GOOSEHEAD INSURANCE, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

Overview

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and the related notes and other financial information included
elsewhere in this Annual Report. In addition to historical financial
information, the following discussion and analysis contains forward-looking
statements that involve risks, uncertainties, and assumptions. Our actual
results and timing of selected events may differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those discussed under "Risk factors" and elsewhere in this Annual
Report.

This discussion includes references to non-GAAP financial measures as defined in
the rules of the Securities and Exchange Commission ('SEC'). We present such
non-GAAP financial measures, specifically, Core Revenue, Adjusted EBITDA and
Adjusted EPS non-GAAP financial measures, as we believe such information is of
interest to the investment community because it provides additional meaningful
methods of evaluating certain aspects of the Company's operating performance
from period to period on a basis that may not be otherwise apparent under U.S.
GAAP, and these provide a measure against which our businesses may be assessed
in the future.

Our methods of calculating these measures may differ from those used by other
companies and therefore comparability may be limited. These financial measures
should be viewed in addition to, not in lieu of, the consolidated financial
statements for the year ended December 31, 2021. See 'Non-GAAP Financial
Measures' below for further discussion of our Core Revenue, Adjusted EBITDA and
Adjusted EPS non-GAAP financial measures

We are a rapidly growing personal lines independent insurance agency,
reinventing the traditional approach to distributing personal lines products and
services throughout the United States. We were founded with one vision in
mind-to provide consumers with superior insurance coverage at the best available
price and in a timely manner. By leveraging our differentiated business model
and innovative technology platform, we are able to deliver a superior insurance
experience to our clients.

The following discussion contains references to the years ended December 31,
2021, December 31, 2020, and December 31, 2019. See Goosehead's Annual Report on
Form 10-K for the year ended December 31, 2020 for a discussion of the changes
from year ended December 31, 2019 to the year ended December 31, 2020.

Financial highlights for 2021:

• Total revenue increased by 29% from 2020 to $151.3 million; Basic income* of
$133.4 million increased by 40% compared to 2020

• Total written premiums placed increased by 45% from 2020 to $1.6 billion

• Net profit decreased by $10.5 million from 2020 to $8.3 million

• Adjusted EBITDA*, a non-GAAP measure, decreased 25% from 2020 to $20.8 millioni.e. 14% of total turnover

• Basic earnings per share were $0.28 and Adjusted EPS*, a non-GAAP measure, was
$0.48 for the year ended December 31, 2021.

• Business in force increased by 42% December 31, 2020 at 1,011,000 at December 31, 2021.

• The company’s sales force increased by 39% compared to December 31, 2020 at 506 at
December 31, 2021.

• From December 31, 2021293 of these commercial agents had less than one year of seniority and 213 had more than one year of seniority.

• Operating franchises increased by 34% compared to December 31, 2020 at 1,198 at December 31, 2021.

• In Texas from December 31, 202157 franchises in operation had less than one year of seniority and 214 franchisees in operation had more than one year of seniority.

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•Apart from Texas from December 31, 2021333 operating franchises were less than a year old and 594 were more than a year old.

*Core Revenue, Adjusted EBITDA and Adjusted EPS are non-GAAP measures.
Reconciliation of Adjusted EBITDA to net income (loss) and Adjusted EPS to EPS,
the most directly comparable financial measures presented in accordance with
GAAP, are set forth in the "Key performance indicators" section of Management's
discussion and analysis of financial condition and results of operations of this
Form 10-K.



Factors Affecting Our Results of Operations

We believe that the most important factors affecting our results of operations include:

•Investment in growth. We continue to invest in expanding our national
footprint, increasing our revenue-producing headcount, and increasing the level
of support provided to our salespeople. Our ability to attract and retain top
Corporate Channel sales agents and franchise owners, ramp up new agent
productivity, and retain existing and future Policies in Force are key to
continued profitable growth.

•Investment in technology. We continue to develop and invest in our technology
platform to drive scalability, adaptability, and efficiency in both the
Corporate Channel and Franchise Channel. We believe our significant proprietary
investment in our technology is a key competitive advantage that supports our
growth and operating margins.

•Continued penetration of Franchise Channel into existing markets. We will
continue to market actively for new franchises in our established markets,
including Texas, which represent over 99% of the U.S. population. We are now
licensed with the necessary state departments of commerce and insurance and
registered as a franchisor in all 50 states in the U.S.

•Continued retention of existing Book of Business. We have made significant
progress in recent years in Client Retention metrics, and maintaining these high
levels of Client Retention is key to future profitability.

