(Mark One) | |||||
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | ||||
(Address of principal executive offices) | (Zip Code) |
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||
☑ | Accelerated filer | ☐ | ||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
Emerging growth company |
Page | ||||||||
Part I | ||||||||
Item 1. | Condensed Consolidated Financial Statements (Unaudited) | |||||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |||||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |||||||
Item 4. | Controls and Procedures | |||||||
Part II | ||||||||
Item 1. | Legal Proceedings | |||||||
Item 1A. | Risk Factors | |||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||||||
Item 3. | Defaults Upon Senior Securities | |||||||
Item 4. | Mine Safety Disclosures | |||||||
Item 5. | Other Information | |||||||
Item 6. | Exhibits | |||||||
Page | ||||||||
Condensed Consolidated Statements of Operations | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
Condensed Consolidated Statements of Stockholders' Equity | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
Notes to the Condensed Consolidated Financial Statements | ||||||||
Note 1 | Organization | |||||||
Note 2 | Summary of significant accounting policies | |||||||
Note 3 | Revenues | |||||||
Note 4 | Franchise fees receivable | |||||||
Note 5 | Allowance for uncollectible agency fees | |||||||
Note 6 | Property and equipment | |||||||
Note 7 | Debt | |||||||
Note 8 | Income taxes | |||||||
Note 9 | Stockholder's equity | |||||||
Note 10 | Non-controlling interest | |||||||
Note 11 | Equity-based compensation | |||||||
Note 12 | Segment information | |||||||
Note 13 | Litigation | |||||||
Three Months Ended March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
Revenues: | ||||||||||||||
Commissions and agency fees | $ | $ | ||||||||||||
Franchise revenues | ||||||||||||||
Interest income | ||||||||||||||
Total revenues | ||||||||||||||
Operating Expenses: | ||||||||||||||
Employee compensation and benefits | ||||||||||||||
General and administrative expenses | ||||||||||||||
Bad debts | ||||||||||||||
Depreciation and amortization | ||||||||||||||
Total operating expenses | ||||||||||||||
Loss from operations | ( | ( | ||||||||||||
Other Income (Expense): | ||||||||||||||
Other income | ||||||||||||||
Interest expense | ( | ( | ||||||||||||
Loss before taxes | ( | ( | ||||||||||||
Tax benefit | ( | ( | ||||||||||||
Net loss | ( | ( | ||||||||||||
Less: net loss attributable to non-controlling interests | ( | ( | ||||||||||||
Net loss attributable to Goosehead Insurance, Inc. | $ | ( | $ | ( | ||||||||||
Earnings per share: | ||||||||||||||
Basic | $ | ( | $ | ( | ||||||||||
Diluted | $ | ( | $ | ( | ||||||||||
Weighted average shares of Class A common stock outstanding | ||||||||||||||
Basic | ||||||||||||||
Diluted | ||||||||||||||
March 31, | December 31, | |||||||||||||
2022 | 2021 | |||||||||||||
Assets | ||||||||||||||
Current Assets: | ||||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Restricted cash | ||||||||||||||
Commissions and agency fees receivable, net | ||||||||||||||
Receivable from franchisees, net | ||||||||||||||
Prepaid expenses | ||||||||||||||
Total current assets | ||||||||||||||
Receivable from franchisees, net of current portion | ||||||||||||||
Property and equipment, net of accumulated depreciation | ||||||||||||||
Right-of-use asset | ||||||||||||||
Intangible assets, net of accumulated amortization | ||||||||||||||
Deferred income taxes, net | ||||||||||||||
Other assets | ||||||||||||||
Total assets | $ | $ | ||||||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||
Current Liabilities: | ||||||||||||||
Accounts payable and accrued expenses | $ | $ | ||||||||||||
Premiums payable | ||||||||||||||
Lease liability | ||||||||||||||
Contract liabilities | ||||||||||||||
Note payable | ||||||||||||||
Total current liabilities | ||||||||||||||
Lease liability, net of current portion | ||||||||||||||
Note payable, net of current portion | ||||||||||||||
Contract liabilities, net of current portion | ||||||||||||||
Liabilities under tax receivable agreement | ||||||||||||||
Total liabilities | ||||||||||||||
Class A common stock, $ | ||||||||||||||
Class B common stock, $ | ||||||||||||||
Additional paid in capital | ||||||||||||||
Accumulated deficit | ( | ( | ||||||||||||
Total stockholders' equity | ( | ( | ||||||||||||
Non-controlling interests | ( | ( | ||||||||||||
Total equity | ( | ( | ||||||||||||
Total liabilities and equity | $ | $ |
Issued shares of Class A common stock | Issued shares of Class B common stock | Class A Common stock | Class B Common Stock | Additional paid in capital | Accumulated deficit | Total stockholders' equity | Non-controlling interest | Total equity | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2022 | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Activity under employee stock purchase plan | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Redemption of LLC Units | ( | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred tax adjustments related to Tax Receivable Agreement | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Reallocation of Non-controlling interest | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance March 31, 2022 | ( | ( | ( | ( |
Issued shares of Class A common stock | Issued shares of Class B common stock | Class A Common stock | Class B Common Stock | Additional paid in capital | Accumulated deficit | Total stockholders' equity | Non-controlling interest | Total equity | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance, January 1, 2021 | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Activity under employee stock purchase plan | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Redemption of LLC Units | ( | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred tax adjustments related to Tax Receivable Agreement | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Reallocation of Non-controlling interest | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance March 31, 2021 | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||
Net loss | $ | ( | $ | ( | ||||||||||
Adjustments to reconcile net loss to net cash provided by (used for) operating activities: | ||||||||||||||
Depreciation and amortization | ||||||||||||||
Bad debt expense | ||||||||||||||
Equity-based compensation | ||||||||||||||
Impacts of Tax Receivable Agreement | ||||||||||||||
Deferred income taxes | ( | ( | ||||||||||||
Noncash lease activity | ||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||
Receivable from franchisees | ( | ( | ||||||||||||
Commissions and agency fees receivable | ||||||||||||||
Prepaid expenses | ( | ( | ||||||||||||
Other assets | ( | ( | ||||||||||||
Accounts payable and accrued expenses | ( | ( | ||||||||||||
Contract liabilities | ||||||||||||||
Premiums payable | ( | ( | ||||||||||||
Payments pursuant to the tax receivable agreement | ||||||||||||||
Net cash provided by (used for) operating activities | ( | |||||||||||||
Cash flows from investing activities: | ||||||||||||||
