Goosehead Insurance Inc.

02/19/2026 | Press release | Distributed by Public on 02/19/2026 08:27

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

Management's discussion and analysis of financial condition and results of operations
Overview
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 under "Risk factors" and elsewhere in this Annual Report.
This discussion includes references to non-GAAP financial measures as defined in the rules of the Securities and Exchange Commission ("the SEC"). We present such non-GAAP financial measures, specifically, Core Revenue, Adjusted EBITDA and Adjusted EPSnon-GAAP financial measures, as we believe such information is of interest to the investment community because it provides additional meaningful methods of evaluating certain aspects of the Company's operating performance from period to period on a basis that may not be otherwise apparent under U.S. GAAP, and these provide a measure against which our businesses may be assessed in the future.
Our methods of calculating these measures may differ from those used by other companies and therefore comparability may be limited. These financial measures should be viewed in addition to, not in lieu of, the consolidated financial statements for the year ended December 31, 2025. See "Non-GAAP Financial Measures" below for further discussion of our Core Revenue, Adjusted EBITDA and Adjusted EPSnon-GAAP financial measures
We are a rapidly growing personal lines independent insurance agency, reinventing the traditional approach to distributing personal lines products and services throughout the United States. We were founded with one vision in mind-to provide clients with superior insurance coverage at the best available price and in a timely manner. By leveraging our differentiated business model and innovative technology platform, we are able to deliver a superior insurance experience to our clients.
The following discussion contains references to the years ended December 31, 2025, December 31, 2024, and December 31, 2023. See Goosehead's Annual Report on Form 10-K for the year ended December 31, 2024 for a discussion of the changes from year ended December 31, 2023 to the year ended December 31, 2024.
Financial Highlights for 2025:
•Total revenue increased 16% from 2024 to $365.3 million; Core Revenues*, a non-GAAP measure, of $317.9 million increased 16% over 2024
•Total Written Premiums Placed increased 17% from 2024 to $4.4 billion
•Net income decreased by $4.7 million from 2024 to $44.5 million, or 12% of total revenues
•Adjusted EBITDA*, a non-GAAP measure, increased by 14% from 2024 to $113.6 million, or 31% of total revenues
•Basic earnings per share was $1.11 and Adjusted EPS*, a non-GAAP measure, was $1.86 for the year ended December 31, 2025.
•Policies in Force increased 14% from December 31, 2024 to 1.9 million at December 31, 2025.
•Corporate sales headcount increased 17% from December 31, 2024 to 489 at December 31, 2025.
◦As of December 31, 2025, 261 of these corporate sales agents had less than one year of tenure and 228 had greater than one year of tenure.
•Operating franchises decreased 9% from December 31, 2024 to 1,009 at December 31, 2025.
◦As of December 31, 2025, 87 operating franchises had less than one year of tenure and 922 operating franchisees had greater than one year of tenure.
◦Total franchise agents increased 1% from December 31, 2024 to 2,113 at December 31, 2025.
*Core Revenue, Adjusted EBITDA and Adjusted EPS are non-GAAP measures. Reconciliation of Total Core Revenue to Total Revenue, Adjusted EBITDA to net income and Adjusted EPS to EPS, the most directly comparable financial measures presented in accordance with GAAP, are set forth in "Key performance indicators" below.
Factors affecting our results of operations
We believe that the most significant factors affecting our results of operations include:
•Investment in growth.We continue to invest in expanding our national footprint, increasing our revenue-producing headcount, and increasing the level of support provided to our salespeople. Our ability to attract and retain top corporate sales agents and franchise owners, ramp up new agent productivity, and retain existing and future Policies in Force are key to continued profitable growth.
•Investment in technology.We continue to develop and invest in our technology platform to drive scalability, adaptability, and efficiency. We believe our significant investment in proprietary technology is a key competitive advantage that supports, and will continue to support, our growth and operating margins.
•Continued penetration of Franchisees into existing markets.We will continue to market actively for new franchises in our established markets, which represent over 97% of the U.S. population. We are licensed with the necessary state departments of commerce and insurance and registered as a franchisor in all 50 states in the U.S.
•Continued retention of existing Book of Business.We have navigated macroeconomic challenges to maintain high levels of Client Retention. Client Retention is key to future profitability.
•Increase in margins as business shifts from new to renewal.Because we are entitled to a higher percentage of Royalty Fees after the first term of a policy and the higher level of back-office support needed during the first term of an insurance policy, the Company begins to see higher levels of profitability on Renewal Revenue. We will focus simultaneously on converting New Business Revenue to Renewal Revenue through our retention efforts, and on continuing to grow New Business Revenue that will convert and allow us to expand our margins in future periods.
•Strength of the insurance market or particular lines of business.We generate the majority of our revenues through commissions, which are calculated as a percentage of the total insurance policy premium. A softening of the insurance market or the particular lines of business that are our focus, characterized by a period of declining premium rates, could negatively impact our profitability.
•Seasonality and cyclicality of housing market conditions.The majority of our new accounts are sourced by referral sources tied to home closing transactions. Major slowdowns in the various housing markets Goosehead serves, including as a result of changes in prevailing interest rates or U.S. monetary policies that affect interest rates, could impact our ability to generate new business. We experience seasonality and revenue related to the sale of insurance policies throughout the course of a calendar year that is tied to the seasonality of new home sales. Revenue from home insurance leads is higher from April to August and lower from October through January. While this can impact month-to-month or quarter-to-quarter results, we expect productivity to normalize year-over-year.
•Increases in interest rates.Our variable rate debt, including our Credit Agreement, exposes us to interest rate risk. If interest rates were to increase, our debt service obligations on our variable rate indebtedness would increase even if the amount borrowed remained the same. To the extent that interest rate risk materializes and is not fully mitigated, the resulting increase in interest expense could have a material adverse effect on our results of operations.
•Effect of natural or man-made disasters. Any increases in loss ratios due to natural or man-made disasters could impact our Contingent Commissions, which are primarily driven by both growth and loss ratio metrics.
•Cost of being a public company.To operate as a public company, we are required to continue to implement changes in certain aspects of our business and develop, manage, and train management-level and other employees to comply with on-going public company requirements. We also incur expenses as a public company, including public reporting obligations, proxy statements, stockholder meetings, stock exchange fees and transfer agent fees.
