Washington, D.C. 20549
(Mark One)
For the quarterly period ended September 30, 2022
For the transition period from _______ to ______
Commission file number: 001-38466

(Exact name of registrant as specified in its charter)
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
1500 Solana Blvd, Building 4, Suite 4500
(Address of principal executive offices)(Zip Code)

(469) 480-3669
(Registrant's telephone number, including area code)

Not applicable
(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Class A Common Stock, par value $.01 per shareGSHDNASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   þ Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer Accelerated filer
Non-accelerated filer  Smaller reporting company
   Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

As of October 26, 2022, there were 21,147,289 shares of Class A common stock outstanding and 16,201,948 shares of Class B common stock outstanding.

Table of contents
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


Commonly used defined terms
As used in this Quarterly Report on Form 10-Q ("Form 10-Q"), unless the context indicates or otherwise requires, the following terms have the following meanings:
Ancillary Revenue: Revenue that is supplemental to our Core Revenue and Cost Recovery Revenue, Ancillary Revenue is unpredictable and often outside of the Company's control. Included in Ancillary Revenue are Contingent Commissions and other income.
Agency Fees: Fees separate from commissions charged directly to clients for efforts performed in the issuance of new insurance policies.
Annual Report on Form 10-K: The Company's annual report on Form 10-K for the year ended December 31, 2021.
Carrier: An insurance company.
Carrier Appointment: A contractual relationship with a Carrier.
Client Retention: 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.
Contingent Commission: Revenue in the form of contractual payments from Carriers contingent upon several factors, including growth and profitability of the business placed with the Carrier.
Core Revenue: The most predictable revenue stream for the Company, these revenues consist of New Business Revenue and Renewal Revenue. New Business Revenue is lower-margin, but fairly predictable. Renewal Revenue is higher-margin and very predictable.
Cost Recovery Revenue: Revenue received by the Company associated with cost recovery efforts associated with selling and financing franchises. Included in Cost Recovery Revenue are Initial Franchise Fees and Interest Income.
Franchise Agreement: Agreements governing our relationships with Franchisees.
Franchisee: An individual or entity who has entered into a Franchise Agreement with us.
GF: Goosehead Financial, LLC.
Initial Franchise Fee: Contracted fees paid by Franchisees to compensate Goosehead for the training, onboarding and ongoing support of new franchise locations.
LLC Unit: a limited liability company unit of Goosehead Financial, LLC.
New Business Commission: Commissions received from Carriers relating to policies in their first term.
New Business Revenue: New Business Commissions, Agency Fees, and New Business Royalty Fees.
New Business Royalty Fees: Royalty Fees received from Franchisees relating to policies in their first term
NPS: Net Promoter Score 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, a score of 7 or 8 are called Passives, and a 9 or 10 are Promoters. NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters.
Policies in Force: As of any reported date, the total count of current (non-cancelled) policies placed by us with our Carriers.
Pre-IPO LLC Members: owners of LLC Units of GF prior to the Offering.
Renewal Revenue: Renewal Commissions and Renewal Royalty Fees.
Royalty Fees: Fees paid by Franchisees to the Company that are tied to the gross commissions paid by the Carriers related to policies sold or renewed by a franchisee.
The Offering: The initial public offering completed by Goosehead Insurance, Inc. on May 1, 2018.
Total Written Premium: As of any reported date, the total amount of current (non-cancelled) gross premium that is placed with Goosehead’s portfolio of Carriers.


Special note regarding forward-looking statements
We have made statements in this Form 10-Q that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include the potential impact of COVID-19 on the Company's business, projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed under the caption entitled “Item 1A. Risk factors” in the Annual Report on Form 10-K.
The forward-looking statements included in this Form 10-Q are made only as of the date hereof. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this Form 10-Q to conform our prior statements to actual results or revised expectations.