Proceeds from notes receivable | ||||||||||||||
Purchase of software | ( | ( | ||||||||||||
Purchase of property and equipment | ( | ( | ||||||||||||
Net cash used for investing activities | ( | ( | ||||||||||||
Cash flows from financing activities: | ||||||||||||||
Repayment of note payable | ( | ( | ||||||||||||
Proceeds from the issuance of Class A common stock | ||||||||||||||
Net cash used for financing activities | ( | ( | ||||||||||||
Net decrease in cash and restricted cash | ( | |||||||||||||
Cash and cash equivalents, and restricted cash, beginning of period | ||||||||||||||
Cash and cash equivalents, and restricted cash, end of period | $ | $ | ||||||||||||
Supplemental disclosures of cash flow data: | ||||||||||||||
Cash paid during the year for interest | ||||||||||||||
Cash paid for income taxes |
Goosehead Insurance, Inc. | ||
Notes to the Condensed Consolidated Financial Statements (Unaudited) |
Goosehead Insurance, Inc. | ||
Notes to the Condensed Consolidated Financial Statements (Unaudited) |
March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
Cash and cash equivalents | $ | $ | ||||||||||||
Restricted cash | ||||||||||||||
Cash and cash equivalents, and restricted cash | $ | $ |
Goosehead Insurance, Inc. | ||
Notes to the Condensed Consolidated Financial Statements (Unaudited) |
Goosehead Insurance, Inc. | ||
Notes to the Condensed Consolidated Financial Statements (Unaudited) |
Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | ||||||||||
Type of revenue stream: | |||||||||||
Commissions and agency fees | |||||||||||
Renewal Commissions | $ | $ | |||||||||
New Business Commissions | |||||||||||
Agency Fees | |||||||||||
Contingent Commissions | |||||||||||
Franchise revenues | |||||||||||
Renewal Royalty Fees | |||||||||||
New Business Royalty Fees | |||||||||||
Initial Franchise Fees | |||||||||||
Other Franchise Revenues | |||||||||||
Interest Income | |||||||||||
Total Revenues | $ | $ | |||||||||
Timing of revenue recognition: | |||||||||||
Transferred at a point in time | $ | $ | |||||||||
Transferred over time | |||||||||||
Total Revenues | $ | $ |
March 31, 2022 | December 31, 2021 | Increase/(decrease) | |||||||||||||||
Cost to obtain franchise contracts(1) | $ | $ | $ | ||||||||||||||
Commissions and agency fees receivable, net(2) | ( | ||||||||||||||||
Receivable from franchisees(2) | |||||||||||||||||
Contract liabilities(2)(3) |
Goosehead Insurance, Inc. | ||
Notes to the Condensed Consolidated Financial Statements (Unaudited) |
Contract liabilities at December 31, 2021 | $ | ||||
Revenue recognized during the period | |||||
New deferrals(1) | |||||
Contract liabilities at March 31, 2022 |
March 31, 2022 | December 31, 2021 | |||||||||||||
Franchise fees receivable(1) | $ | $ | ||||||||||||
Less: Unamortized discount(1) | ( | ( | ||||||||||||
Less: Allowance for uncollectible franchise fees(1) | ( | ( | ||||||||||||
Net franchise fees receivable(1) | $ | $ |
Balance at December 31, 2021 | $ | |||||||
Charges to bad debts | ||||||||
Write offs | ( | |||||||
Balance at March 31, 2022 | $ | |||||||
Balance at December 31, 2020 | $ | |||||||
Charges to bad debts | ||||||||
Write offs | ( | |||||||
Balance at March 31, 2021 | $ |
Balance at December 31, 2021 | $ | |||||||
Charges to bad debts | ||||||||
Write offs | ( | |||||||
Balance at March 31, 2022 | $ | |||||||
Balance at December 31, 2020 | $ | |||||||
Charges to bad debts | ||||||||
Write offs | ( | |||||||
Balance at March 31, 2021 | $ |
Goosehead Insurance, Inc. | ||
Notes to the Condensed Consolidated Financial Statements (Unaudited) |
March 31, 2022 | December 31, 2021 | |||||||||||||
Furniture & fixtures | $ | $ | ||||||||||||
Computer equipment | ||||||||||||||
Network equipment | ||||||||||||||
Phone system | ||||||||||||||
Leasehold improvements | ||||||||||||||
Total | ||||||||||||||
Less accumulated depreciation | ( | ( | ||||||||||||
Property and equipment, net | $ | $ |
Leverage Ratio | Interest Rate | ||||
< | LIBOR + | ||||
> | LIBOR + | ||||
> | LIBOR + | ||||
> | LIBOR + |
Goosehead Insurance, Inc. | ||
Notes to the Condensed Consolidated Financial Statements (Unaudited) |
Amount | |||||
2022 | |||||
2023 | |||||
2024 | |||||
2025 | |||||
2026 | |||||
Total | $ |
Goosehead Insurance, Inc. | ||
Notes to the Condensed Consolidated Financial Statements (Unaudited) |
Goosehead Insurance, Inc. | ||
Notes to the Condensed Consolidated Financial Statements (Unaudited) |
Three Months Ended March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
Numerator: | ||||||||||||||
Loss before taxes | $ | ( | $ | ( | ||||||||||
Less: loss before taxes attributable to non-controlling interests | ( | ( | ||||||||||||
Loss before taxes attributable to GSHD | ( | ( | ||||||||||||
Less: income tax expense (benefit) attributable to GSHD | ( | ( | ||||||||||||
Net loss attributable to GSHD | $ | ( | $ | ( | ||||||||||
Denominator: | ||||||||||||||
Weighted average shares of Class A common stock outstanding - basic | ||||||||||||||
Effect of dilutive securities: | ||||||||||||||
Stock options(1) | ||||||||||||||
Weighted average shares of Class A common stock outstanding - diluted | ||||||||||||||
Earnings per share of Class A common stock - basic | $ | ( | $ | ( | ||||||||||
Earnings per share of Class A common stock - diluted | $ | ( | $ | ( |
Goosehead Insurance, Inc. | ||
Notes to the Condensed Consolidated Financial Statements (Unaudited) |
March 31, 2022 | ||||||||
LLC Units | Ownership % | |||||||
Number of LLC Units held by GSHD | ||||||||
Number of LLC Units held by non-controlling interest holders | ||||||||
Number of LLC Units outstanding |
Three Months Ended March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
Net income attributable to Goosehead Insurance Inc. | $ | ( | $ | ( | ||||||||||
Transfers (to) from non-controlling interests: | ||||||||||||||
Decrease in additional paid-in capital as a result of the redemption of LLC interests | ( | ( | ||||||||||||
Increase in additional paid-in capital as a result of activity under employee stock purchase plan | ||||||||||||||
Total effect of changes in ownership interest on equity attributable to Goosehead Insurance Inc. | $ | ( | $ | ( |
Three Months Ended March 31, | ||||||||||||||||||||||||||
(in thousands) | 2022 | 2021 | ||||||||||||||||||||||||
Core Revenue: | ||||||||||||||||||||||||||
Renewal Commissions(1) | $10,207 | 25 | % | $7,757 | 25 | % | ||||||||||||||||||||
Renewal Royalty Fees(2) | 14,002 | 34 | % | 8,746 | 28 | % | ||||||||||||||||||||
New Business Commissions(1) | 5,367 | 13 | % | 4,616 | 15 | % | ||||||||||||||||||||
New Business Royalty Fees(2) | 4,292 | 10 | % | 3,157 | 10 | % | ||||||||||||||||||||
Agency Fees(1) | 2,637 | 6 | % | 2,424 | 8 | % | ||||||||||||||||||||
Total Core Revenue | 36,505 | 88 | % | 26,700 | 86 | % | ||||||||||||||||||||
Cost Recovery Revenue: | ||||||||||||||||||||||||||
Initial Franchise Fees(2) | 2,296 | 6 | % | 1,432 | 5 | % | ||||||||||||||||||||
Interest Income | 319 | 1 | % | 261 | 1 | % | ||||||||||||||||||||
Total Cost Recovery Revenue | 2,615 | 6 | % | 1,693 | 5 | % | ||||||||||||||||||||
Ancillary Revenue: | ||||||||||||||||||||||||||