•Increase in margins as business shifts from new to renewal. Because we are
entitled to a higher percentage of Royalty Fees after the first term of a policy
and the higher level of back-office support needed during the first term of an
insurance policy, the Company begins to see higher levels of profitability on
Renewal Revenue. We will focus simultaneously on converting New Business Revenue
to Renewal Revenue through our retention efforts, and on continuing to grow New
Business Revenue that will convert and allow us to expand our margins in future
periods.

•Strength of the insurance market or particular lines of business. We generate
the majority of our revenues through commissions, which are calculated as a
percentage of the total insurance policy premium. A softening of the insurance
market or the particular lines of business that are our focus, characterized by
a period of declining premium rates, could negatively impact our profitability.

•Seasonality and cyclicality of housing market conditions. The majority of our
new accounts are sourced by referral sources tied to home closing transactions.
Major slowdowns in the various housing markets Goosehead serves could impact our
ability to generate new business. We experience seasonality and revenue related
to the sale of insurance policies throughout the course of a calendar year that
is tied to the seasonality of new home sales. Revenue from home insurance leads
is higher from April to August and lower from October through January. While
this can impact month-to-month or quarter-to-quarter results, we expect
productivity to normalize year-over-year.

•Effect of natural or man-made disasters. Any increases in loss ratios due to
natural or man-made disasters could impact our Contingent Commissions, which are
primarily driven by both growth and loss ratio metrics.

•Cost of being a public company. To operate as a public company, we are required
to continue to implement changes in certain aspects of our business and develop,
manage, and train management level and other employees to comply with on-going
public company requirements. We also incur expenses as a public company,
including public reporting obligations, proxy statements, stockholder meetings,
stock exchange fees and transfer agent fees.

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Effects of the reorganization on our corporate structure

Goosehead Insurance, Inc. was formed for the purpose of the Offering and has
engaged to date only in activities related to Goosehead Financial, LLC.
Goosehead Insurance, Inc. is a holding company and its sole material asset is a
controlling ownership and profits interest in Goosehead Financial, LLC. All of
our business is conducted through Goosehead Financial, LLC and its consolidated
subsidiaries, and the financial results of Goosehead Financial, LLC and its
consolidated subsidiaries are included in the consolidated financial statements
of Goosehead Insurance, Inc. Goosehead Financial, LLC is currently taxed as a
partnership for federal income tax purposes and, as a result, its members,
including Goosehead Insurance, Inc., pay taxes with respect to their allocable
shares of its net taxable income.

Prior redemptions and exchanges of LLC Units have resulted, and we expect future
redemptions and exchanges will result in increases in the tax basis in our share
of the tangible and intangible assets of Goosehead Financial, LLC that otherwise
would not have been available. These increases in tax basis have reduced the
amount of tax we are required to pay, and may reduce the amount of tax that we
would otherwise be required to pay in the future. The tax receivable agreement
requires Goosehead Insurance, Inc. to pay 85% of the amount of cash savings, if
any, in U.S. federal, state and local income tax or franchise tax that we
actually realize to the Pre-IPO LLC Members. Furthermore, payments under the tax
receivable agreement give rise to additional tax benefits and therefore
additional payments under the tax receivable agreement itself. See "Item 13.
Certain relationships and related transactions, and director independence".

COVID-19[feminine

The COVID-19 pandemic has severely restricted the level of economic activity
around the world. In response to this outbreak, the governments of many
countries, states, cities and other geographic regions, including in the United
States, have taken preventative or protective actions, such as imposing
restrictions on travel and business operations and advising or requiring
individuals to limit or forego their time outside of their homes. In the United
States, temporary closures of businesses have been ordered and numerous other
businesses have temporarily closed voluntarily.

Given the uncertainty regarding the spread and severity of COVID-19 and the
adverse effects on the national and global economy, the related financial impact
on our business cannot be accurately predicted at this time. We continue to
monitor the rapidly evolving situation and guidance from the authorities,
including federal, state and local public health officials and as a result may
take additional actions. While we intend to continue to execute on our strategic
plans and operational initiatives during the outbreak, in these circumstances,
there may be developments outside our control requiring us to adjust our
operating plan. See Part II, Item 1A. "Risk Factors-The ongoing global COVID-19
pandemic has negatively impacted the global economy in a significant manner and
may continue to do so for an extended period of time, and could also materially
adversely affect our business and operating results."

