Business context and reporting period
Goosehead Insurance, Inc. filed this Form 10-K for the fiscal year ended December 31, 2023. It operates a U.S. personal-lines-focused insurance agency, distributing policies through corporate sales and franchisees and supporting both with centralized service centers and proprietary technology. The filing reports annual results; it does not provide a clear standalone fourth-quarter financial summary.
Key financial and operating metrics
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Total revenue | $261.3 million, up 25% | $209.4 million |
| Net income | $23.7 million; 9% net margin | $2.6 million; 1% net margin |
| Net income attributable to Goosehead Insurance, Inc. | $14.1 million | $0.6 million |
| Basic / diluted EPS | $0.59 / $0.55 | $0.03 / $0.03 |
| Adjusted EBITDA (non-GAAP) | $69.8 million; 27% margin | $36.7 million; 18% margin |
| Operating cash flow | $50.8 million | $35.7 million |
| Investing / financing cash flow | $(19.2) million / $(17.9) million | $(12.6) million / $(23.2) million |
| Cash and restricted cash, year-end | $44.0 million | $30.4 million |
| Debt, year-end | $77.5 million | $93.6 million, based on balance-sheet note payable |
Core Revenue, a company-defined non-GAAP measure, rose 24% to $233.0 million. Renewal Revenue increased 32% to $178.3 million, while New Business Revenue grew 3% to $54.8 million. Total Written Premium increased 34% to $3.0 billion, and policies in force rose 16% to 1.486 million. Client retention was 86%, down from 88%; premium retention was 101%. NPS increased to 92 from 90.
At year-end, current assets were $74.6 million and current liabilities were $40.9 million. Cash and restricted cash totaled $44.0 million. The company had $77.5 million of term debt, no revolver borrowings and $49.8 million available to draw. The term loan is secured by substantially all company assets, bears variable SOFR-based interest, and has a $55.6 million balloon payment due in June 2026 after a voluntary $10 million principal payment in 2023. The balance sheet also included $149.3 million of liabilities under the tax receivable agreement (TRA) and $66.3 million of lease liabilities.
Material changes versus the prior comparable period
- Revenue growth was led by renewal streams: Renewal Royalty Fees rose 39% to $107.5 million and Renewal Commissions rose 23% to $70.7 million. Contingent Commissions increased 79% to $13.7 million, but are variable and less predictable.
- Profitability improved substantially: net income increased by $21.1 million and Adjusted EBITDA rose 90%. Management attributed the Adjusted EBITDA improvement to higher Core Revenue and slower growth in compensation and general and administrative expenses.
- New Business Commissions fell 3% and Agency Fees fell 25%; corporate sales headcount declined 6% to 300. Operating franchises decreased 13% to 1,226, while total franchises fell 33% to 1,415, including locations in implementation.
- Employee compensation and benefits rose 14% to $152.6 million. General and administrative expense rose 17% to $62.1 million, including $3.6 million of impairment charges. Interest expense increased 31% to $6.6 million.
- Operating cash flow increased, while investing outflows rose with $6.9 million of book-of-business purchases and higher software-development spending. Financing outflows included $16.9 million of term-loan principal payments and $10.9 million of member distributions.
Outlook, commentary, risks and unusual items
Management expects continued investment in recruiting, technology, franchise expansion, productivity and client retention, and sees potential for future margin expansion as policies move from lower-margin new business to higher-margin renewals. The filing gives no quantified revenue, earnings or cash-flow guidance. Management stated that available cash, working capital, operating cash flow and borrowing capacity should fund requirements for the foreseeable future.
- Key business sensitivities include insurance-premium and commission-rate cycles, carrier capacity and profitability, weather and catastrophe losses that can affect contingent commissions, and housing-market activity and interest rates that influence referrals tied to home purchases.
- Other disclosed risks include dependence on carriers (two each represented 16% and 12% of 2023 revenue), competition, franchisee recruitment and retention, regulatory and litigation exposure, cybersecurity and technology risks, and the concentration of business in states including Texas, California, Florida and Illinois.
- Variable-rate debt exposes the company to higher interest costs; the credit agreement includes financial covenants and restrictions on distributions and other actions. The company reported compliance with covenants at year-end.
- Unusual 2023 items included $3.6 million of impairment charges for software not expected to be completed and assets at two offices planned for sublease. The company also paid $10.0 million of additional term-loan principal.
- A proposed settlement in a stockholder governance action provided for non-monetary changes to governance documents; final approval was scheduled for February 22, 2024, and a fee petition was pending. Management said any potential loss was not expected to be material. The company reported no other material legal proceedings.
- The 2023 financial statements and internal control over financial reporting received unqualified audit opinions. The auditor identified commission and royalty-fee revenue estimates as a critical audit matter. No cybersecurity incident in 2023 was identified as materially affecting, or reasonably likely to materially affect, the company.
- No dividends were paid in 2023. Any future dividend is discretionary and subject to cash availability, holding-company structure, debt restrictions and TRA obligations.
Most important facts for investors to verify
- Whether renewal growth and retention remain strong, particularly given client retention declined to 86% and operating franchise count fell 13%.
- How much reported earnings and Adjusted EBITDA growth depends on non-cash equity compensation add-backs ($24.0 million) and the $3.6 million impairment adjustment; compare non-GAAP measures with GAAP results.
- Progress on debt repayment and refinancing before the June 2026 maturity, including the $55.6 million balloon and exposure to floating interest rates.
- Collectability and timing of franchisee receivables, contingent commissions and the $149.3 million TRA liability.
- Carrier concentration, franchise terminations and the final outcome and costs of the governance settlement and related fee petition.