Contingent Commissions(1) | 1,798 | 4 | % | 2,737 | 9 | % | ||||||||||||||||||||
Other Income(2) | 360 | 1 | % | 98 | — | % | ||||||||||||||||||||
Total Ancillary Revenue | 2,158 | 5 | % | 2,835 | 9 | % | ||||||||||||||||||||
Total Revenues | $41,278 | 100 | % | $31,228 | 100 | % |
Three Months Ended March 31, | ||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||
Revenues: | ||||||||||||||||||||
Commissions and agency fees | $ | 20,009 | 48 | % | $ | 17,534 | 56 | % | ||||||||||||
Franchise revenues | 20,950 | 51 | % | 13,433 | 43 | % | ||||||||||||||
Interest income | 319 | 1 | % | 261 | 1 | % | ||||||||||||||
Total revenues | 41,278 | 100 | % | 31,228 | 100 | % | ||||||||||||||
Operating Expenses: | ||||||||||||||||||||
Employee compensation and benefits | 31,484 | 66 | % | 21,309 | 67 | % | ||||||||||||||
General and administrative expenses | 13,524 | 29 | % | 9,274 | 30 | % | ||||||||||||||
Bad debts | 796 | 2 | % | 447 | 1 | % | ||||||||||||||
Depreciation and amortization | 1,576 | 3 | % | 1,000 | 3 | % | ||||||||||||||
Total operating expenses | 47,380 | 100 | % | 32,030 | 100 | % | ||||||||||||||
Loss from operations | (6,102) | (802) | ||||||||||||||||||
Other Income (Expense): | ||||||||||||||||||||
Other income | — | 20 | ||||||||||||||||||
Interest expense | (883) | (601) | ||||||||||||||||||
Loss before taxes | (6,985) | (1,383) | ||||||||||||||||||
Tax benefit | (1,602) | (294) | ||||||||||||||||||
Loss Income | (5,383) | (1,089) | ||||||||||||||||||
Less: net loss attributable to non-controlling interests | (3,126) | (693) | ||||||||||||||||||
Net loss attributable to Goosehead Insurance Inc. | $ | (2,257) | $ | (396) |
Three Months Ended March 31, | ||||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||||
Core Revenue: | ||||||||||||||||||||||||||
Renewal Commissions | 10,207 | 51 | % | 7,757 | 44 | % | ||||||||||||||||||||
New Business Commissions | 5,367 | 27 | % | 4,616 | 26 | % | ||||||||||||||||||||
Agency Fees | 2,637 | 13 | % | 2,424 | 14 | % | ||||||||||||||||||||
Total Core Revenue: | 18,211 | 91 | % | 14,797 | 84 | % | ||||||||||||||||||||
Ancillary Revenue: | ||||||||||||||||||||||||||
Contingent Commissions | 1,798 | 9 | % | 2,737 | 16 | % | ||||||||||||||||||||
Commissions and agency fees | $ | 20,009 | 100 | % | $ | 17,534 | 100 | % |
Three Months Ended March 31, | ||||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||||
Core Revenues: | ||||||||||||||||||||||||||
Renewal Royalty Fees | 14,002 | 67 | % | 8,746 | 65 | % | ||||||||||||||||||||
New Business Royalty Fees | 4,292 | 20 | % | 3,157 | 24 | % | ||||||||||||||||||||
Total Core Revenues: | 18,294 | 87 | % | 11,903 | 89 | % | ||||||||||||||||||||
Cost Recovery Revenues: | ||||||||||||||||||||||||||
Initial Franchise Fees | 2,296 | 11 | % | 1,432 | 11 | % | ||||||||||||||||||||
Ancillary Revenues: | ||||||||||||||||||||||||||
Other Franchise Revenues | 360 | 3 | % | 98 | 1 | % | ||||||||||||||||||||
Franchise revenues | $ | 20,950 | 100 | % | $ | 13,433 | 100 | % |
Three Months Ended March 31, | % Change | |||||||||||||||||||
2022 | 2021 | |||||||||||||||||||
Corporate sales Total Written Premium | $ | 110,395 | $ | 88,946 | 24 | % | ||||||||||||||
Franchise sales Total Written Premium | 340,516 | 229,949 | 48 | % | ||||||||||||||||
Total Written Premium | $ | 450,911 | $ | 318,895 | 41 | % |
Three Months Ended March 31, | |||||||||||
2022 | 2021 | ||||||||||
Total Revenues | $ | 41,278 | $ | 31,228 | |||||||
Core Revenue: | |||||||||||
Renewal Commissions(1) | $ | 10,207 | $ | 7,757 | |||||||
Renewal Royalty Fees(2) | 14,002 | 8,746 | |||||||||
New Business Commissions(1) | 5,367 | 4,616 | |||||||||
New Business Royalty Fees(2) | 4,292 | 3,157 | |||||||||
Agency Fees(1) | 2,637 | 2,424 | |||||||||
Total Core Revenue | 36,505 | 26,700 | |||||||||
Cost Recovery Revenue: | |||||||||||
Initial Franchise Fees(2) | 2,296 | 1,432 | |||||||||
Interest Income | 319 | 261 | |||||||||
Total Cost Recovery Revenue | 2,615 | 1,693 | |||||||||
Ancillary Revenue: | |||||||||||
Contingent Commissions(1) | 1,798 | 2,737 | |||||||||
Other Income(2) | 360 | 98 | |||||||||
Total Ancillary Revenue | 2,158 | 2,835 | |||||||||
Total Revenues | $ | 41,278 | $ | 31,228 |
Three Months Ended March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
Net Income | $ | (5,383) | $ | (1,089) | ||||||||||
Interest expense | 883 | 601 | ||||||||||||
Depreciation and amortization | 1,576 | 1,000 | ||||||||||||
Tax (benefit) expense | (1,602) | (294) | ||||||||||||
Equity-based compensation | 5,788 | 1,941 | ||||||||||||
Other (income) expense | — | (20) | ||||||||||||
Adjusted EBITDA | $ | 1,262 | $ | 2,139 | ||||||||||
Adjusted EBITDA Margin(1) | 3 | % | 7 | % |
Three Months Ended March 31, | ||||||||||||||
2022 | 2021 | |||||||||||||
Earnings per share - basic (GAAP) | $ | (0.11) | $ | (0.02) | ||||||||||
Add: equity-based compensation(1) | 0.16 | 0.05 | ||||||||||||
Adjusted EPS (non-GAAP) | $ | 0.04 | $ | 0.03 |
Three Months Ended March 31, | ||||||||||||||||||||
2022 | 2021 | Change | ||||||||||||||||||
Net cash provided by (used for) operating activities | $ | (5,154) | $ | 7,888 | $ | (13,042) | ||||||||||||||
Net cash used for investing activities | (2,491) | (2,100) | (391) | |||||||||||||||||
Net cash used for financing activities | (155) | (69) | (86) | |||||||||||||||||
Net increase in cash and cash equivalents | (7,800) | 5,719 | (13,519) | |||||||||||||||||
Cash and cash equivalents, and restricted cash, beginning of period | 30,479 | 26,236 | 4,243 | |||||||||||||||||
Cash and cash equivalents, and restricted cash, end of period | $ | 22,679 | $ | 31,955 | $ | (9,276) |
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) | $ | 66,090 | $ | 5,190 | $ | 16,575 | $ | 16,955 | $ | 27,370 | ||||||||||||||||||||||
Debt obligations payable(2) | 98,125 | 5,000 | 17,500 | 75,625 | — | |||||||||||||||||||||||||||
Interest expense(3) | 17,586 | 8,313 | 3,203 | 6,070 | — | |||||||||||||||||||||||||||
Liabilities under the tax receivable agreement(4) | 103,193 | — | 16,353 | 11,864 | 74,976 | |||||||||||||||||||||||||||
Total | $ | 284,994 | $ | 18,503 | $ | 53,631 | $ | 110,514 | $ | 102,346 |
101.INS | XBRL Instance Document | ||||
101.SCH | XBRL Schema Document | ||||
101.CAL | XBRL Calculation Linkbase Document | ||||
101.DEF | XBRL Definition Linkbase Document | ||||
101.LAB | XBRL Label Linkbase Document | ||||
101.PRE | XBRL Presentation Linkbase |
GOOSEHEAD INSURANCE, INC. | ||||||||||||||
Date: | April 27, 2022 | By: | /s/ Mark E. Jones | |||||||||||
Mark E. Jones | ||||||||||||||
Chairman and Chief Executive Officer | ||||||||||||||
(Principal Executive Officer) | ||||||||||||||
Date: | April 27, 2022 | By: | /s/ Mark S. Colby | |||||||||||
Mark S. Colby | ||||||||||||||
Chief Financial Officer | ||||||||||||||
(Principal Financial Officer and Principal Accounting Officer) |
Condensed Consolidated Balance Sheets (Unaudited) - Parenthetical - $ / shares |
Mar. 31, 2022 |
Dec. 31, 2021 |
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Class A Common Stock | ||
Common stock par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock shares authorized (in shares) | 300,000,000 | 300,000,000 |