Certains postes du compte de résultat

Revenus

In 2021, revenue increased by 29% to $151.3 million from $117.0 million in 2020.
Total Written Premium growth, which is the best leading indicator of future
revenue growth, was 45% to $1.6 billion from $1.1 billion in 2020. Total Written
Premiums Placed drive our current and future Core Revenue and gives us potential
opportunities to earn Ancillary Revenue in the form of Contingent Commissions.
Our various revenue streams do not equally contribute to the long-term value of
Goosehead. For instance, Renewal Revenue and Renewal Royalty Fees are more
predictable and have higher margin profiles, thus are higher quality revenue
streams for the Company. Alternatively, Contingent Commissions, while high
margin, are unpredictable and dependent on insurance company underwriting and
forces of nature and thus are lower quality revenue for the Company. Our revenue
streams can be viewed in three distinct categories: Core Revenue, Cost Recovery
Revenue, and Ancillary Revenue, which are non-GAAP measures. A reconciliation of
Core Revenue, Cost Recovery Revenue, and Ancillary Revenue to total revenue, the
most directly comparable financial measures presented in accordance with GAAP,
are set forth in the "Key performance indicators" section of Management's
discussion and analysis of financial condition and results of operations of this
Form 10-K.

Core Revenue:
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•Renewal Commissions - highly predictable, higher-margin revenue stream, which
is managed by our service team.
•Renewal Royalty Fees - highly predictable, higher-margin revenue stream, which
is managed by our service team. For policies in their first renewal term, we see
an increase in our share of royalties from 20% to 50% on the commission paid by
the Carriers.
•New Business Commissions - predictable based on agent headcount and consistent
ramp-up of agents, but lower margin than Renewal Commissions because of higher
commissions paid to agents and higher back-office costs associated with policies
in their first term. This revenue stream has predictably converted into
higher-margin Renewal Commissions historically, and we expect this to continue
moving forward.
•New Business Royalty Fees - predictable based on franchise count and consistent
ramp-up of franchises, but lower margin than Renewal Royalty Fees because the
Company only receives a royalty fee of 20% on the commissions paid by the
Carrier in the first term of every policy and higher back-office costs
associated with policies in their first term. This revenue stream has
predictably convert into higher-margin Renewal Royalty Fees historically, and we
expect this to continue moving forward.
•Agency Fees - although predictable based on agent count, Agency Fees do not
renew like New Business Commissions and Renewal Commissions.

Revenus de récupération des coûts :

•Initial Franchise Fees - one-time Cost Recovery Revenue stream per franchise
unit that covers the Company's costs to recruit, train, onboard, and support the
franchise for the first year. These fees are fully earned and non-refundable
when a franchise attends our initial training.
•Interest Income - like Initial Franchise Fees, interest income is a Cost
Recovery Revenue stream that reimburses the Company for those franchises on a
payment plan.

Ancillary Revenue:

•Contingent Commissions - although high margin, Contingent Commissions are
unpredictable and susceptible to weather events and Carrier underwriting
results. Management does not rely on Contingent Commissions for operating cash
flow or budget planning.
•Other Income - book transfer fees, marketing investments from Carriers and
other items that are unpredictable and supplemental to other revenue streams.

Nous abordons ci-dessous la répartition de nos revenus par flux :

      Years ended December 31,                                             
    2021
(in thousands)                                          2021                                2020                                2019                      % Growth
Core Revenue:
Renewal Commissions(1)                      $  39,111               26  %       $  28,891               25  %       $ 22,924               30  %                35  %
Renewal Royalty Fees(2)                        46,079               30  %          29,309               25  %         19,462               25  %                57  %
New Business Commissions(1)                    22,108               15  %          17,324               15  %         11,961               15  %                28  %
New Business Royalty Fees(2)                   14,616               10  %          10,623                9  %          7,149                9  %                38  %
Agency Fees(1)                                 11,506                7  %           8,921                7  %          6,058                8  %                29  %
Total Core Revenue                            133,420               88  %          95,068               81  %         67,554               87  %                40  %
Cost Recovery Revenue:
Initial Franchise Fees(2)                       6,516                4  %           4,236                4  %          3,784                5  %                54  %
Interest Income                                 1,153                1  %             813                1  %            617                1  %                42  %
Total Cost Recovery Revenue                     7,669                5  %           5,049                5  %          4,401                6  %                52  %
Ancillary Revenue:
Contingent Commissions(1)                       9,926                7  %          16,675               14  %          5,423                7  %               (40) %
Other Income(2)                                   297                -  %             222                -  %            108                -  %                34  %
Total Ancillary Revenue                        10,223                7  %          16,897               14  %          5,531                7  %               (39) %
Total Revenues                              $ 151,312              100  %       $ 117,014              100  %       $ 77,486              100  %                29  %



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(1) Les commissions de renouvellement, les commissions sur les nouvelles affaires, les frais d’agence et les commissions conditionnelles sont inclus dans les « Commissions et frais d’agence », comme indiqué dans les états consolidés des résultats.