Effects of the reorganization on our corporate structure
Goosehead Insurance, Inc. was formed for the purpose of the Offering and to date has only engaged in activities related to Goosehead Financial, LLC. Goosehead Insurance, Inc. is a holding company and its sole material asset is a controlling ownership and profits interest in Goosehead Financial, LLC. All of our business is conducted through Goosehead Financial, LLC and its consolidated subsidiaries, and the financial results of Goosehead Financial, LLC and its consolidated subsidiaries are included in the consolidated financial statements of Goosehead Insurance, Inc. Goosehead Financial, LLC is currently taxed as a partnership for federal income tax purposes and, as a result, its members, including Goosehead Insurance, Inc., pay taxes with respect to their allocable shares of its net taxable income.
Prior redemptions and exchanges of LLC Units have resulted, and we expect future redemptions and exchanges will result in increases in the tax basis in our share of the tangible and intangible assets of Goosehead Financial, LLC that otherwise would not have been available. These increases in tax basis have reduced the amount of tax we are required to pay, and may reduce the amount of tax that we would otherwise be required to pay in the future. The tax receivable agreement requires Goosehead Insurance, Inc. to pay 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize to the Pre-IPO LLC Members. Furthermore, payments under the tax receivable agreement give rise to additional tax benefits and therefore additional payments under the tax receivable agreement itself. See "Item 13. Certain relationships and related transactions, and director independence".
Certain income statement line items
Revenues
In 2025, revenue increased by 16% to $365.3 million from $314.5 million in 2024. Total Written Premium growth, which is the best indicator of future revenue growth, increased 17% to $4.4 billion in 2025 from $3.8 billion in 2024. Total Written Premiums Placed drive our current and future Core Revenue and give us potential opportunities to earn Ancillary Revenue in the form of Contingent Commissions. Our various revenue streams do not equally contribute to the long-term value of Goosehead. For instance, Renewal Revenue and Renewal Royalty Fees are more predictable and have higher margin profiles, thus are higher quality revenue streams for the Company. Alternatively, Contingent Commissions, while high margin, are unpredictable and dependent on insurance company underwriting and forces of nature and thus are lower quality revenue for the Company. Our revenue streams can be viewed in three distinct categories: Core Revenue, Cost Recovery Revenue, and Ancillary Revenue, which are non-GAAP measures. A reconciliation of Core Revenue, Cost Recovery Revenue, and Ancillary Revenue to total revenue, the most directly comparable financial measures presented in accordance with GAAP, are set forth in the "Key performance indicators" section of Management's discussion and analysis of financial condition and results of operations of this Form 10-K.
Core Revenue:
•Renewal Commissions - highly predictable, higher-margin revenue stream, which is managed by our service team.
•Renewal Royalty Fees - highly predictable, higher-margin revenue stream, which is managed by our service team. For policies in their first renewal term, we see an increase in our share of royalties from 20% to 50% on the commission paid by the Carriers.
•New Business Commissions - predictable based on agent headcount and consistent ramp-up of agents, but lower margin than Renewal Commissions because of higher commissions paid to agents and higher back-office costs associated with policies in their first term. This revenue stream has predictably converted into higher-margin Renewal Commissions historically, and we expect this to continue moving forward.
•New Business Royalty Fees - predictable based on franchise agent count and consistent ramp-up of franchises, but lower margin than Renewal Royalty Fees because the Company only receives a royalty fee of 20% on the commissions paid by the Carrier in the first term of every policy and higher back-office costs associated with policies in their first term. This revenue stream has predictably converted into higher-margin Renewal Royalty Fees historically, and we expect this to continue moving forward.
•Agency Fees - although predictable based on agent count, Agency Fees do not renew like New Business Commissions and Renewal Commissions.
Cost Recovery Revenue:
•Initial Franchise Fees - Cost Recovery Revenue stream charged one time per franchise unit that covers the Company's costs to recruit, train, and onboard the franchisee, and to provide ongoing support over the life
of the franchise agreement. These fees are fully earned and non-refundable when a franchise attends our initial training and are recognized in revenue over the life of the franchise agreement.
•Interest Income - like Initial Franchise Fees, interest income is a Cost Recovery Revenue stream that reimburses the Company for those franchises on a payment plan. Interest income is recognized over the term of the franchise fee payment plan.
Ancillary Revenue:
•Contingent Commissions - although high margin, Contingent Commissions are unpredictable and susceptible to weather events and Carrier underwriting results. Management does not rely on Contingent Commissions for operating cash flow or budget planning.
•Other Income - book transfer fees, marketing investments from Carriers and other items that are unpredictable and supplemental to other revenue streams.
We discuss below the breakdown of our revenue by stream:
Years ended December 31, 2025
(in thousands) 2025 2024 2023 % Growth
Core Revenue:
Renewal Commissions(1)
$ 78,621 22 % $ 74,938 24 % $ 70,730 27 % 5 %
Renewal Royalty Fees(2)
170,767 46 % 138,942 44 % 107,524 41 % 23 %
New Business Commissions(1)
27,985 8 % 24,608 8 % 23,411 9 % 14 %
New Business Royalty Fees(2)
30,153 8 % 27,122 9 % 23,168 9 % 11 %
Agency Fees(1)
10,404 3 % 8,127 3 % 8,174 3 % 28 %
Total Core Revenue 317,930 87 % 273,737 87 % 233,007 89 % 16 %
Cost Recovery Revenue:
Initial Franchise Fees(2)
5,594 2 % 6,620 2 % 11,238 4 % (15) %
Interest Income 670 - % 932 - % 1,443 1 % (28) %
Total Cost Recovery Revenue 6,264 2 % 7,552 2 % 12,681 5 % (17) %
Ancillary Revenue:
Contingent Commissions(1)
38,376 10 % 31,385 10 % 13,746 5 % 22 %
Other Income(2)
2,734 1 % 1,831 1 % 1,843 1 % 49 %
Total Ancillary Revenue 41,110 11 % 33,216 11 % 15,588 6 % 24 %
Total Revenues $ 365,304 100 % $ 314,505 100 % $ 261,276 100 % 16 %
(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.