Item 1. Condensed Consolidated Financial Statements (Unaudited)
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 1Organization
Note 2Summary of significant accounting policies
Note 3Revenues
Note 4Franchise fees receivable
Note 5Allowance for uncollectible agency fees
Note 6Property and equipment
Note 7Debt
Note 8Income taxes
Note 9Stockholder's equity
Note 10Non-controlling interest
Note 11Equity-based compensation
Note 12Segment information
Note 13Litigation
Note 14Subsequent events


Goosehead Insurance, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
  Three Months Ended September 30,Nine Months Ended September 30,
Commissions and agency fees$27,402 $22,420 $73,676 $61,007 
Franchise revenues29,922 18,960 77,299 49,234 
Interest income363 301 1,012 841 
Total revenues57,687 41,681 151,987 111,082 
Operating Expenses:
Employee compensation and benefits36,328 26,078 99,471 69,862 
General and administrative expenses13,456 10,141 39,358 29,549 
Bad debts2,306 732 4,762 1,825 
Depreciation and amortization1,809 1,188 5,043 3,320 
Total operating expenses53,899 38,139 148,634 104,556 
Income from operations3,788 3,542 3,353 6,526 
Other Income (Expense):
Other income 7  146 
Interest expense(1,414)(756)(3,411)(1,903)
Income (loss) before taxes2,374 2,793 (58)4,769 
Tax expense (benefit)(666)(2,575)(104)(2,646)
Net income3,040 5,368 46 7,415 
Less: net income (loss) attributable to non-controlling interests1,061 1,332 (18)2,288 
Net income attributable to Goosehead Insurance, Inc.$1,979 $4,036 $64 $5,127 
Earnings per share:
Basic$0.09 $0.21 $ $0.27 
Diluted$0.09 $0.19 $ $0.25 
Weighted average shares of Class A common stock outstanding
Basic20,892 19,559 20,531 18,903 
Diluted21,569 21,206 21,430 20,570 

See Notes to the Condensed Consolidated Financial Statements

Goosehead Insurance, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
  September 30,December 31,
Current Assets:
Cash and cash equivalents$46,107 $28,526 
Restricted cash2,263 1,953 
Commissions and agency fees receivable, net11,271 12,056 
Receivable from franchisees, net2,929 2,986 
Prepaid expenses5,573 4,785 
Total current assets68,143 50,306 
Receivable from franchisees, net of current portion28,126 29,180 
Property and equipment, net of accumulated depreciation35,219 24,933 
Right-of-use asset42,528 32,656 
Intangible assets, net of accumulated amortization4,334 2,798 
Deferred income taxes, net140,244 125,676 
Other assets5,394 4,742 
Total assets$323,988 $270,291 
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and accrued expenses$13,500 $12,995 
Premiums payable2,263 1,953 
Lease liability6,776 4,893 
Contract liabilities6,224 6,054 
Note payable6,250 4,375 
Total current liabilities35,013 30,270 
Lease liability, net of current portion64,181 47,335 
Note payable, net of current portion113,530 118,361 
Contract liabilities, net of current portion44,535 42,554 
Liabilities under tax receivable agreement112,394 100,959 
Total liabilities369,653 339,479 
Class A common stock, $0.01 par value per share - 300,000 shares authorized, 21,202 shares issued and outstanding as of September 30, 2022, 20,198 shares issued and outstanding as of December 31, 2021
210 200 
Class B common stock, $0.01 par value per share - 50,000 shares authorized, 16,201 issued and outstanding as of September 30, 2022, 16,909 shares issued and outstanding as of December 31, 2021
163 170 
Additional paid in capital67,238 46,281 
Accumulated deficit(61,282)(60,671)
Total stockholders' equity (deficit) 6,329 (14,020)
Non-controlling interests(51,994)(55,168)
Total equity(45,665)(69,188)
Total liabilities and equity$323,988 $270,291 