(2) Renewal Royalty Fees, New Business Royalty Fees, Initial Franchise Fees, and
Other Income are included in "Franchise revenues" as shown on the Consolidated
statements of operations.

Core Revenue:

The Company's primary source of revenue is through the placement of insurance
policies. We are paid a percentage of the premium from the Carriers in the form
of New Business Commissions and, in states which allow it, we charge Agency Fees
for the placement of the policy. For policies placed by the Franchise Channel,
we receive 20% of the commissions and fees received as New Business Royalties
during the first term of the policy. All clients are serviced by our world-class
service centers, allowing for predictable retention of our Book of Business,
which has historically been 89%. All commissions received in the Corporate
Channel after the first term of the policy are recognized as Renewal
Commissions, which are higher margin due to lower servicing costs. For all
policies that renew in our Franchise Channel, we receive 50% of the commissions
received from the Carrier as Renewal Royalty Fees, creating a mechanical
increase in revenue of 120% if we renew at historical rates, and higher margin
due to lower servicing costs on higher revenue. For this reason, and because we
are placing an increasing percentage of Total Written Premium in the Franchise
Channel, Core Revenue growth will lag that of Total Written Premium.

Revenus de récupération des coûts :

The Company charges every franchise an Initial Franchise Fee, which, on a cash
flow basis, covers our costs to recruit, train, onboard, and support the
franchise for the first year. The Initial Franchise Fee is determined by the
state of the Franchise location and the payment terms. The Company recognizes
revenue over the 10-year life of the contract. If the franchise elects the
payment plan, the difference between the pay-in-full and the payment plan
amounts is recognized as Interest Income using the interest rate method over the
5-year term of the payment plan.

Recettes annexes :

With certain Carriers, the Company has the opportunity to earn additional
revenue in the form of Contingent Commissions, typically based on the growth and
loss ratio of the business placed with the select Carriers. The Contingent
Commissions are extremely difficult to predict in any given period. Although the
Company can control the amount of business placed with the Carriers, loss ratios
depend on many factors that are outside of our control, such as weather events
and Carrier underwriting accuracy. As such, we view these Contingent Commissions
as a bonus and have historically returned the cash from the Continent
Commissions to shareholders by way of a special dividend. The Company estimates
the amount to be received during the period over which the Contingent
Commissions are earned.

Vous trouverez ci-dessous un résumé montrant les commissions conditionnelles historiques en pourcentage du total des primes souscrites placées pour la période au cours de laquelle les commissions conditionnelles ont été gagnées (en milliers).

                                                   Contingent
                    Total Written Premium      Commission Revenue      % of Premium
            2019          739,009                    5,423                   0.73  %
            2020        1,074,076                   16,675                   1.55  %
            2021        1,559,858                    9,926                   0.64  %
                                                    3-year average           0.97  %



Contingent Commissions can vary significantly from year-to-year and should be
viewed over several years. Since 2019, revenue from Contingent Commissions have
historically represented approximately 0.97% of Total Written Premium at
year-end. Most of our Contingent Commissions are earned in the year prior to
when they are received. For the year ended December 31, 2019, $5.4 million of
Contingent Commissions were earned (below our historical average as a percentage
of premium), of which $3.6 million was still receivable at December 31, 2019.
For the year ended December 31, 2020, $16.7 million of Contingent Commissions
were earned (significantly above our historical average as a percentage of
premium), of which $15.1 million was still receivable at December 31, 2020. For
the year ended December 31, 2021, $9.9 million of Contingent Commissions were
earned (significantly below our historical average as a percentage of premium),
of which $7.4 million was still receivable at December 31, 2021. Contingent
Commissions are paid by Carriers based upon the profitability, volume and/or
growth of the business
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placés auprès de ces entreprises au cours de l’année précédente, par conséquent, les commissions conditionnelles gagnées peuvent varier considérablement d’une année à l’autre.

Prime par secteur d’activité

We are a distributor of insurance policies in a range of primarily personal
lines of business including homeowner's insurance, automotive, dwelling property
insurance, flood, wind and earthquake insurance, excess liability or umbrella
insurance, specialty lines insurance (motorcycle, recreational vehicle, and
other insurance), commercial lines insurance (general liability, property and
auto insurance for small businesses) and life insurance. The following table
sets forth our Total Written Premium placed by line of business by amount and as
a percentage of our Total Written Premium for the periods indicated (in
thousands):

                                               Year Ended December 31,
                                2021                     2020                    2019
Line of business
Homeowner               $   885,130     56  %    $   585,515     55  %    $ 395,572     53  %
Automotive                  618,483     40  %        456,320     42  %      321,857     44  %
Commercial                   39,254      3  %         20,730      2  %       13,831      2  %
Other                        16,991      1  %         11,511      1  %        7,749      1  %
Total Written Premium   $ 1,559,858    100  %    $ 1,074,076    100  %    $ 739,009    100  %



Expenses

En raison de notre stratégie de croissance purement organique, la quasi-totalité de nos investissements dans la croissance future concernent les personnes et certaines technologies. Par conséquent, la majorité de nos investissements ne sont pas capitalisables et sont comptabilisés immédiatement dans notre état des résultats.