Core Revenue:
The Company's primary source of revenue is through the placement of insurance policies. We are paid a percentage of the premium from the Carriers in the form of New Business Commissions and, in states which allow it, we charge Agency Fees for the placement of the policy. For policies placed through franchise sales, we receive 20% of the commissions and fees received as New Business Royalties during the first term of the policy. All clients are serviced by our world-class service centers, allowing for predictable retention of our Book of Business. Client retention was 85% as of December 31, 2025. All commissions received in corporate sales after the first term of the policy are recognized as Renewal Commissions, which are higher margin due to lower commissions and servicing costs. For all policies that renew related to franchise sales, we receive as Renewal Royalty Fees 50% of the commissions received from the Carrier, creating a mechanical increase in revenue of 150% in the first renewal term. Renewal Royalty Fees are higher margin compared to New Business Royalty Fees due to lower servicing costs on higher revenue. Because of the lower royalty fees on New Business Commissions as compared to Renewal Commissions, and because we are placing an increasing percentage of Total Written Premium in franchise sales, Core Revenue growth will lag that of Total Written Premium.
Cost Recovery Revenue:
The Company charges every franchise an Initial Franchise Fee, which, on a cash flow basis, helps to cover our costs to recruit, train, onboard, and to provide ongoing support over the life of the franchise agreement. The Company recognizes revenue over the 10-year life of the contract. For franchises that have elected the payment plan, the difference between the pay-in-full and the payment plan amounts is recognized as Interest Income using the interest rate method over the 5-year term of the payment plan.
Ancillary Revenue:
With certain Carriers, the Company has the opportunity to earn additional revenue in the form of Contingent Commissions, typically based on the volume, growth, and loss ratios of the business placed with the select Carriers. The Contingent Commissions are extremely difficult to predict in any given period and can vary greatly from year to year. Although the Company can control the amount of business placed with the Carriers, loss ratios depend on many factors that are outside of our control, such as weather events and Carrier underwriting accuracy. The Company estimates the amount to be received during the period over which the Contingent Commissions are earned.
Below is a summary showing the historical Contingent Commissions as a percentage of Total Written Premiums Placed for the period in which the Contingent Commissions were earned (in thousands).
Total Written Premium Contingent
Commission Revenue 		% of Premium
2023 $ 2,963,984 $ 13,746 0.46 %
2024 3,811,992 31,385 0.82 %
2025 4,448,095 38,376 0.86 %
3-year average 0.71 %
Contingent Commissions can vary significantly from year-to-year and should be viewed over several years. Since 2023, revenue from Contingent Commissions has represented approximately 0.71% of Total Written Premium at year-end. Most of our Contingent Commissions are earned in the year prior to when they are received. For the year ended December 31, 2023, $13.7 million of Contingent Commissions were earned (below our historical average as a percentage of premium), of which $6.9 million was still receivable at December 31, 2023. For the year ended December 31, 2024, $31.4 million of Contingent Commissions were earned (above our historical average as a percentage of premium), of which $25.5 million was still receivable at December 31, 2024. For the year ended December 31, 2025, $38.4 million of Contingent Commissions were earned (above our historical average as a percentage of premium), of which $29.1 million was still receivable at December 31, 2025.
Premium by line of business
We are a distributor of insurance policies in a range of primarily personal lines of business including homeowner's insurance; automotive insurance; dwelling property insurance; flood, wind and earthquake insurance; excess liability or umbrella insurance; specialty lines insurance (motorcycle, recreational vehicle, and other insurance); commercial lines insurance (general liability, property and auto insurance for small businesses) and life insurance. The following table sets forth our Total Written Premium placed by line of business by amount and as a percentage of our Total Written Premium for the periods indicated (in thousands):
Year Ended December 31,
2025 2024 2023
Line of business
Homeowner $ 2,816,235 63 % $ 2,338,616 61 % $ 1,729,138 58 %
Automotive 1,509,451 34 % 1,367,578 36 % 1,149,737 39 %
Commercial 84,916 2 % 72,804 2 % 57,207 2 %
Other 37,493 1 % 32,994 1 % 27,903 1 %
Total Written Premium $ 4,448,095 100 % $ 3,811,992 100 % $ 2,963,985 100 %
Expenses
Due to our organic-focused growth strategy, virtually all of our investments in future growth are in people and technology. The majority of our investments in people, such as in sales and service functions, are not capitalizable and are recognized immediately on our statement of operations, while investments in software are capitalized as intangible assets and recognized as expense over the useful life of the software.
Employee compensation and benefits.Employee compensation and benefits is our largest expense and consists of (a) base compensation comprising salary, bonuses, commissions, and benefits paid and payable to employees, and (b) stock option awards for our senior employees. We expect to continue to experience a general rise in compensation and benefits expense commensurate with expected growth in headcount and with the need to maintain competitive compensation levels as we expand geographically and create new products and services.
General and administrative expenses.General and administrative expenses include technology, travel, professional services, marketing and advertising, occupancy, depreciation and other costs associated with our operations. Our occupancy-related costs and professional services expenses, in particular, generally increase or decrease in relative proportion to the number of our employees and the overall size and scale of our business operations.
Key performance indicators
Our key operating metrics are discussed below:
Total Written Premium
Total Written Premium represents the total amount of current (non-cancelled) gross premium that is placed with Goosehead's portfolio of Carriers for a reporting period. We believe that Total Written Premium is an appropriate measure of operating performance because it reflects growth of our business relative to other insurance agencies.
For the year ended December 31, 2025, we had $4.4 billion in Total Written Premium, representing a 17% increase, compared to $3.8 billion for the year ended December 31, 2024. The following table shows Total Written Premium by channel for the years ended 2025 and 2024 (in thousands).
Year Ended December 31 % Change
2025 2024
Corporate Sales Total Written Premium $ 793,735 $ 765,485 4 %
Franchise Sales Total Written Premium 3,654,360 3,046,507 20 %
Total Written Premium $ 4,448,095 $ 3,811,992 17 %
Policies in Force
Policies in Force means the total count of current (non-cancelled) policies placed with Goosehead's portfolio of Carriers as of a reported date. We believe that Policies in Force is an appropriate measure of operating performance because it reflects growth of our business relative to other insurance agencies.