Common stock shares issued (in shares) | 20,198,000 | |
Common stock shares outstanding (in shares) | 20,321,000 | 20,198,000 |
Class B Common Stock | ||
Common stock par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock shares issued (in shares) | 16,909,000 | 16,909,000 |
Common stock shares outstanding (in shares) | 16,808,000 | 16,909,000 |
Organization |
3 Months Ended |
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Mar. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization | Organization Goosehead Insurance, Inc. (“GSHD”) is the sole managing member of Goosehead Financial, LLC (“GF”) and has the sole voting power and control of management of GF. Accordingly, GSHD consolidates the financial results of GF and reports non-controlling interest in GSHD’s condensed consolidated financial statements. GF was organized on January 1, 2016 as a Delaware Limited Liability Company and is headquartered in Westlake, TX. GSHD (collectively with its consolidated subsidiaries, the “Company”) provides personal and commercial property and casualty insurance brokerage services for its clients through a network of corporate-owned agencies and franchise units across the nation. The Company had 15 and 10 corporate-owned locations in operation at March 31, 2022 and 2021, respectively. Franchisees are provided access to insurance Carrier Appointments, product training, technology infrastructure, client service centers and back office services. During the three months ended March 31, 2022 and 2021, the Company onboarded 113 and 117 franchise locations, respectively, and had 1,268 and 987 operating franchise locations as of March 31, 2022 and 2021, respectively. No franchises were purchased by the Company during the three months ended March 31, 2022 or 2021. All intercompany accounts and transactions have been eliminated in consolidation.
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Summary of Significant Accounting Policies |
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Mar. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all of the annual disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). However, in the opinion of management, these statements include all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of the condensed consolidated financial positions at March 31, 2022 and December 31, 2021, the condensed consolidated results of operations, stockholders' equity and statements of cash flows for the three months ended March 31, 2022 and 2021. The interim period condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements that are included in the Annual Report on Form 10-K. In accordance with Accounting Standards Codification 280 "Segment Reporting", the Company began reporting one operating segment due to changes in how the Company's chief operating decision maker assesses the Company's performance and allocates resources. See Note 12 "Segment Reporting". The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results that can be expected for the entire year. The Company experiences seasonal fluctuations of its revenue due to the timing of contingent commission revenue recognition and trends in housing market activity. Impact of the Coronavirus (“COVID-19”) Pandemic To date, the pandemic has not increased our costs of or access to capital under our term note and revolving credit facility, and we do not believe it is reasonably likely to do so in the future. In addition, we do not believe that the pandemic will affect our ongoing ability to meet the covenants in our debt instruments, including under our term note and revolving credit facility. To date, the pandemic has not impacted the collectability of receivables or adversely affected our ability to generate new business, add new franchises, or retain existing franchises or policies. Changes in consumer behavior linked to the COVID-19 pandemic may have contributed to reduced loss ratios through the twelve months ended December 31, 2020, increasing the amount of revenue from Contingent Commissions the Company received. Due to the nature of our business, the effect of the COVID-19 pandemic may not be fully reflected in our results of operations until future periods. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Accordingly, actual results could differ from those estimates as more information becomes known. Income Taxes The Company accounts for income taxes pursuant to the asset and liability method which requires the recognition of deferred income tax assets and liabilities related to the expected future tax consequences arising from temporary differences between the carrying amounts and tax bases of assets and liabilities based on enacted statutory tax rates applicable to the periods in which the temporary differences are expected to reverse. Any effects of changes in income tax rates or laws are included in income tax expense in the period of enactment. Restricted Cash The Company holds premiums received from the insured, but not yet remitted to the insurance Carrier in a fiduciary capacity. Premiums received but not yet remitted included in restricted cash were $1.5 million and $1.2 million as of March 31, 2022 and 2021, respectively. The following is a reconciliation of our cash and restricted cash balances as presented in the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 (in thousands):
Recently adopted accounting pronouncements Simplifying the Accounting for Income Taxes (ASU 2019-12): In 2019, the Financial Accounting Standards Board issued ASU 2019-12 to simplify the accounting for income taxes. The guidance primarily addresses how to (1) recognize a deferred tax liability after we transition to or from the equity method of accounting, (2) evaluate if a step-up in the tax basis of goodwill is related to a business combination or is a separate transaction, (3) recognize all of the effects of a change in tax law in the period of enactment, including adjusting the estimated annual tax rate, and (4) include the amount of tax based on income in the income tax provision and any incremental amount as a tax not based on income for hybrid tax regimes. We adopted the guidance in the first quarter of 2021. The adoption did not have a material impact on our condensed consolidated financial statements or related disclosures. Reference Rate Reform (ASU 2020-04): In March 2020, the Financial Accounting Standards Board issued ASU 2020-04. Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP if certain criteria are met to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued. ASU 2020-04 is effective from March 12, 2020 through December 31, 2022. A substantial portion of our indebtedness bears interest at variable interest rates, primarily based on USD-LIBOR. The adoption of ASU 2020-04 did not have a material impact on our consolidated financial statements. The standard will ease, if warranted, the administrative requirements for accounting for the future effects of the rate reform. Our debt agreement contains a provision to move to the Secured Overnight Financing Rate ("SOFR") if or when LIBOR is phased out.