Employee compensation and benefits. Employee compensation and benefits is our
largest expense and consists of (a) base compensation comprising salary, bonuses
and benefits paid and payable to employees, and (b) stock option awards for our
senior employees. We expect to continue to experience a general rise in
compensation and benefits expense commensurate with expected growth in headcount
and with the need to maintain competitive compensation levels as we expand
geographically and create new products and services.

General and administrative expenses. General and administrative expenses include
technology, travel, accounting, legal and other professional fees, commissions,
placement fees, office expenses, depreciation and other costs associated with
our operations. Our occupancy-related costs and professional services expenses,
in particular, generally increase or decrease in relative proportion to the
number of our employees and the overall size and scale of our business
operations. Expenses allocated to the Segments related to our service centers
and other overhead are applied to the appropriate Segment using a transfer
pricing methodology that seeks to maximize the scale efficiencies of our
business by sharing certain expenses across the two Segments. These shared
expenses are then allocated between the two Segments based on certain cost
drivers related to each expense. Examples of specific expenses and their cost
drivers include, but are not limited to: service team compensation costs are
allocated based on the number of cases processed for each Segment, our rent
expense by location is allocated based on the full time equivalent count and
Segment, and our technology charges are allocated based on the number of
individual licenses used by each Segment.

Indicateurs clés de performance

Nos principaux paramètres d’exploitation sont décrits ci-dessous :

Prime souscrite totale

Total Written Premium represents for any reported period, the total amount of
current (non-cancelled) gross premium that is placed with Goosehead's portfolio
of Carriers. We believe that Total Written Premium is an
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mesure appropriée de la performance opérationnelle, car elle reflète la croissance de nos activités par rapport à d’autres agences d’assurance.

Pour l’année terminée 31 décembre 2021nous avons eu 1,6 milliard de dollars du total des primes émises, soit une augmentation de 45 %, par rapport à 1,1 milliard de dollars pour l’année terminée 31 décembre 2020. Le tableau suivant indique le total des primes souscrites par canal pour les années se terminant en 2021 et 2020 (en milliers).

                                                 Year Ended December 31     

% Changement

                                                      2021             2020

Canal d’entreprise Total des primes souscrites 421 792 $ 320 495 $

         32  %
Franchise Channel Total Written Premium        1,138,066          753,581           51  %
Total Written Premium                        $ 1,559,858      $ 1,074,076           45  %


Policies in Force

Les polices en vigueur signifient, à toute date rapportée, le nombre total de polices actuelles (non annulées) placées auprès du portefeuille de transporteurs de Goosehead. Nous estimons que les polices en vigueur constituent une mesure appropriée de la performance opérationnelle car elle reflète la croissance de nos activités par rapport à d’autres agences d’assurance.

À partir de 31 décembre 2021nous avions 1 011 000 polices en vigueur comparativement à 713 000 en date du 31 décembre 2020soit une augmentation de 42 %.

NPS

Net Promoter Score (NPS) is calculated based on a single question: "How likely
are you to refer Goosehead Insurance to a friend, family member or colleague?"
Clients that respond with a 6 or below are Detractors, 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. For example, if 50% of respondents were Promoters and 10% were
Detractors, NPS is a 40. NPS is a useful gauge of the loyalty of client
relationships and can be compared across companies and industries.

Le NPS a légèrement diminué à 91 en date du 31 décembre 2021 de 92 à 31 décembre 2020principalement grâce à l’attention continue de l’équipe de service sur la fourniture de niveaux de service hautement différenciés.

Fidélisation des clients

Client Retention is calculated by comparing the number of all clients that had
at least one policy in force twelve months prior to the date of measurement and
still have at least one policy in force at the date of measurement. We believe
Client Retention is useful as a measure of how well Goosehead retains clients
year-over-year and minimizes defections.

Client Retention increased to 89% at December 31, 2021 when compared to 88% at
December 31, 2020, again driven by the service team's continued focus on
delivering highly differentiated service levels. Our retention rate is even
stronger on a premium basis. In 2021, we retained 93% of the premiums we
distributed in 2020, an increase from premium retention in 2020 of 89% due to
improved client retention and premium increases from our Carriers during the
year. Our premium retention rate is higher than our Client Retention rate as a
result of both premiums increasing year over year and additional coverages sold
by our sales and service teams.