As of December 31, 2025, we had 1,900,000 Policies in Force compared to 1,674,000 as of December 31, 2024, representing a 14% increase.
NPS
Net Promoter Score (NPS) is calculated based on a single question: "How likely are you to refer Goosehead Insurance to a friend, family member or colleague?" Clients that respond with a 6 or below are Detractors, with a 7 or 8 are Passives, and with a 9 or 10 are Promoters. NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters. For example, if 50% of respondents were Promoters and 10% were Detractors, NPS is a 40. NPS is a useful gauge of the loyalty of client relationships and can be compared across companies and industries. NPS is calculated on a trailing twelve-month basis.
NPS has decreased to 77 as of December 31, 2025 from 89 at December 31, 2024.
Client Retention
Client Retention is calculated by comparing the number of all clients that had at least one policy in force twelve months prior to the date of measurement and still have at least one policy in force at the date of measurement. We believe Client Retention is useful as a measure of how well Goosehead retains clients year-over-year and minimizes defections.
Client Retention increased to 85% at December 31, 2025 when compared to 84% at December 31, 2024, reflecting continued execution by our service teams in delivering highly differentiated service levels and moderating premium rate increases. Our retention rate is even stronger on a premium basis, driven from increases in premium taken by our Carriers and additional coverages sold by our sales agents. In 2025, we retained 90% of the premiums we distributed in 2024, a decrease from premium retention in 2024 of 98%.
New Business Revenue
New Business Revenue is commissions received from the Carrier, Agency Fees received from clients, and Royalty Fees relating to policies in their first term.
For the year ended December 31, 2025, New Business Revenue grew 15% to $68.5 million, from $59.9 million for the year ended December 31, 2024. Growth in New Business Revenue is primarily attributable to increases in the number of sales agents, growth in Franchise productivity, and rising premium rates.
Any diminished capacity of Carriers to place new business (including as a result of 2025 wildfires in Southern California, severe floods in Central Texas, or other natural disasters) could slow the growth of our New Business Revenue in the future.
Renewal Revenue
Renewal Revenue is commissions received from the Carrier and Royalty Fees from franchises after the first term of a policy.
For the year ended December 31, 2025, Renewal Revenue grew 17% to $249.4 million, from $213.9 million for the year ended December 31, 2024. Growth in Renewal Revenue was driven primarily by an increase in the number of policies in a renewal term assisted by Client Retention of 85% at December 31, 2025, and premium rate increases over the prior year. The increase during the year ended December 31, 2025 also reflects the release of the constraint on certain variable consideration related to policies placed and made effective in previous periods.
Increases in premium rates may continue to exert pressure on client retention and could slow the growth of our Renewal Revenue in the future.
Non-GAAP Financial Measures
Core Revenue, Cost Recovery Revenue, Ancillary Revenue, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EPS are not measures of financial performance under GAAP and should not be considered substitutes for total revenue, net income, net income margin or earnings per share, which we consider to be the most directly comparable GAAP measure. We refer to these measures as "non-GAAP financial measures." We consider 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 we believe are not representative of our core business. Core Revenue, Cost Recovery Revenue, Ancillary Revenue, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EPS have limitations as analytical tools, and when assessing our operating performance, you should not consider Core Revenue, Cost Recovery Revenue, Ancillary Revenue, Adjusted EBITDA, Adjusted EBITDA Margin, or Adjusted EPS in isolation or as substitutes for net income, earnings per share or other consolidated income statement data prepared in accordance with GAAP. Other companies may calculate Core Revenue, Cost Recovery Revenue, Ancillary Revenue, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EPS differently than we do, limiting their usefulness as comparative measures.
Core Revenue
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.
Core Revenue increased by $44.2 million, or 16%, to $317.9 million for the year ended December 31, 2025 from $273.7 million for the year ended December 31, 2024. The primary drivers of the increase from December 31, 2024 to December 31, 2025 are an increase in policies in their renewal term, assisted by Client Retention of 85% at December 31, 2025; the release of the constraint on certain variable consideration related to policies placed and made effective in previous periods; more new policies written driven by increases in the number of sales agents and growth in Franchise productivity; and rising premium rates.
Cost Recovery Revenue
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.
Cost Recovery Revenue decreased by $1.3 million, or 17%, to $6.3 million for the year ended December 31, 2025 from $7.6 million for the year ended December 31, 2024. The primary drivers of the decrease were a decrease in total franchises and fewer franchise terminations during the period, resulting in less acceleration of initial franchise fee revenue.
Ancillary Revenue
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.
Ancillary Revenue increased by $7.9 million, or 24%, to $41.1 million for the year ended December 31, 2025 from $33.2 million for the year ended December 31, 2024. The primary drivers of the increase from December 31, 2024 to December 31, 2025 were an increase in Total Written Premium and receiving and qualifying for additional Contingent Commissions, assisted by improved loss ratios.
Contingent Commissions are inherently volatile as they are based on carrier underwriting profitability and may be impacted by catastrophic losses resulting from natural or man-made disasters.
Adjusted EBITDA
Adjusted EBITDA is a supplemental measure of our 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 underlying 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, impairment expense, and other non-operating items, including, among other things, certain non-cash charges and certain non-recurring or non-operating gains or losses.
Adjusted EBITDA increased by $13.7 million, or 14%, to $113.6 million for the year ended December 31, 2025, from $99.9 million for the year ended December 31, 2024, driven by a 16% increase in Core Revenue, a $7.0 million increase in high-margin Contingent Commissions, partially offset by growth of 19% in employee compensation and benefits excluding equity-based compensation and 15% in general and administrative expenses excluding impairment. Additionally, the increase for the year ended December 31, 2025 included $4.0 million of Renewal Revenues recognized due to the release of a constraint on certain variable consideration related to policies placed and made effective in previous periods.
Adjusted EBITDA Margin
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.
For the year ended December 31, 2025, Adjusted EBITDA Margin was 31% compared to 32% for the year ended December 31, 2024. The Adjusted EBITDA margin decrease came as a result of employee compensation and benefits, excluding equity-based compensation, growing faster than total revenue.
