comprised of $2.0 millionof the remaining balance under the Term Loan C, and $0.6 millionin acquisition-related notes, and $0.9 million of acquisition-related payables. For the periods following the next 12 months, we have an additional $8.7 millionof debt maturities representing $2.0 million under the Term Loan C, $0.5 millionin acquisition-related notes, and $6.1 million of acquisition-related payables. As of December 31, 2025, there was no outstanding balances under our Revolving Facility. In the future, 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%, 4.69% and 5.00%, and our effective interest rates on the Term Loan C for the year ended December 31, 2025 was 4.185%. Asof December 31, 2025, 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. SeeNote 6
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"Derivatives" and Note 8, "Debt and Deferred Acquisition Payables" to our consolidated financial statements included elsewhere in this Annual Report for additional information.
Tax receivable agreement
As a result of our ownership of LLC Units in TWFG Holding, we are subject to U.S. federal, state and local income taxes with respect to our attributable share of any taxable income of TWFG Holding and are taxed at the prevailing U.S. federal income tax rates applicable to corporations. In addition to tax expenses, we also incur expenses related to our operations and we may be required to make payments under the Tax Receivable Agreement in the future, if and when exchanges of LLC Units occur. As of December 31, 2025, no exchanges had occurred, and no amounts were payable under the Tax Receivable Agreement. 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 Tax Receivable Agreement; however, we estimate that such tax benefits and the related Tax Receivable Agreement 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 attributable to taxable redemptions, exchanges or purchases of LLC Units from the other holders of LLC Units, the payments that we may make to theother holders of LLC Units could be substantial.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 Tax Receivable Agreement in respect of future taxable redemptions, exchanges or purchases of LLC Units, will vary depending 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 Tax Receivable Agreement (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 Tax Receivable Agreement are not conditioned on continued ownership of us by the other holders of LLC Units. There may be a material negative effect on our liquidity if, as described below, the payments under the Tax Receivable Agreement exceed the actual benefits we receive in respect of the tax attributes subject to the Tax Receivable Agreement and/or distributions to us by TWFG Holding are not sufficient to permit us to make payments under the Tax Receivable Agreement.
The Tax Receivable Agreement Acceleration Event provisions in the Tax Receivable Agreement may result in situations where the other holders of LLC Units have interests that differ from or are in addition to those of our other stockholders. Our obligations under the Tax Receivable Agreement will also apply with respect to any person who becomes a party to the Tax Receivable Agreement.
Finally, because we are a holding company with no operations of our own, our ability to make payments under the Tax Receivable Agreement depends on the ability of TWFG Holding to make distributions to us. To the extent that we are unable to make payments under the Tax Receivable Agreement 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
We do not invest in any off-balance sheet vehicles that provide liquidity, capital resources, market or credit risk support, or engage in any activities that expose us to any liability that is not reflected in our consolidated financial statements.
Critical accounting estimates
We prepare our consolidated financial statements in accordance with GAAP. In applying many of these accounting principles, we need to make assumptions, estimates or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates or judgments; however, are both subjective and subject to change, and actual results may differ from our assumptions and estimates. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. We believe our significant accounting policies could potentially produce materially different results if we were to change underlying assumptions, estimates or judgments. The accounting policies that we believe reflect our more significant estimates, judgments and assumptions that are most critical to understanding and evaluating our
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reported financial results are: revenue recognition, intangible assets impairment, income taxes and contingent consideration. See Note 2, "Summary of Significant Accounting Policies," to our consolidated financial statements included elsewhere in this Annual Report for a summary of our significant accounting policies.
The critical accounting estimates relating to our significant accounting policies are as follows:
Revenue recognition
Commission income
Commission income represents the largest component of the Company's revenue and is generated from commissions earned on the placement and servicing of insurance policies between insurance carriers and policyholders. The accounting for commission income requires management to make estimates and assumptions that involve judgment and uncertainty and that could materially affect the timing and amount of revenue recognized.
We consider commission income to be a critical accounting policy because determining the amount and timing of revenue recognition requires management to apply judgment in estimating amounts expected to be realized and in assessing the nature and timing of performance obligations. While management believes the estimates and assumptions used are reasonable, actual results may differ from those estimates.
For the majority of the Company's commission arrangements, revenue is recognized at a point in time, generally at the binding or effective date of the insurance policy, when the Company has substantially completed its placement services. In certain arrangements, including policies assumed through take-out programs where the Company did not originate the policy, revenue is recognized over time as ongoing servicing obligations are performed over the remaining policy term.
The critical estimates and assumptions involved in recognizing commission income include:
•Estimated policy cancellations and endorsements, which impact the amount of commission ultimately earned and may result in adjustments to previously recognized revenue;
•Expected collectability, which is based on historical experience with insurance carrier partners and current market conditions;
•Estimation of variable consideration, including contingent commissions, as described below, which depend on future retention, loss experience, or premium volume and are recognized only to the extent that a significant reversal of revenue is not probable; and
•Determination of the servicing period for certain assumed policies, up to 12 months, which affects the timing of revenue recognition for commissions recognized over time.