Nouveaux revenus commerciaux

Les revenus des nouvelles affaires sont les commissions reçues du transporteur, les frais d’agence reçus des clients et les redevances liées aux polices dans leur premier mandat.

For the year ended December 31, 2021, New Business Revenue grew 31% to $48.2
million, from $36.9 million for the year ended December 31, 2020. Growth in New
Business Revenue is driven by an increase in Corporate Channel sales agent
headcount of 39% and growth in operating franchises of 34%.

Revenus de renouvellement

Les revenus de renouvellement sont les commissions reçues du transporteur et les redevances après le premier terme d’une police.

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For the year ended December 31, 2021, Renewal Revenue grew 46% to $85.2 million,
from $58.2 million for the year ended December 31, 2020. Growth in Renewal
Revenue was driven by Client Retention of 89% at December 31, 2021. As our agent
force matures on both the Corporate Channel and the Franchise Channel, the
policies they wrote in prior years begins to convert from New Business Revenue
to more profitable Renewal Revenue.

Mesures financières non conformes aux PCGR

Core Revenue, Cost Recovery Revenue, Ancillary Revenue, Adjusted EBITDA,
Adjusted EBITDA Margin, and Adjusted EPS are not measures of financial
performance under GAAP and should not be considered substitutes for net income
or earnings per share, which we consider to be the most directly comparable GAAP
measure. We refer to these measures as "non-GAAP financial measures." We
consider these non-GAAP financial measures to be useful metrics for management
and investors to facilitate operating performance comparisons from period to
period by excluding potential differences caused by variations in capital
structures, tax position, depreciation, amortization and certain other items
that we believe are not representative of our core business. Core Revenue, Cost
Recovery Revenue, Ancillary Revenue, Adjusted EBITDA, Adjusted EBITDA Margin,
and Adjusted EPS have limitations as analytical tools, and when assessing our
operating performance, you should not consider Core Revenue, Cost Recovery
Revenue, Ancillary Revenue, Adjusted EBITDA, Adjusted EBITDA Margin, or Adjusted
EPS in isolation or as substitutes for net income, earnings per share or other
consolidated income statement data prepared in accordance with GAAP. Other
companies may calculate Core Revenue, Cost Recovery Revenue, Ancillary Revenue,
Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted EPS differently than we
do, limiting their usefulness as comparative measures.

Revenus de base

Core Revenue is a supplemental measure of our performance and includes Renewal
Commissions, Renewal Royalty Fees, New Business Commissions, New Business
Royalty Fees, and Agency Fees. We believe that Core Revenue is an appropriate
measure of operating performance because it summarizes all of our revenues from
sales of individual insurance policies.

Core Revenue increased by $38.3 million, or 40%, to $133.4 million for the year
ended December 31, 2021 from $95.1 million for the year ended December 31, 2020.
The primary driver of the increase is growth in operating franchises, corporate
agent sales headcount, and number of policies in the renewal term from December
31, 2020 to December 31, 2021.

Recettes de recouvrement des coûts

Cost Recovery Revenue is a supplemental measure of our performance and includes
Initial Franchise Fees and Interest Income. We believe that Cost Recovery
Revenue is an appropriate measure of operating performance because it summarizes
revenues that are viewed by management as cost recovery mechanisms.

Cost Recovery Revenue increased by $2.7 million, or 52%, to $7.7 million for the
year ended December 31, 2021 from $5.0 million for the year ended December 31,
2020. The primary driver of the increase is a larger number of franchises in the
system.

Ancillary Revenue

Ancillary Revenue is a supplemental measure of our performance and includes
Contingent Commissions and Other Income. We believe that Ancillary Revenue is an
appropriate measure of operating performance because it summarizes revenues that
are ancillary to our core business.

Ancillary Revenue decreased by $6.7 million, or 39%, to $10.2 million for the
year ended December 31, 2021 from $16.9 million for the year ended December 31,
2020. The primary driver of the decrease from December 31, 2020 to December 31,
2021 was unfavorable loss ratios with our carriers.

BAIIA ajusté

Adjusted EBITDA is a supplemental measure of our performance. We believe that
Adjusted EBITDA is an appropriate measure of operating performance because it
eliminates the impact of items that do not relate to underlying business
performance. Adjusted EBITDA is defined as net income (the most directly
comparable GAAP measure) before interest, income taxes, depreciation and
amortization, adjusted to exclude equity-based compensation and other
non-operating items, including, among other things, certain non-cash charges and
certain non-recurring or non-operating gains or losses.
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Adjusted EBITDA decreased by $7.0 million, or 25%, to $20.8 million for the year
ended December 31, 2021, from $27.8 million for the year ended December 31,
2020, driven primarily by a significant decrease in high-margin revenue from
Contingent Commissions.