See Notes to the Condensed Consolidated Financial Statements

Goosehead Insurance, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(In thousands)
Issued shares of Class A common stockIssued shares of Class B common stockClass A Common stockClass B Common StockAdditional paid in capitalAccumulated deficitTotal stockholders' equityNon-controlling interestTotal equity
Balance, January 1, 202220,198 16,909 $200 $170 $46,281 $(60,671)$(14,020)$(55,168)$(69,188)
Net loss— — — — — (2,257)(2,257)(3,126)(5,383)
Exercise of stock options19 — — — 256 — 256 — 256 
Equity-based compensation— — — — 5,788 — 5,788 — 5,788 
Activity under employee stock purchase plan3 — — — 214 — 214 — 214 
Redemption of LLC Units101 (101)1 (1)(344)— (344)344  
Deferred tax adjustments related to Tax Receivable Agreement— — — — 394 — 394 22 416 
Reallocation of Non-controlling interest— — — — — (478)(478)478  
Balance March 31, 202220,321 16,808 $201 $169 $52,589 $(63,406)$(10,447)$(57,450)$(67,897)

Net income— — — — — 342 342 2,047 2,389 
Exercise of stock options94 — 1 — 1,007 — 1,008 — 1,008 
Equity-based compensation— — — — 5,173 — 5,173 — 5,173 
Activity under employee stock purchase plan4 — — — 177 — 177 — 177 
Redemption of LLC Units115 (115)1 (1)(377)— (377)377  
Deferred tax adjustments related to Tax Receivable Agreement— — — — 373 — 373 30 403 
Reallocation of Non-controlling interest— — — — — (226)(226)226  
Balance June 30, 202220,534 16,693 $203 $168 $58,942 $(63,290)$(3,977)$(54,770)$(58,747)
Net income— — — — — 1,979 1,979 1,061 3,040 
Exercise of stock options171 — 2 — 3,004 — 3,006 — 3,006 
Equity-based compensation— — — — 5,395 — 5,395 — 5,395 
Activity under employee stock purchase plan5 — — — 165 — 165 — 165 
Redemption of LLC Units492 (492)5 (5)(1,579)— (1,579)1,579  
Deferred tax adjustments related to Tax Receivable Agreement— — — — 1,311 — 1,311 165 1,476 
Reallocation of Non-controlling interest— — — — — 29 29 (29) 
Balance September 30 202221,202 16,201 $210 $163 $67,238 $(61,282)$6,329 $(51,994)$(45,665)
Issued shares of Class A common stockIssued shares of Class B common stockClass A Common stockClass B Common StockAdditional paid in capitalAccumulated deficitTotal stockholders' equityNon-controlling interestTotal equity
Balance, January 1, 202118,304 18,447 $183 $184 $29,371 $(34,614)$(4,876)$(33,528)$(38,404)
Distributions— — — — — — —  
Net loss— — — — — (396)(396)(693)(1,089)
Exercise of stock options9 — 226 226 226 
Equity-based compensation— — — — 1,941 — 1,941 — 1,941 
Activity under employee stock purchase plan2 — — — 205 — 205 — 205 
Redemption of LLC Units133 (133)1 (1)(249)— (249)249  
Deferred tax adjustments related to Tax Receivable Agreement— — — — 798 — 798 18 816 
Reallocation of Non-controlling interest— — — — — 2 2 (2) 
Balance March 31, 202118,448 18,314 $184 $183 $32,292 $(35,008)$(2,349)$(33,956)$(36,305)