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Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue Commissions and fees The Company earns new and renewal commissions paid by insurance Carriers and fees paid by its clients for the binding of insurance coverage. The transactions price is set as the estimated commissions to be received over the term of the policy based on an estimate of premiums placed, policy changes and cancellations, net of a constraint. These commissions and fees are earned at a point in time upon the effective date of bound insurance coverage, as no performance obligation exists after coverage is bound. For Agency Fees, the Company enters into a contract with the insured, in which the Company's performance obligation is to place an insurance policy. The transaction price of the agency fee is set at the time the sale is agreed upon, and is included in the contract. Agency Fee revenue is recognized at a point in time, which is the effective date of the policy. Contingent commission revenue is generated from contracts between the Company and insurance carriers, for which the Company is compensated for certain growth, profitability, or other performance-based metrics. The performance obligations for contingent commissions will vary by contract, but generally include the Company increasing profitable written premium with the insurance carrier. The transaction price for contingent commissions is estimated based on all available information and is recognized over time as the Company completes its performance obligations, as the underlying policies are placed, net of a constraint. Franchise revenues Franchise revenues include initial franchise fees and ongoing new and renewal royalty fees from franchisees. Revenue from initial franchise fees is generated from a contract between the Company and a franchisee. The Company's performance obligation is to provide initial training, onboarding, ongoing support and use of the Company's business operations over the period of the franchise agreement. The transaction price is set by the franchise agreement and revenue is recognized over time as the Company completes its performance obligations. Revenue from new and renewal royalty fees is recorded by applying the sales- and usage-based royalties exception. Under the sales- and usage-based exception, the Company estimates the anticipated amount of the royalties to be received over the term of the policy based on an estimate of premiums placed by the franchisee, policy changes, and cancellations, net of a constraint. Revenue from royalty fees is recognized over time as the placement of the underlying policies occur. Contract costs Additionally, the Company has evaluated ASC Topic 340 - Other Assets and Deferred Cost (“ASC 340”) which requires companies to defer certain incremental cost to obtain customer contracts, and certain costs to fulfill customer contracts. Incremental cost to obtain - The adoption of ASC 340 resulted in the Company deferring certain costs to obtain customer contracts primarily as they relate to commission-based compensation plans for the franchise sales team, in which the Company pays an incremental amount of compensation on new Franchise Agreements. These incremental costs are deferred and amortized over a 10-year period, which is consistent with the term of the contract. Costs to fulfill - The Company has evaluated the need to capitalize costs to fulfill customer contracts and has determined that there are no costs that meet the definition for capitalization under ASC 340. Disaggregation of Revenue The following table disaggregates revenue by source (in thousands):
Contract Balances The following table provides information about receivables, cost to obtain, and contract liabilities from contracts with customers (in thousands):
(1) Cost to obtain franchise contracts is included in Other assets on the condensed consolidated balance sheets. (2) Includes both the current and long term portion of this balance. (3) Initial Franchise Fees to be recognized over the life of the contract. The Company records Franchise Fees as contract liabilities on the Condensed Consolidated Balance Sheets when the agreement is executed. Contract liabilities are reduced as fees are recognized in revenue over the expected life of the franchise license. As the term of the franchise license is typically ten years, substantially all of the franchise fee revenue recognized in the period ended March 31, 2022 was included in the contract liabilities balance as of December 31, 2021. The weighted average remaining amortization period for contract liabilities related to open franchises is 8.1 years. Significant changes in contract liabilities are as follows (in thousands):
(1) Initial Franchise Fees where the consideration is received from the customer for services which are to be transferred to the Franchisee over the expected life of the Franchise Agreement
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Franchise Fees Receivable |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Franchise Fees Receivable | Franchise Fees Receivable The balance of Franchise fees receivable included in Receivable from franchisees consisted of the following (in thousands):
(1) Includes both the current and long term portion of this balance Activity in the allowance for uncollectible franchise fees was as follows (in thousands):
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Allowance for Uncollectible Agency Fees |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Uncollectible Agency Fees | Allowance for Uncollectible Agency FeesActivity in the allowance for uncollectible Agency Fees was as follows (in thousands):
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Property and equipment |
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Property and equipment | Property and equipment Property and equipment consisted of the following (in thousands):
Depreciation expense was $1.4 million and $0.9 million for three months ended March 31, 2022 and 2021.
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt On July 21, 2021, the Company refinanced its $25.0 million revolving credit facility and $80.0 million term note payable to a $50.0 million revolving credit facility and $100.0 million term note payable to finance general corporate purposes and the special dividend. The Company also has the right, subject to approval by the administrative agent and each issuing bank, to increase the commitments under the credit facilities by an additional $25.0 million. The $50.0 million revolving credit facility accrues interest on amounts drawn at an initial interest rate of LIBOR plus 2.50%, then at an interest rate determined by the Company's leverage ratio for the preceding period. At March 31, 2022 the Company was accruing interest at LIBOR plus 250 basis points. At March 31, 2022, the Company had $25.0 million drawn against the revolving credit facility and had a letter of credit of $0.2 million applied against the maximum borrowing availability, payable on July 21, 2026. Thus, amounts available to draw totaled $24.8 million. The revolving credit facility is collateralized by substantially all the Company’s assets, which includes rights to future commissions. The term note is payable in quarterly installments of $0.6 million the first twelve months, $1.3 million the next twelve months, $1.9 million the next twelve months, and $2.5 million the last twenty-four months, with a balloon payment on July 21, 2026. The note is collateralized by substantially all of the Company’s assets, which includes rights to future commissions. Interest is calculated initially at LIBOR plus 2.50%, then at an interest rate based on the Company's leverage ratio for the preceding period. At March 31, 2022 the Company was accruing interest at LIBOR plus 250 basis points. The interest rate for each leverage ratio tier is as follows:
Maturities of the term note payable for the next five years are as follows (in thousands):
The Company’s note payable agreement contains certain restrictions and covenants. Under these restrictions, the Company is limited in the amount of debt incurred and distributions payable. As of March 31, 2022, the Company's maximum allowable trailing twelve months debt-to-EBITDA ratio, as defined by the credit agreement, was 4.5x. In addition, the credit agreement contains certain change of control provisions that, if broken, would trigger a default. Finally, the Company must maintain certain financial ratios. As of March 31, 2022, the Company was in compliance with these covenants. Because of both instruments’ variable interest rate, the note payable balance at March 31, 2022 and December 31, 2021, approximates fair value using Level 2 inputs, described below. The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described as follows: •Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets. •Level 2—Significant other observable inputs other than Level 1 prices such as quoted prices in markets that are not active, quoted prices for similar assets or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset. •Level 3—Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
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Income Taxes |
3 Months Ended |
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Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes GSHD is the sole managing member of GF, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, GF is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by GF is passed through to and included in the taxable income or loss of its members, including GSHD, on a pro rata basis. GSHD is subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to GSHD's allocable share of income of GF. Income tax expense (benefit) Provision for/(benefit from) income taxes for the three months ended March 31, 2022 was $(1.6) million compared to $(294) thousand for the three months ended March 31, 2021. The effective tax rate was 23% for the three months ended March 31, 2022 and 21% for the three months ended March 31, 2021. The increase in the effective tax rate for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily due to a decrease in exercises of employee stock options. Deferred taxes Deferred tax assets at March 31, 2022 were $129.0 million compared to $125.7 million at December 31, 2021. The primary contributing factor to the increase in deferred tax assets is additional redemptions of LLC Units of GF for shares of Class A common stock of GSHD during the three months ended March 31, 2022. Tax Receivable Agreement GF intends to make 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 and corresponding Class B common stock for shares of Class A common stock occurs. Future taxable redemptions or exchanges are expected to result in tax basis adjustments to the assets of GF that will be allocated to the Company and thus produce favorable tax attributes. These tax attributes would not be available to GSHD in the absence of those transactions. The anticipated tax basis adjustments are expected to reduce the amount of tax that GSHD would otherwise be required to pay in the future. GSHD entered into a tax receivable agreement with the Pre-IPO LLC Members on May 1, 2018 that provides for the payment by GSHD 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 GSHD actually realizes as a result of (i) any increase in tax basis in GSHD's assets and (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the tax receivable agreement. During the three months ended March 31, 2022, an aggregate of 100,690 LLC Units were redeemed by the Pre-IPO LLC Members for newly issued shares of Class A common stock. In connection with these redemptions, GSHD received 100,690 LLC Units, which resulted in an increase in the tax basis of its investment in GF subject to the provisions of the tax receivable agreement. The Company recognized a liability for the TRA Payments due to the Pre-IPO LLC Members, representing 85% of the aggregate tax benefits the Company expects to realize from the tax basis increases related to the redemptions of LLC Units, after concluding it was probable that such TRA Payments would be paid based on its estimates of future taxable income. As of March 31, 2022, the total amount of TRA Payments due to the Pre-IPO LLC Members under the tax receivable agreement was $103.2 million, of which $0.0 million was current and included in Accounts payables and accrued expenses on the Consolidated Balance Sheet. Future exchanges of LLC Units for Class A common stock will result in additional TRA payments. Uncertain tax positions GSHD has determined there are no material uncertain tax positions as of March 31, 2022.