Adjusted EBITDA Margin

Adjusted EBITDA Margin is Adjusted EBITDA as defined above, divided by total
revenue excluding other non-operating items. Adjusted EBITDA Margin is helpful
in measuring profitability of operations on a consolidated level.
For the year ended December 31, 2021, Adjusted EBITDA Margin was 14% compared to
24% for the year ended December 31, 2020. The Adjusted EBITDA margin reduction
came from a significant decrease in high-margin Contingent Commissions,
investments to grow the Corporate sales agents 39%, plus additional investments
in systems technology.

Adjusted EPS

Adjusted EPS is a supplemental measure of our performance, defined as earnings
per share (the most directly comparable GAAP measure) before non-recurring or
non-operating income and expenses, adjusted to assume a single class of stock
(Class A) and assuming non-controlling interest does not exist. Adjusted EPS is
a useful measure to management because it eliminates the impact of items that do
not relate to business performance and helps compare companies that may not have
a dual-share class structure.

Rapprochements PCGR et non PCGR

                                       Year ended December 31,
                                  2021           2020           2019
Total Revenues                 $ 151,312      $ 117,014      $ 77,486

Core Revenue:
Renewal Commissions(1)         $  39,111      $  28,891      $ 22,924
Renewal Royalty Fees(2)           46,079         29,309        19,462
New Business Commissions(1)       22,108         17,324        11,961
New Business Royalty Fees(2)      14,616         10,623         7,149
Agency Fees(1)                    11,506          8,921         6,058
Total Core Revenue               133,420         95,068        67,554
Cost Recovery Revenue:
Initial Franchise Fees(2)          6,516          4,236         3,784
Interest Income                    1,153            813           617
Total Cost Recovery Revenue        7,669          5,049         4,401
Ancillary Revenue:
Contingent Commissions(1)          9,926         16,675         5,423
Other Income(2)                      297            222           108
Total Ancillary Revenue           10,223         16,897         5,531
Total Revenues                 $ 151,312      $ 117,014      $ 77,486

(1) Les commissions de renouvellement, les commissions sur les nouvelles affaires, les frais d’agence et les commissions conditionnelles sont inclus dans les « Commissions et frais d’agence », comme indiqué dans les états consolidés des résultats.

(2) Renewal Royalty Fees, New Business Royalty Fees, Initial Franchise Fees, and
Other Income are included in "Franchise revenues" as shown on the Consolidated
statements of operations.

Le tableau suivant présente un rapprochement entre le bénéfice net et le BAIIA ajusté pour l’exercice terminé 31 décembre 20212020 et 2019 (en milliers) :

                                       58
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                                                                   Year ended December 31,
                                                        2021                 2020                 2019
Net income (loss)                                  $     8,296          $    18,755          $    10,382
Interest expense                                         2,854                2,310                2,387
Depreciation and amortization                            4,873                3,147                1,931
Tax expense (benefit)                                   (2,292)              (1,035)               1,304
Equity-based compensation                                7,292                4,745                1,526
Other income (expense, including state
franchise tax)                                            (185)                 (90)                   -
Adjusted EBITDA                                    $    20,838          $    27,832          $    17,530
Adjusted EBITDA Margin(1)                                   14  %                24  %                23  %


(1) Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by Total
Revenue excluding other non-operating items ($20,838 / $151,312) for the year
ended December 31, 2021, ($27,832 / $117,014) for the year ended December 31,
2020, and ($17,530 /$77,486) for the year ended December 31, 2019.


Les tableaux suivants présentent un rapprochement entre le bénéfice de base par action et le BPA ajusté pour les exercices clos 31 décembre 20212020 et 2019. Notez que les totaux peuvent ne pas correspondre en raison des arrondis :

                                                              Year ended 

le 31 décembre,

                                                            2021            2020        2019
      Earnings (loss) per share - basic (GAAP)        $    0.28           $ 0.55      $ 0.24
      Add: equity-based compensation(1)                    0.20             0.13        0.04
      Adjusted EPS (non-GAAP)                         $    0.48           $ 0.68      $ 0.28



(1) Calculated as equity-based compensation divided by the weighted average of
Class A and Class B shares outstanding during the period 2021 - [$7.3 million /
( 19.2 million + 17.7 million ) 2020 - [ $4.7 million / ( 16.8 million + 19.7
million )] 2019 - [ $1.5 million / ( 14.9 million + 21.4 million )]


Consolidated operating results

The following is a discussion of our consolidated results of operations for each
of the years ended December 31, 2021, December 31, 2020, and December 31, 2019.
This information is derived from our accompanying consolidated financial
statements prepared in accordance with GAAP. For further discussion regarding
our consolidated results of operations for the year ended December 31, 2020 as
compared to the year ended
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December 31, 2019see “Part II, Item 7. MD&A and Discussion of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020.