Management develops these estimates using historical data by product type and tenure, adjusted for known trends or events that may affect future outcomes. Changes in these assumptions, particularly changes in cancellation patterns or servicing assumptions for assumed policies, could materially impact revenue recognized in future periods.
Because these estimates affect both the timing and amount of revenue recognized, changes in assumptions or differences between estimated and actual outcomes may affect comparability between reporting periods. In particular, changes in cancellation experience or the mix of commission arrangements recognized at a point in time versus over time may cause fluctuations in reported revenue that are not necessarily indicative of changes in underlying business activity or operating performance.
The recognition of commission income requires management to exercise judgment in determining whether the Company's performance obligations are satisfied at a point in time or over time. For most policies placed by the Company, the performance obligation is satisfied at the time the policy is bound, as the Company's primary obligation is the placement of coverage between the insurance carrier and the insured. For certain policies, including assumed or take-out policies where the Company did not originate the policy, the Company performs ongoing servicing activities that represent a performance obligation satisfied over time, and the related commission income is recognized over the remaining policy term.
Contingent income
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The timing of revenue recognition and constraints applied to contingent commissions are based on estimates and assumptions. Contingent income is paid when we meet or exceed certain premium volumes and/or fall below specific loss ratio quotas predetermined by insurance carriers. Because of the uncertainty regarding estimated loss ratio and premium volume, we estimate the contingent income based on specific factors such as historical trends, written premium estimates, and loss ratios, which are used to accrue the contingent income during the year. The uncertainty regarding the estimated contingent income is primarily in the profitability of the insurance policies placed, as determined by the loss ratios maintained by the insurance carriers. The uncertainty is resolved upon receiving notification from the insurance carrier regarding actual profitability results. We evaluate the assumptions used to estimate contingent income and adjust those assumptions accordingly as experience changes.
Intangible assets impairment
Intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may no longer be recoverable. If indicators of impairment exist, we assess the recoverability of our intangible assets by reviewing the estimated future undiscounted cash flows generated by the corresponding asset or asset group. If based on the assessment, we determined that the intangible assets are impaired, such assets are written down to their fair values with the related impairment losses recognized in the result of operations.
We are required to apply judgment when determining if indicators of impairment exist. Any of the following factors, if present, may trigger an impairment review: (i) a significant underperformance relative to historical or projected future operations, (ii) significant negative or economic trends, and (iii) a significant decline in the market capitalization of the Company. If it is determined that the recoverability of the intangible asset is unlikely due to the existence of one of the triggering events noted above, an impairment analysis is performed. We must make assumptions regarding the estimated cash flows and other factors to determine the fair value of the identified asset. If these estimates or related assumptions change in the future, we may be required to record an impairment charge.
Income Taxes
Deferred tax assets are recognized to the extent that it is determined that these assets are more likely than not to be realized. In making this determination, the Company considers all available favorable and unfavorable evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations.
Based on our evaluation of this evidence, we have recorded a valuation allowance against our deferred tax assets. Estimating future taxable income is inherently uncertain and requires significant judgment. In projecting future taxable income, we consider our historical results, growth strategies, future market trends and incorporate certain other assumptions.
Changes in our estimates of future taxable income, changes in tax laws or rates, or other relevant factors could result in adjustments to our valuation allowance in future periods. Any such adjustments could have a material impact on our results of operations. Other than those potential impacts, we do not believe there is a reasonable likelihood there will be a material change in the tax related balances or valuation allowances. However, due to the complexity of some of these uncertainties, the ultimate resolution may significantly differ from our estimate.
Contingent Consideration
Certain acquisitions of select Books of Business that do or do not constitute a complete business enterprise include contingent consideration arrangements, which are based on the acquired Book of Business achieving thresholds related to future revenues or earnings before interest, tax, depreciation, and amortization. Contingent consideration arrangements can reduce the risk of overpaying for acquisitions if certain results are not achieved.
The Company accounts for contingent consideration relating to acquisitions as a Deferred Acquisition Payable and a corresponding asset adjustment at the date of acquisition. Once recognized, the contingent consideration is not derecognized until the contingency is resolved and the consideration is issued or becomes issuable. The Deferred Acquisition Payable is continually remeasured at each balance sheet date by recording changes in the fair value as an offsetting adjustment to the acquired asset in the Consolidated Balance Sheets. The ultimate settlement of the contingent consideration may be for amounts that are materially different from the amounts initially recorded and may cause volatility in the Company's results of operations. The fair value of contingent consideration becomes more certain as the acquired Books of Business approach their respective settlement date.
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Recent accounting pronouncements
For a description of our recently adopted accounting pronouncements and recently issued accounting standards not yet adopted, see Note 2, "Summary of Significant Accounting Policies," to our consolidated financial statements included elsewhere in this Annual Report.
Emerging growth company
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.
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. We have elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies.
TWFG Inc. published this content on March 10, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 10, 2026 at 10:01 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]