Net income— — — — — 1,487 1,487 1,649 3,136 
Exercise of stock options31 — — — 439 — 439 — 439 
Equity-based compensation— — — — 1,851 — 1,851 — 1,851 
Activity under employee stock purchase plan2 — — — 214 — 214 — 214 
Redemption of LLC Units728 (728)7 (7)(1,280)— (1,280)1,280  
Deferred tax adjustments related to Tax Receivable Agreement— — — — 3,063 — 3,063 101 3,164 
Reallocation of Non-controlling interest— — — — — (6)(6)6  
Balance June 30, 202119,209 17,586 $191 $176 $36,579 $(33,527)$3,419 $(30,920)$(27,501)
Dividends declared— — — — — (31,657)(31,657)(28,343)(60,000)
Net income— — — — — 4,036 4,036 1,332 5,368 
Exercise of stock options229 — 2 — 2,309 — 2,311 — 2,311 
Equity-based compensation— — — — 1,851 — 1,851 — 1,851 
Activity under employee stock purchase plan1 — — — 194 — 194 — 194 
Redemption of LLC Units347 (347)3 (3)(1,144)— (1,144)1,144  
Deferred tax adjustments related to Tax Receivable Agreement— — — — 2,031 — 2,031 62 2,093 
Reallocation of Non-controlling interest— — — — — 99 99 (99) 
Balance September 30, 202119,786 17,239 196 173 41,820 (61,049)(18,860)(56,824)(75,684)

See Notes to the Condensed Consolidated Financial Statements

Goosehead Insurance, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
  Nine Months Ended September 30,
Cash flows from operating activities:
Net income$46 $7,415 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization5,212 3,508 
Bad debt expense4,762 1,825 
Equity-based compensation16,356 5,644 
Impacts of Tax Receivable Agreement11,794 31,884 
Deferred income taxes(12,274)(34,942)
Noncash lease activity8,857 2,594 
Changes in operating assets and liabilities:
Receivable from franchisees(2,021)(7,840)
Commissions and agency fees receivable(878)8,947 
Prepaid expenses(788)(2,782)
Other assets(646)(1,257)
Accounts payable and accrued expenses136 2,092 
Contract liabilities2,151 10,408 
Premiums payable310 (144)
Payments pursuant to the tax receivable agreement (549)
Net cash provided by operating activities33,017 26,803 
Cash flows from investing activities:
Proceeds from notes receivable32 24 
Purchase of software(2,094)(1,989)
Purchase of property and equipment(14,771)(8,181)
Net cash used for investing activities(16,833)(10,146)
Cash flows from financing activities:
Debt issuance costs (666)
Repayment of note payable(3,125)(3,744)
Proceeds from notes payable 44,619 
Proceeds from the issuance of Class A common stock4,832 3,589 
Member distributions and dividends (60,000)
Net cash provided by (used for) financing activities1,707 (16,202)
Net increase in cash and restricted cash17,891 455 
Cash and cash equivalents, and restricted cash, beginning of period30,479 26,236 
Cash and cash equivalents, and restricted cash, end of period$48,370 $26,691 
Supplemental disclosures of cash flow data:
Cash paid during the period for interest3,242 1,715 
Cash paid for income taxes444 272 
See Notes to the Condensed Consolidated Financial Statements

Goosehead Insurance, Inc.
Notes to the Condensed Consolidated Financial Statements

1. 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 12 corporate-owned locations in operation at September 30, 2022 and 2021. Franchisees are provided access to insurance Carrier Appointments, product training, technology infrastructure, client service centers and back office services. During the three months ended September 30, 2022 and 2021, the Company onboarded 144 and 92 franchise locations, respectively, and had 1,403 and 1,139 operating franchise locations as of September 30, 2022 and 2021, respectively. No franchises were purchased by the Company during the three and nine months ended September 30, 2022 or 2021.
All intercompany accounts and transactions have been eliminated in consolidation.

2. 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 September 30, 2022 and December 31, 2021, the condensed consolidated results of operations, stockholders' equity and statements of cash flows for the three and nine months ended September 30, 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", and in the first quarter of 2022, 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 and nine months ended September 30, 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. While contingent commissions initially benefited from lower loss ratios in the early part of the pandemic, we now anticipate lower contingent commissions as customers return to pre-pandemic driving patterns and loss ratios increase. 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.