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Stockholders' Equity |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders' Equity Class A Common Stock GSHD has a total of 20,321 thousand shares of its Class A common stock outstanding at March 31, 2022. Each share of Class A common stock holds economic rights and entitles its holder to one vote per share on all matters submitted to a vote of the stockholders of GSHD. Class B Common Stock GSHD has a total of 16,808 thousand shares of its Class B common stock outstanding at March 31, 2022. Each share of Class B common stock has no economic rights but entitles its holder to one vote per share on all matters submitted to a vote of the stockholders of GSHD. Holders of Class A common stock and Class B common stock vote together as a single class on all matters presented to GSHD's shareholders for their vote or approval, except as otherwise required by applicable law, by agreement, or by GSHD's certificate of incorporation. Earnings Per Share The following table sets forth the calculation of basic earnings per share ("EPS") based on net income attributable to GSHD for the three months ended March 31, 2022 and 2021, divided by the basic weighted average number of Class A common stock as of March 31, 2022 and March 31, 2021 (in thousands, except per share amounts). Diluted earnings per share of Class A common stock is computed by dividing net income attributable to GSHD by the weighted average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities. The Company has not included the effects of conversion of Class B shares to Class A shares in the diluted EPS calculation using the "if-converted" method, because doing so has no impact on diluted EPS.
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Non-controlling interest |
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Noncontrolling Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-controlling interest | Non-controlling interest GSHD is the sole managing member of GF and, as a result, it consolidates the financial results of GF. GSHD reports a non-controlling interest representing the economic interest in GF held by the other members of GF. Under the amended and restated Goosehead Financial, LLC Agreement, the Pre-IPO LLC Members have the right, from and after the completion of the Offering (subject to the terms of the amended and restated Goosehead Financial, LLC Agreement), to require GSHD to redeem all or a portion of their LLC Units for, at GSHD's election, newly-issued shares of Class A common stock on a one-for-one basis or a cash payment equal to the volume weighted average market price of one share of GSHD's Class A common stock for each LLC Unit redeemed (subject to customary adjustments, including for stock splits, stock dividends and reclassifications) in accordance with the terms of the amended and restated Goosehead Financial, LLC Agreement. Additionally, in the event of a redemption request by a Pre-IPO LLC Member, GSHD may, at its option, effect a direct exchange of cash or Class A common stock for LLC Units in lieu of such a redemption. Shares of Class B common stock will be cancelled on a one-for-one basis if GSHD, at the election of a Pre-IPO LLC Member, redeems or exchanges LLC Units of such Pre-IPO LLC Member pursuant to the terms of the amended and restated Goosehead Financial, LLC Agreement. Except for transfers to GSHD pursuant to the amended and restated Goosehead Financial, LLC Agreement or to certain permitted transferees, the Pre-IPO LLC Members are not permitted to sell, transfer or otherwise dispose of any LLC Units or shares of Class B common stock. During the three months ended March 31, 2022, an aggregate of 101 thousand LLC Units were redeemed by the non-controlling interest holders. Pursuant to the GF LLC Agreement, GSHD issued 101 thousand shares of Class A common stock in connection with these redemptions and received 101 thousand LLC Interests, increasing GSHD's ownership interest in GF. Simultaneously, and in connection with these redemptions, and 101 thousand shares of Class B common stock were surrendered and cancelled. The following table summarizes the ownership interest in GF as of March 31, 2022 (in thousands):
The weighted average ownership percentages for the applicable reporting periods are used to attribute net income to GSHD and the non-controlling interest holders. The non-controlling interest holders' weighted average ownership percentage for the three months ended March 31, 2022 was 45.5%. The following table summarizes the effects of changes in ownership in GF on the equity of GSHD for the three months ended March 31, 2022 and 2021 as follows (in thousands):
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Equity-Based Compensation |
3 Months Ended |
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Mar. 31, 2022 | |
Share-based Payment Arrangement [Abstract] | |
Equity-Based Compensation | Equity-Based CompensationStock option expense was $5.8 million for the three months ended March 31, 2022. Stock option expense was $1.9 million for the three months ended March 31, 2021. |
Segment Information |
3 Months Ended |
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Mar. 31, 2022 | |
Segment Reporting [Abstract] | |
Segment Information | Segment InformationThe Company’s Chief Operating Decision Maker, its Chief Executive Officer (“CEO”), reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating its financial performance. Accordingly, the Company has determined that it operates in a single reportable segment. As a result, GSHD has modified the presentation of its segment financial information with retrospective application to all prior periods presented. All of the Company’s long-lived assets are located in the United States. Since the Company operates in one operating segment, all required financial segment information can be found in the consolidated financial statements. |
Litigation |
3 Months Ended |
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Mar. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Litigation | LitigationFrom time to time, GSHD may be involved in various legal proceedings, lawsuits and claims incidental to the conduct of the Company's business. The amount of any loss from the ultimate outcomes is not probable or reasonably estimable. It is the opinion of management that the resolution of outstanding claims will not have a material adverse effect on the financial position or results of operations of the Company. |
Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2022 | |
Accounting Policies [Abstract] | |
Basis of Combination | All intercompany accounts and transactions have been eliminated in consolidation. |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all of the annual disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). However, in the opinion of management, these statements include all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of the condensed consolidated financial positions at March 31, 2022 and December 31, 2021, the condensed consolidated results of operations, stockholders' equity and statements of cash flows for the three months ended March 31, 2022 and 2021. The interim period condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements that are included in the Annual Report on Form 10-K. In accordance with Accounting Standards Codification 280 "Segment Reporting", the Company began reporting one operating segment due to changes in how the Company's chief operating decision maker assesses the Company's performance and allocates resources. See Note 12 "Segment Reporting". The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results that can be expected for the entire year. The Company experiences seasonal fluctuations of its revenue due to the timing of contingent commission revenue recognition and trends in housing market activity.