Adjusted EPS
Adjusted EPS is a supplemental measure of our performance, defined as earnings per share (the most directly comparable GAAP measure) before non-recurring or non-operating income and expenses, adjusted to assume a single class of stock (Class A) and assuming noncontrolling interest does not exist. Adjusted EPS is a useful measure to management because it eliminates the impact of items that do not relate to business performance and helps compare companies that may not have a dual-share class structure.
Adjusted EPS decreased by $0.13 to $1.86 for the year ended December 31, 2025, from $1.99 for the year ended December 31, 2024, driven by a decrease in basic EPS and equity-based compensation, partially offset by an increase in impairment and other gains and losses.
GAAP to Non-GAAP Reconciliations
The following table shows a reconciliation of total revenues to other non-GAAP measures of revenue for the years ended December 31, 2025, 2024, and 2023 (in thousands):
Year ended December 31,
2025 2024 2023
Total Revenues $ 365,304 $ 314,505 $ 261,276
Core Revenue:
Renewal Commissions(1)
$ 78,621 $ 74,938 $ 70,730
Renewal Royalty Fees(2)
170,767 138,942 107,524
New Business Commissions(1)
27,985 24,608 23,411
New Business Royalty Fees(2)
30,153 27,122 23,168
Agency Fees(1)
10,404 8,127 8,174
Total Core Revenue 317,930 273,737 233,007
Cost Recovery Revenue:
Initial Franchise Fees(2)
5,594 6,620 11,238
Interest Income 670 932 1,443
Total Cost Recovery Revenue 6,264 7,552 12,681
Ancillary Revenue:
Contingent Commissions(1)
38,376 31,385 13,746
Other Income(2)
2,734 1,831 1,843
Total Ancillary Revenue 41,110 33,216 15,588
Total Revenues $ 365,304 $ 314,505 $ 261,276
(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 table shows a reconciliation from net income to Adjusted EBITDA for the years ended December 31, 2025, 2024, and 2023 (in thousands):
Year ended December 31,
2025 2024 2023
Net income $ 44,451 $ 49,113 $ 23,696
Interest expense 23,793 7,339 6,568
Depreciation and amortization 11,270 10,453 9,244
Tax expense (benefit) 6,397 (2,413) 2,692
Equity-based compensation 23,375 27,971 23,989
Impairment and other gains and losses
4,505 347 3,628
Other (income) expense (192) 7,101 -
Adjusted EBITDA $ 113,599 $ 99,911 $ 69,817
Net Income Margin(1)
12 % 16 % 9 %
Adjusted EBITDA Margin(2)
31 % 32 % 27 %
(1) Net Income Margin is calculated as Net Income divided by Total Revenue ($44,451 / $365,304), ($49,113 / $314,505), and ($23,696 / $261,276) for the years ended December 31, 2025, 2024, and 2023, respectively.
(2) Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by Total Revenue excluding other non-operating items ($113,599 / $365,304), ($99,911 / $314,505), and ($69,817 /$261,276) for the years ended December 31, 2025, 2024, and 2023, respectively.
The following tables show a reconciliation from basic earnings per share to Adjusted EPS for the years ended December 31, 2025, 2024, and 2023. Note that totals may not sum due to rounding:
Year ended December 31,
2025 2024 2023
Earnings per share - basic (GAAP) $ 1.11 $ 1.23 $ 0.59
Add: equity-based compensation(1)
0.63 0.75 0.64
Add: impairment and other gains and losses(2)
0.12 0.01 0.10
Adjusted EPS (non-GAAP) $ 1.86 $ 1.99 $ 1.33
(1) Calculated as equity-based compensation divided by the sum of the weighted average number of shares of Class A common stock and Class B common stock outstanding during the period 2025 - [$23.4 million / ( 25.0 million+ 12.2 million )] 2024 - [ $28.0 million / ( 24.7 million + 12.7 million )] 2023 - [ $24.0 million / ( 23.9 million + 13.8 million )]
(2) Calculated as impairment and other gains and losses divided by the sum of the weighted average number of shares of Class A common stock and Class B common stock [ $4.5 million / ( 25.0 million + 12.2 million )] for the year ended December 31, 2025, [ $0.3 million/ ( 24.7 million+ 12.7 million )] for the year ended December 31, 2024, and [ $3.6 million/ ( 23.9 million+ 13.8 million )] for the year ended December 31, 2023.
Consolidated results of operations
The following is a discussion of our consolidated results of operations for each of the years ended December 31, 2025, 2024, and 2023. This information is derived from our accompanying consolidated financial statements prepared in accordance with GAAP. For further discussion regarding our consolidated results of operations for the year ended December 31, 2024 as compared to the year ended December 31, 2023, refer to "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
The following table summarizes our results of operations for the years ended December 31, 2025, 2024, and 2023 (in thousands):
Year Ended December 31,
2025 2024 2023
Revenues:
Commissions and agency fees $ 155,386 43 % $ 139,059 44 % $ 116,061 44 %
Franchise revenues 209,248 57 % 174,514 56 % 143,772 55 %
Interest income 670 - % 932 - % 1,443 1 %
Total revenues 365,304 100 % 314,505 100 % 261,276 100 %
Operating Expenses:
Employee compensation and benefits 196,364 67 % 172,942 68 % 152,604 67 %
General and administrative expenses 81,379 28 % 67,069 27 % 62,111 27 %
Bad debts 1,842 1 % 2,901 1 % 4,361 2 %
Depreciation and amortization 11,270 4 % 10,453 4 % 9,244 4 %
Total operating expenses 290,855 100 % 253,365 100 % 228,320 100 %
Income from operations 74,449 61,140 32,956
Other Income:
Interest expense (23,793) (7,339) (6,568)
Other income (expense) 192 (7,101) -
Income before taxes 50,848 46,700 26,388
Tax expense (benefit) 6,397 (2,413) 2,692
Net Income 44,451 49,113 23,696
Less: net income attributable to noncontrolling interests 16,620 18,687 9,556
Net Income attributable to Goosehead Insurance, Inc. $ 27,831 $ 30,426 $ 14,140
Revenues
In 2025, revenue increased by 16% to $365.3 million from $314.5 million in 2024.
Commissions and agency fees
Commissions and agency fees consist of Core Revenue from New Business Commissions, Renewal Commissions, and Agency Fees, and Ancillary Revenue from Contingent Commissions generated from corporate sales.