Goosehead Insurance, Inc.
Notes to the Condensed Consolidated Financial Statements
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.
Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements.
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 $2.3 million and $1.2 million as of September 30, 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 nine months ended September 30, 2022 and 2021 (in thousands):
September 30,
Cash and cash equivalents$46,107 $25,512 
Restricted cash2,263 1,179 
Cash and cash equivalents, and restricted cash$48,370 $26,691 

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 condensed 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.


Goosehead Insurance, Inc.
Notes to the Condensed Consolidated Financial Statements
3. 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
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.


Goosehead Insurance, Inc.
Notes to the Condensed Consolidated Financial Statements
Disaggregation of Revenue
The following table disaggregates revenue by source (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
Type of revenue stream:
Commissions and agency fees
Renewal Commissions$16,485 $10,969 $41,233 $29,036 
New Business Commissions6,215 6,013 18,312 16,573 
Agency Fees2,740 3,050 8,491 8,579 
Contingent Commissions1,962 2,388 5,640 6,819 
Franchise revenues
Renewal Royalty Fees21,574 13,206 54,446 33,622 
New Business Royalty Fees4,866 4,003 13,979 10,840 
Initial Franchise Fees3,056 1,680 7,943 4,570 
Other Franchise Revenues426 71 931 202 
Interest Income363 301 1,012 841 
Total Revenues$57,687 $41,681 $151,987 $111,082 
Timing of revenue recognition:
Transferred at a point in time$25,440 $20,032 $68,036 $54,188 
Transferred over time32,247 21,649 83,951 56,894 
Total Revenues$57,687 $41,681 $151,987 $111,082 

Contract Balances
The following table provides information about receivables, cost to obtain, and contract liabilities from contracts with customers (in thousands):
September 30, 2022December 31, 2021Increase/(decrease)
Cost to obtain franchise contracts(1)
$3,007 $1,973 $1,034 
Commissions and agency fees receivable, net(2)
11,271 12,056 (785)
Receivable from franchisees(2)
31,055 29,673 1,382 
Contract liabilities(2)(3)
50,759 48,608 2,151 
(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 September 30, 2022 was included in the contract liabilities balance as of December 31, 2021.


Goosehead Insurance, Inc.
Notes to the Condensed Consolidated Financial Statements
The weighted average remaining amortization period for contract liabilities related to open franchises is 7.9 years.

Significant changes in contract liabilities are as follows (in thousands):
Contract liabilities at December 31, 2021
Revenue recognized during the period(7,943)
New deferrals(1)
Contract liabilities at September 30, 2022
(1) Initial Franchise Fees where the consideration is received from the franchisee for services which are to be transferred to the Franchisee over the expected life of the Franchise Agreement

4. Franchise Fees Receivable
The balance of Franchise fees receivable included in Receivable from franchisees consisted of the following (in thousands):
September 30, 2022December 31, 2021
Franchise fees receivable(1)
$41,161 $40,171 
Less: Unamortized discount(1)
Less: Allowance for uncollectible franchise fees(1)
Net franchise fees receivable(1)
$29,558 $30,350 
(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):
Balance at December 31, 2021$303 
Charges to bad debts3,099 
Write offs(2,840)
Balance at September 30, 2022$562 
Balance at December 31, 2020$149 
Charges to bad debts516 
Write offs(484)
Balance at September 30, 2021$181 

5. Allowance for Uncollectible Agency Fees
Activity in the allowance for uncollectible Agency Fees was as follows (in thousands):
Balance at December 31, 2021$489 
Charges to bad debts1,663 
Write offs(1,658)
Balance at September 30, 2022$494 
Balance at December 31, 2020$468 
Charges to bad debts1,309 
Write offs(1,270)
Balance at September 30, 2021$507 

Goosehead Insurance, Inc.
Notes to the Condensed Consolidated Financial Statements

6. Property and equipment
Property and equipment consisted of the following (in thousands):
September 30, 2022December 31, 2021
Furniture & fixtures$7,784 $7,283 
Computer equipment4,033