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Accordingly, actual results could differ from those estimates as more information becomes known.
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Income Taxes | Income Taxes The Company accounts for income taxes pursuant to the asset and liability method which requires the recognition of deferred income tax assets and liabilities related to the expected future tax consequences arising from temporary differences between the carrying amounts and tax bases of assets and liabilities based on enacted statutory tax rates applicable to the periods in which the temporary differences are expected to reverse. Any effects of changes in income tax rates or laws are included in income tax expense in the period of enactment.
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Restricted Cash | Restricted CashThe Company holds premiums received from the insured, but not yet remitted to the insurance Carrier in a fiduciary capacity. |
Reclassification | |
Recently Issued and Adopted Accounting Pronouncements | Recently adopted accounting pronouncements Simplifying the Accounting for Income Taxes (ASU 2019-12): In 2019, the Financial Accounting Standards Board issued ASU 2019-12 to simplify the accounting for income taxes. The guidance primarily addresses how to (1) recognize a deferred tax liability after we transition to or from the equity method of accounting, (2) evaluate if a step-up in the tax basis of goodwill is related to a business combination or is a separate transaction, (3) recognize all of the effects of a change in tax law in the period of enactment, including adjusting the estimated annual tax rate, and (4) include the amount of tax based on income in the income tax provision and any incremental amount as a tax not based on income for hybrid tax regimes. We adopted the guidance in the first quarter of 2021. The adoption did not have a material impact on our condensed consolidated financial statements or related disclosures. Reference Rate Reform (ASU 2020-04): In March 2020, the Financial Accounting Standards Board issued ASU 2020-04. Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP if certain criteria are met to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued. ASU 2020-04 is effective from March 12, 2020 through December 31, 2022. A substantial portion of our indebtedness bears interest at variable interest rates, primarily based on USD-LIBOR. The adoption of ASU 2020-04 did not have a material impact on our consolidated financial statements. The standard will ease, if warranted, the administrative requirements for accounting for the future effects of the rate reform. Our debt agreement contains a provision to move to the Secured Overnight Financing Rate ("SOFR") if or when LIBOR is phased out.
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Framework for Measuring Fair Value | The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described as follows: •Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets. •Level 2—Significant other observable inputs other than Level 1 prices such as quoted prices in markets that are not active, quoted prices for similar assets or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset. •Level 3—Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
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Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restrictions on Cash and Cash Equivalents | The following is a reconciliation of our cash and restricted cash balances as presented in the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 (in thousands):
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Schedule of Reconciliation of Cash and Restricted Cash | The following is a reconciliation of our cash and restricted cash balances as presented in the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 (in thousands):
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Revenue (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disaggregation of Revenue | The following table disaggregates revenue by source (in thousands):
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Schedule of Contract Balances | The following table provides information about receivables, cost to obtain, and contract liabilities from contracts with customers (in thousands):
(1) Cost to obtain franchise contracts is included in Other assets on the condensed consolidated balance sheets. (2) Includes both the current and long term portion of this balance. (3) Initial Franchise Fees to be recognized over the life of the contract. Significant changes in contract liabilities are as follows (in thousands):
(1) Initial Franchise Fees where the consideration is received from the customer for services which are to be transferred to the Franchisee over the expected life of the Franchise Agreement
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Franchise Fees Receivable (Tables) |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Franchise Fees Receivable | The balance of Franchise fees receivable included in Receivable from franchisees consisted of the following (in thousands):
(1) Includes both the current and long term portion of this balance Activity in the allowance for uncollectible Agency Fees was as follows (in thousands):
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Schedule of Allowance for Uncollectible Franchise Fees | Activity in the allowance for uncollectible franchise fees was as follows (in thousands):
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Allowance for Uncollectible Agency Fees (Tables) |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Allowance for Uncollectible Agency Fees | The balance of Franchise fees receivable included in Receivable from franchisees consisted of the following (in thousands):
(1) Includes both the current and long term portion of this balance Activity in the allowance for uncollectible Agency Fees was as follows (in thousands):
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Property and equipment (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property and Equipment | Property and equipment consisted of the following (in thousands):
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Interest Rate Dependent of Leverage Ratio | The interest rate for each leverage ratio tier is as follows:
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Schedule of Maturities of Note Payable | Maturities of the term note payable for the next five years are as follows (in thousands):
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Stockholders' Equity (Tables) |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table sets forth the calculation of basic earnings per share ("EPS") based on net income attributable to GSHD for the three months ended March 31, 2022 and 2021, divided by the basic weighted average number of Class A common stock as of March 31, 2022 and March 31, 2021 (in thousands, except per share amounts). Diluted earnings per share of Class A common stock is computed by dividing net income attributable to GSHD by the weighted average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities. The Company has not included the effects of conversion of Class B shares to Class A shares in the diluted EPS calculation using the "if-converted" method, because doing so has no impact on diluted EPS.