The following table sets forth our commissions and agency fees by amount and as a percentage of our revenues for the periods indicated (in thousands):
Year Ended December 31,
2025 2024 2023
Core Revenue:
Renewal Commissions $ 78,621 50 % $ 74,938 54 % $ 70,730 61 %
New Business Commissions 27,985 18 % 24,608 18 % 23,411 20 %
Agency Fees 10,404 7 % 8,127 6 % 8,174 7 %
Total 117,010 75 % 107,673 77 % 102,315 88 %
Ancillary Revenue:
Contingent Commissions 38,376 25 % 31,385 23 % 13,746 12 %
Commissions and agency fees $ 155,386 100 % $ 139,059 100 % $ 116,061 100 %
Renewal Commissions increased by $3.7 million, or 5%, to $78.6 million for the year ended December 31, 2025 from $74.9 million for the year ended December 31, 2024. This increase is primarily attributable to the recognition of
$3.0 million due to the release of the constraint on certain variable consideration related to policies placed and made effective in previous periods as well as an increase in the number of policies in the renewal term from December 31, 2024 to December 31, 2025, assisted by client retention of 85% and premium rate increases.
New Business Commissions increased by $3.4 million, or 14%, to $28.0 million for the year ended December 31, 2025 from $24.6 million for the year ended December 31, 2024. This increase in New Business Commissions was primarily attributable to an increase in total sales agent head count to 489 at December 31, 2025, from 417 at December 31, 2024, a 17% increase. Revenue from Agency Fees increased by $2.3 million, or 28%, to $10.4 million for the year ended December 31, 2025 from $8.1 million for the year ended December 31, 2024. This increase in Agency Fees was primarily attributable to increases in the average fee charged as well as an increase in the number of policies written where an agency fee was charged.
Revenue from Contingent Commissions increased by $7.0 million, or 22%, to $38.4 million for the year ended December 31, 2025, from $31.4 million for the year ended December 31, 2024. The increase is primarily attributable to growth in Total Written Premium as well as receiving and qualifying for additional Contingent Commissions.
Franchise Revenues
Franchise Revenues consist of Core Revenues from Royalty Fees, Cost Recovery Revenues from Initial Franchise Fees, and Ancillary Revenues from Other Franchise Revenues.
The following table sets forth our franchise revenues by amount and as a percentage of our revenues for the periods indicated (in thousands):
Year Ended December 31,
2025 2024 2023
Core Revenues:
Renewal Royalty Fees $ 170,767 82 % $ 138,942 80 % $ 107,524 75 %
New Business Royalty Fees 30,153 14 % 27,122 16 % 23,168 16 %
Total 200,920 96 % 166,064 96 % 130,692 91 %
Cost Recovery Revenues:
Initial Franchise Fees 5,594 3 % 6,620 4 % 11,238 8 %
Ancillary Revenues:
Other Franchise Revenues 2,734 1 % 1,831 1 % 1,843 1 %
Franchise revenues $ 209,248 100 % $ 174,514 100 % $ 143,772 100 %
Revenue from Renewal Royalty Fees increased by $31.8 million, or 23%, to $170.8 million, for the year ended December 31, 2025 from $138.9 million for the year ended December 31, 2024. The increase in revenue from Renewal Royalty Fees was primarily attributable to an increase in the number of policies in the renewal term from December 31, 2024 to December 31, 2025, assisted by client retention of 85% and premium rate increases. The increase was also impacted by the recognition of $1.0 million due to the release of the constraint on certain variable consideration related to policies placed and made effective in previous periods.
Revenue from New Business Royalty Fees increased by $3.0 million, or 11%, to $30.2 million for the year ended December 31, 2025 from $27.1 million for the year ended December 31, 2024. The increase in revenue from New Business Royalty Fees was driven primarily by an increase in the number of franchise agents, an increase in Franchise productivity, and rising premium rates.
Initial Franchise Fee revenue decreased by $1.0 million, or 15%, to $5.6 million for the year ended December 31, 2025 from $6.6 million for the year ended December 31, 2024. The primary drivers of the decrease in Initial Franchise Fees were a decrease in total franchises and lower turnover of franchises during the period, which avoids accelerated recognition of Initial Franchise Fees for terminated franchises.
Interest Income
Interest Income decreased to $0.7 million for 2025 compared to $0.9 million for 2024, driven by fewer franchises on a payment plan in the current period.
Expenses
Employee compensation and benefits
Employee compensation and benefits expenses increased by $23.4 million, or 14%, to $196.4 million for 2025 from $172.9 million for 2024. The increase was primarily related to investments in corporate producers and our service and technology functions, partially offset by a decrease in equity-based compensation.
General and administrative expenses
General and administrative expenses increased by $14.3 million, or 21%, to $81.4 million for 2025 from $67.1 million for 2024. This increase was primarily attributable to increases in spend on technology and professional services as well as an increase of $4.3 million in asset impairment charges.
Bad debts
Bad debts decreased by $1.1 million, or 36%, to $1.8 million for 2025 from $2.9 million for 2024. This decrease was primarily attributable to lower franchise turnover and an increase in average cash collections relative to revenue recognized for terminated franchises on the payment plan.
Depreciation and amortization
Depreciation and amortization increased by $0.8 million, or 8%, to $11.3 million for 2025 from $10.5 million for 2024. This increase was primarily attributable to the increase in investments in software development during 2025.
Interest expense
Interest expense increased by $16.5 million, or 224%, to $23.8 million for 2025 from $7.3 million for 2024. This increase is attributable to an increase in total borrowings outstanding.
Other income (expense)
Other income (expense) consists of interest earned on cash deposits, loss on debt extinguishment, debt modification expense, and operating remeasurements of our tax receivable agreement liability. Other income (expense) increased by $7.3 million to $0.2 million for 2025, primarily due to remeasurements of our tax receivable agreement liability during 2024 due to increases in our effective tax rate as we identified additional state filing requirements.
Tax expense (benefit)
Tax expense (benefit) increased by $8.8 million, or 365%, to $6.4 million expense for 2025 from $2.4 million benefit for 2024. This increase is primarily attributable to the increase in income before taxes during 2025 and the benefit in 2024 attributable to the remeasurement of our deferred tax assets due to increases in our effective tax rate as we identified additional state filing requirements.