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Non-controlling interest (Tables) |
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Noncontrolling Interest [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Ownership Interests | The following table summarizes the ownership interest in GF as of March 31, 2022 (in thousands):
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Effects of Changes in Ownership Interests on Equity | The following table summarizes the effects of changes in ownership in GF on the equity of GSHD for the three months ended March 31, 2022 and 2021 as follows (in thousands):
|
Organization - Narrative (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2022
location
franchise
|
Mar. 31, 2021
franchise
location
|
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Corporate-owned locations (in locations) | location | 15 | 10 |
Franchise locations sold (in franchises) | 113 | 117 |
Operating franchise locations (in franchises) | 1,268 | 987 |
Franchises purchased (in franchises) | 0 | 0 |
Summary of Significant Accounting Policies - Narrative (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022
USD ($)
segment
|
Mar. 31, 2021
USD ($)
|
|
Accounting Policies [Abstract] | ||
Restricted cash | $ | $ 1,492 | $ 1,158 |
Number of operating segments | segment | 1 |
Summary of Significant Accounting Policies - Restricted Cash (Details) - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|---|---|
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 21,187 | $ 28,526 | $ 30,797 | |
Restricted cash | 1,492 | 1,158 | ||
Cash and cash equivalents, and restricted cash | $ 22,679 | $ 30,479 | $ 31,955 | $ 26,236 |
Revenue - Narrative (Details) |
3 Months Ended |
---|---|
Mar. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Amortization period | 10 years |
Franchise license revenue | 10 years |
Weighted average remaining amortization period for contract liabilities | 8 years 1 month 6 days |
Revenue - Contract Balances (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
Revenue from Contract with Customer [Abstract] | |||
Cost to obtain franchise contracts | $ 2,196 | $ 1,973 | |
Increase (decrease) in contract with customer, asset | 223 | ||
Commissions and agency fees receivable, net | 8,804 | 12,056 | |
Increase (decrease) in commissions and agency fees receivable, net | (3,252) | ||
Receivables from franchisees | 31,789 | 29,673 | |
Increase (decrease) in receivables from franchisees | 2,116 | ||
Contract liability | 51,576 | $ 48,608 | |
Increase (decrease) in contract liability | 2,968 | $ 3,553 | |
Contract Liability [Roll Forward] | |||
Contract liabilities at December 31, 2021 | 48,608 | ||
Revenue recognized during the period | 2,296 | ||
New deferrals | 672 | ||
Contract liabilities at March 31, 2022 | $ 51,576 |
Franchise Fees Receivable - Balance of Franchise Fees Receivable (Details) - Franchise Fees Receivable - USD ($) $ in Thousands |
Mar. 31, 2022 |
Dec. 31, 2021 |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Franchise fees receivable | $ 43,703 | $ 40,171 | ||
Less: Unamortized discount | (10,557) | (9,518) | ||
Less: Allowance for uncollectible franchise fees | (388) | (303) | $ (160) | $ (149) |
Net franchise fees receivable | $ 32,758 | $ 30,350 |
Franchise Fees Receivable - Roll-Forward of Allowance (Details) - Franchise Fees Receivable - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Financing Receivable, Allowance for Credit Loss [Roll Forward] | ||
Beginning balance | $ 303 | $ 149 |
Charges to bad debts | 271 | 161 |
Write offs | (186) | (150) |
Ending balance | $ 388 | $ 160 |
Allowance for Uncollectible Agency Fees - Roll-Forward of Allowance (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Accounts Receivable, Allowance for Credit Loss [Roll Forward] | ||
Charges to bad debts | $ 796 | $ 447 |
Agency Fees | ||
Accounts Receivable, Allowance for Credit Loss [Roll Forward] | ||
Beginning balance | 489 | 468 |
Charges to bad debts | 525 | 286 |
Write offs | (499) | (307) |
Ending balance | $ 515 | $ 447 |
Property and equipment (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $ 35,792 | $ 37,218 | |
Less accumulated depreciation | (10,535) | (12,285) | |
Property and equipment, net | 25,257 | 24,933 | |
Depreciation | 1,400 | $ 900 | |
Furniture & fixtures | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 7,647 | 7,283 | |
Computer equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 3,074 | 3,369 | |
Network equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 314 | 514 | |
Phone system | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | 326 | 937 | |
Leasehold improvements | |||
Property, Plant and Equipment [Line Items] | |||
Property and equipment, gross | $ 24,431 | $ 25,115 |
Debt - Schedule of Maturities of Note Payable (Details) $ in Thousands |
Mar. 31, 2022
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2022 | $ 3,750 |
2023 | 6,875 |
2024 | 9,375 |
2025 | 10,000 |
2026 | 68,125 |
Total | $ 98,125 |
Income Taxes - Narrative (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
Dec. 31, 2021 |
|
Income Tax Contingency [Line Items] | |||
Taxes | $ (1,602,000) | $ (294,000) | |
Effective income tax rate | 23.00% | 21.00% | |
Deferred income taxes, net | $ 128,977,000 | $ 125,676,000 | |
Uncertain tax positions | $ 0 | ||
Tax Receivable Agreement | |||
Income Tax Contingency [Line Items] | |||
Percentage due to related parties | 85.00% | ||
Tax Receivable Agreement | Pre-IPO LLC | |||
Income Tax Contingency [Line Items] | |||
Percentage due to related parties | 85.00% | ||
Due to related parties | $ 103,200,000 | ||
Due to related parties, current | $ 0 | ||
LLC Units | |||
Income Tax Contingency [Line Items] | |||
Redemption of LLC Units (in shares) | 101,000 | ||
LLC Units | Noncontrolling interest holders | |||
Income Tax Contingency [Line Items] | |||
Redemption of LLC Units (in shares) | 100,690 |
Stockholders' Equity - Narrative (Details) |
Mar. 31, 2022
vote
shares
|
Dec. 31, 2021
shares
|
---|---|---|
Class A Common Stock | ||
Class of Stock [Line Items] | ||
Common stock shares outstanding (in shares) | shares | 20,321,000 | 20,198,000 |
Vote per share (in votes) | vote | 1 | |
Class B Common Stock | ||
Class of Stock [Line Items] | ||
Common stock shares outstanding (in shares) | shares | 16,808,000 | 16,909,000 |
Vote per share (in votes) | vote | 1 |
Non-controlling interest - Narrative (Details) |
3 Months Ended | |
---|---|---|
May 01, 2018 |
Mar. 31, 2022
shares
|
|
Noncontrolling interest holders | ||
Noncontrolling Interest [Line Items] | ||
Ownership interest held by non-controlling interest holders | 0.455 | |
LLC Units | ||
Noncontrolling Interest [Line Items] | ||
Conversion ratio | 1 | |
Redemption of LLC Units (in shares) | 101,000 | |
LLC Units | Noncontrolling interest holders | ||
Noncontrolling Interest [Line Items] | ||
Redemption of LLC Units (in shares) | 100,690 | |
Class A Common Stock | ||
Noncontrolling Interest [Line Items] | ||
Redemption of LLC Units (in shares) | 101,000 | |
Class B Common Stock | ||
Noncontrolling Interest [Line Items] | ||
Redemption of LLC Units (in shares) | 101,000 |
Non-controlling interest - Ownership interests (Details) shares in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2022
shares
| |
Noncontrolling Interest [Line Items] | |
Number of LLC units outstanding (in shares) | 37,129 |
Noncontrolling interest, ownership percentage | 100.00% |
Goosehead Financial, LLC | |
Noncontrolling Interest [Line Items] | |
Ownership interest held by Goosehead Insurance, Inc. | 54.70% |
Noncontrolling interest holders | |
Noncontrolling Interest [Line Items] | |
Ownership interest held by non-controlling interest holders | 45.30% |
Parent | |
Noncontrolling Interest [Line Items] | |
Number of LLC units outstanding (in shares) | 20,321 |
Non-controlling interest | |
Noncontrolling Interest [Line Items] | |
Number of LLC units outstanding (in shares) | 16,808 |
Non-controlling interest - Effect of changes in ownership interests on equity (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Noncontrolling Interest [Line Items] | ||
Net income attributable to Goosehead Insurance Inc. | $ (2,257) | $ (396) |
Decrease in additional paid-in capital as a result of the redemption of LLC interests | 0 | 0 |
Increase in additional paid-in capital as a result of activity under employee stock purchase plan | 214 | 205 |
Parent | ||
Noncontrolling Interest [Line Items] | ||
Net income attributable to Goosehead Insurance Inc. | (2,257) | (396) |
Decrease in additional paid-in capital as a result of the redemption of LLC interests | (344) | (249) |
Increase in additional paid-in capital as a result of activity under employee stock purchase plan | 214 | 205 |
Total effect of changes in ownership interest on equity attributable to Goosehead Insurance Inc. | $ (2,387) | $ (440) |
Equity-Based Compensation - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2022 |
Mar. 31, 2021 |
|
Stock Option | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Equity-based compensation expense | $ 5.8 | $ 1.9 |
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