Liquidity and capital resources
Historical liquidity and capital resources
We have managed our historical liquidity and capital requirements primarily through the receipt of revenues from our corporate and franchise sales. Our primary cash flow activities involve: (1) generating cash flow from Commissions and Fees, which largely includes New Business Commissions, Renewal Commissions and Agency Fees; (2) generating cash flow from Franchise Revenue operations, which largely includes Royalty Fees and Initial Franchise Fees; (3) borrowings, interest payments and repayments under our credit agreement; and (4) issuing shares of Class A common stock. As of December 31, 2025, our unrestricted cash and cash equivalents, and restricted cash was $37.9 million. We have used cash flow from operations primarily to pay compensation and related expenses; general, administrative and other expenses; investments in strategic technologies; debt service; special dividends, share repurchases, and distributions to our owners.
Credit agreement
See "Note 9. Debt" in the consolidated financial statements included herein for a discussion of the Company's credit facilities.
Comparative cash flows
The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated:
Year Ended December 31
2025 2024 2023
Net cash provided by operating activities $ 91,757 $ 71,544 $ 50,833
Net cash used for investing activities (23,543) (12,419) (19,182)
Net cash used for financing activities (88,250) (45,199) (17,991)
Net increase (decrease) in cash and cash equivalents (20,036) 13,926 13,660
Cash and cash equivalents, and restricted cash, beginning of period 57,973 44,047 30,387
Cash and cash equivalents, and restricted cash, end of period $ 37,937 $ 57,973 $ 44,047
Operating activities
Net cash provided by operating activities was $91.8 million for 2025 as compared to net cash provided by operating activities of $71.5 million for 2024. The increase in net cash provided by operating activities was primarily attributable to an increase in revenues of $50.8 million, including improved cash collections on commissions and agency fees. This increase was partially offset by a $37.5 million increase in operating expenses, which included noncash impairment expense of $4.7 million. Operating activities also reflected a $9.6 million operating increase in our deferred tax assets.
Investing activities
Net cash used for business investment activities was $23.5 million for 2025 as compared to net cash used for business investment activities of $12.4 million for 2024. This increase in net cash used in business investment activities was primarily attributable to a $4.9 million increase in purchases of books of business and a $4.7 million increase in cash purchases of property and equipment.
Financing activities
Net cash used for financing activities was $88.3 million for 2025 as compared to net cash used for financing activities of $45.2 million for 2024. This increase in net cash used for financing activities was primarily driven by issuance of a $300.0 million term loan, which was used to repay our previous term loan of $93.1 million and fund a special distribution and dividend of $205.0 million. We also made share repurchases during the year of $81.7 million.
Future sources and uses of liquidity
Our sources of liquidity are (1) cash on hand, (2) net working capital, (3) cash flows from operations and (4) our Revolving Credit Facility or other sources of debt financing. Based on our current expectations, we believe that these sources of liquidity will be sufficient to fund our working capital requirements and to meet our commitments in the foreseeable future.
Our primary liquidity needs comprise cash to (1) provide capital to facilitate the organic growth of our business, (2) pay operating expenses, including cash compensation to our employees, (3) make payments under the tax receivable agreement, (4) pay interest and principal due on borrowings under our Credit Agreement (5) pay income taxes, (6) repurchase shares under our Share Repurchase Program, and (7) pay dividends when deemed advisable by our board of directors.
Dividend policy
Assuming Goosehead Financial, LLC makes distributions to its members in any given year, the determination to pay dividends, if any, to our Class A common stockholders out of the portion, if any, of such distributions remaining after our payment of taxes and tax receivable agreement payments (any such portion, an "excess distribution") will be made at the sole discretion of our board of directors. Our board of directors may change our dividend policy at any
time. See "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities - Dividend policy".
Share Repurchase Program
On April 24, 2024, our board of directors approved a share repurchase program with authorization to purchase up to $100 million of our Class A common stock, which expired on March 31, 2025. On April 23, 2025, our board of directors approved a new share repurchase program with authorization to purchase up to $100 million of our Class A common stock through May 1, 2026. On February 17, 2026, our board of directors extended our share repurchase program, increasing the authorization by $180.0 million and extending the program through May 1, 2027. See "Note 11. Stockholders' Equity" in the consolidated financial statements included herein for a discussion of the repurchase programs.
Tax receivable agreement
We entered into the tax receivable agreement with the Pre-IPO LLC Members on May 1, 2018 that provides for the payment by us to the Pre-IPO LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of (i) any increase in tax basis in Goosehead Insurance, Inc.'s assets and (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the tax receivable agreement. See "Item 13. Certain relationships and related transactions, and director independence".
Holders of Goosehead Financial, LLC Units (other than Goosehead Insurance, Inc.) may, subject to certain conditions and transfer restrictions described above, redeem or exchange their LLC Units for shares of Class A common stock of Goosehead Insurance, Inc. on a one-for-one basis. Goosehead Financial, LLC has made an election under Section 754 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the "Code") effective for each taxable year in which a redemption or exchange of LLC Units for shares of Class A common stock occurs, which has resulted and is expected to result in increases to the tax basis of the assets of Goosehead Financial, LLC at the time of a redemption or exchange of LLC Units. Prior redemptions and exchanges have resulted, and we expect future redemptions and exchanges will result in increases in the tax basis of the tangible and intangible assets of Goosehead Financial, LLC. These increases in tax basis have reduced the amount of tax we are required to pay, and may reduce the amount of tax that Goosehead Insurance, Inc. would otherwise be required to pay in the future. We have entered into a tax receivable agreement with the Pre-IPO LLC Members that provides for the payment by us to the Pre-IPO LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of (i) any increase in tax basis in Goosehead Insurance, Inc.'s assets resulting from (a) the purchase of LLC Units from any of the Pre-IPO LLC Members using the net proceeds from any future offering, (b) redemptions or exchanges by the Pre-IPO LLC Members of LLC Units for shares of our Class A common stock or (c) payments under the tax receivable agreement and (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the tax receivable agreement. This payment obligation is an obligation of Goosehead Insurance, Inc. and not of Goosehead Financial, LLC. For purposes of the tax receivable agreement, the cash tax savings in income tax will be computed by comparing the actual income tax liability of Goosehead Insurance, Inc. (calculated with certain assumptions) to the amount of such taxes that Goosehead Insurance, Inc. would have been required to pay had there been no increase to the tax basis of the assets of Goosehead Financial, LLC as a result of the redemptions or exchanges and had Goosehead Insurance, Inc. not entered into the tax receivable agreement. Estimating the amount of payments that may be made under the tax receivable agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors. While the actual increase in tax basis from future purchases, redemptions or exchanges, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including the timing of redemptions or exchanges, the price of shares of our Class A common stock at the time of the redemption or exchange, the extent to which such redemptions or exchanges are taxable and the amount and timing of our income. See "Item 13. Certain relationships and related transactions, and director independence". We historically accounted, and anticipate that we will continue to account for the effects of these increases in tax basis and associated payments under the tax receivable agreement arising from redemptions or exchanges as follows:
•we will record an increase in deferred tax assets for the estimated income tax effects of the increases in tax basis based on enacted federal and state tax rates at the date of the redemption or exchange;
•to the extent we estimate that we will not realize the full benefit represented by the deferred tax asset, based on an analysis that will consider, among other things, our expectation of future earnings, we will reduce the deferred tax asset with a valuation allowance; and
•we will record 85% of the estimated realizable tax benefit (which is the recorded deferred tax asset less any recorded valuation allowance) as an increase to the liability due under the tax receivable agreement and the remaining 15% of the estimated realizable tax benefit as an increase to additional paid-in capital.
All of the effects of changes in any of our estimates after the date of the redemption or exchange will be included in net income. Similarly, the effect of subsequent changes in the enacted tax rates will be included in net income.
Contractual obligations, commitments and contingencies
The following table represents our contractual obligations as of December 31, 2025, aggregated by type.
Contractual obligations, commitments and contingencies
(in thousands) Total Less than 1 year 1-3 years 3-5 years More than 5 years
Operating leases(1)
$ 70,861 $ 11,483 $ 25,431 $ 19,533 $ 14,414
Debt obligations payable(2)
298,502 2,993 5,986 5,986 283,537
Interest expense(3)
119,514 20,352 40,144 39,270 19,748
Liabilities under tax receivable agreement(4)
171,922 6,237 21,058 41,135 103,492
Total $ 660,799 $ 41,065 $ 92,619 $ 105,924 $ 421,191
(1)The Company leases its facilities under non-cancelable operating leases. In addition to monthly lease payments, the lease agreements require the Company to reimburse the lessors for its portion of operating costs each year. Rent expense was $6.8 million, $7.5 million, and $7.8 million for years ending December 31, 2025, 2024, and 2023.
(2)The Company entered into a new credit agreement on January 8, 2025 for a $300 million term loan and a $75 million revolving credit facility, of which nothing was drawn as of December 31, 2025. See "Note 9. Debt" under Part II, Item 8 of this Form 10-K.
(3)Interest payments on our outstanding debt obligations under our Credit Agreement. Our debt obligations have variable interest rates. We have calculated future interest obligations based on the interest rate for our debt obligations as of December 31, 2025.
(4)See "Item 7. Management's discussion and analysis of financial condition and results of operation - Tax receivable agreement."
Critical accounting policies and 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 the following critical accounting policies could potentially produce materially different results if we were to change underlying assumptions, estimates or judgments. See "Item 8. Financial statements and supplementary data - Summary of significant accounting policies" for a summary of our significant accounting policies, and discussion of recent accounting pronouncements.
Revenue recognition
Goosehead provides personal and commercial property and casualty insurance brokerage services for its clients through a network of corporate-owned offices and franchise units. Goosehead is compensated for the insurance brokerage services that it provides for clients in the form of commission revenue, agency fees, royalty fees, and contingent commissions.
The transaction price for commissions revenue and royalty fees is set as an estimate of the variable consideration to be received for the current policy term. This estimate includes the fixed consideration due based on the contractual terms of the current policy and adjustments for estimates of modifications of the contractual terms of the current policy and/or termination of the policy before the end of the current term. This variable consideration is constrained to the extent that it is probable there will not be a significant reversal of revenue. The Company adjusts its estimate of revenue recognized for commissions and royalty fees based on cash collections during the term of the policy. Commissions revenue is earned at a point in time on the effective date of the policy. Royalty fees are earned over time as the underlying policies are placed.
The transaction price for contingent commissions is estimated based on all available information and constrained such that it is probable there will not be a significant reversal of revenue. Contingent commissions revenueis
recognized over time as the Company completes its performance obligations as the underlying policies are placed and other contractual obligations are met.
Certain costs to obtain or fulfill a contract are capitalized. The Company capitalizes the incremental costs to obtain franchise contracts. These deferred costs are amortized over the expected life of the underlying franchise fee and are included in Other assets in the Company's consolidated balance sheet as of December 31, 2025.
Liabilities under tax receivable agreement
In connection with the Offering, we entered into a tax receivable agreement with the Pre-IPO LLC Members that provides for the payment by us to the Pre-IPO LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of (i) any increase in tax basis in Goosehead Financial, LLC's assets resulting from (a) the acquisition of LLC Units using the net proceeds from any future offering, (b) redemptions or exchanges by the Pre-IPO LLC Members of LLC Units and the corresponding number of shares of Class B common stock for shares of our Class A common stock or (c) payments under the tax receivable agreement, and (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the tax receivable agreement.
The actual increase in tax basis from future redemptions and exchanges, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending on a number of factors, including, but not limited to, the timing of any future redemptions, exchanges or purchases of the LLC Units held by Pre-IPO LLC Members, the price of our Class A common stock at the time of the purchase, redemption or exchange, the extent to which redemptions or exchanges are taxable, the amount and timing of the taxable income that we generate in the future, the tax rates then applicable and the portion of our payments under the tax receivable agreement constituting imputed interest.
As of December 31, 2025, as a result of the prior redemptions of LLC Units, we recognized liabilities totaling $171.9 million relating to our obligations under the tax receivable agreement.
Goosehead Insurance Inc. published this content on February 19, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 19, 2026 at 14:27 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]