The following table summarizes our results of operations for the years ended
December 31, 20212020 and 2019 (in thousands):

                                                                          Year Ended December 31,
                                                   2021                             2020                             2019
Revenues:
Commissions and agency fees             $ 82,651             54  %       $ 71,811             61  %       $ 46,366             60  %
Franchise revenues                        67,508             45  %         44,390             38  %         30,503             39  %
Interest income                            1,153              1  %            813              1  %            617              1  %
Total revenues                           151,312            100  %        117,014            100  %         77,486            100  %
Operating Expenses:
Employee compensation and benefits        93,038             66  %         66,819             69  %         41,715             66  %
General and administrative expenses       41,729             29  %         25,532             26  %         19,042             30  %
Bad debts                                  2,999              2  %          1,576              2  %            725              1  %
Depreciation and amortization              4,873              3  %          3,147              3  %          1,931              3  %
Total operating expenses                 142,639            100  %         97,074            100  %         63,413            100  %
Income from operations                     8,673                           19,940                           14,073
Other Income:
Other income                                 185                               90                                -
Interest expense                          (2,854)                          (2,310)                          (2,387)
Income before taxes                        6,004                           17,720                           11,686
Tax expense (benefit)                     (2,292)                          (1,035)                           1,304
Net Income                                 8,296                           18,755                           10,382
Less: net income attributable to
non-controlling interests                  2,893                            9,468                            6,815
Net Income attributable to Goosehead
Insurance Inc.                          $  5,403                         $  9,287                         $  3,567


Revenues

In 2021, turnover increased by 29% to $151.3 million from $117.0 million in 2020.

Commissions and agency fees

Commissions and agency fees include base revenue from new business commissions, renewal commissions and agency fees, and ancillary revenue from contingent commissions generated by the enterprise channel and the franchise channel and other income.

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The following table presents our commissions and agency fees in amount and as a percentage of our revenues for the periods indicated (in thousands):

                                                      Year Ended December 31
                                      2021                     2020                     2019
Core Revenue:
Renewal Commissions           $ 39,111        47  %    $ 28,891        40  %    $ 22,924        49  %
New Business Commissions        22,108        27  %      17,324        24  %      11,961        26  %
Agency Fees                     11,506        14  %       8,921        13  %       6,058        13  %
Total                           72,725        88  %      55,136        77  %      40,943        88  %
Ancillary Revenue:
Contingent Commissions           9,926        12  %      16,675        23  

% 5,423 12% Commissions and agency fees $82,651 100% $71,811 100% $46,366 100%



Renewal Commissions increased by $10.2 million, or 35%, to $39.1 million for the
year ended December 31, 2021 from $28.9 million for the year ended December 31,
2020. These increases are primarily attributable to an increase in the number of
policies in the renewal term at December 31, 2021 compared to December 31, 2020.

New Business Commissions increased by $4.8 million, or 28%, to $22.1 million for
the year ended December 31, 2021 from $17.3 million for the year ended December
31, 2020. Revenue from Agency Fees increased by $2.6 million, or 29%, to $11.5
million for the year ended December 31, 2021 from $8.9 million for the year
ended December 31, 2020. These increases were primarily attributable to an
increase in total sales agent head count to 506 at December 31, 2021, from 364
at December 31, 2020, a 39% increase.

Revenue from Contingent Commissions decreased by $6.7 million, or (40)%, to $9.9
million for the year ended December 31, 2021, from $16.7 million for the year
ended December 31, 2020. The decrease is primarily attributable to the increase
in loss ratios in our book of business with the Carriers that offer contingency
programs.

Franchise Revenues

Franchise revenue includes base revenue from royalties, cost recovery revenue from initial franchise fees, and ancillary revenue from interest income.

The following table presents our franchise revenues in amount and as a percentage of our revenues for the periods indicated (in thousands):

                                                    Year Ended December 31,
                                    2021                     2020                     2019
Core Revenues:
Renewal Royalty Fees        $ 46,079        68  %    $ 29,309        65  %    $ 19,462        65  %
New Business Royalty Fees     14,616        22  %      10,623        24  %       7,149        23  %
Total                         60,695        90  %      39,932        89  %      26,611        88  %
Cost Recovery Revenues:
Initial Franchise Fees         6,516        10  %       4,236        10  %       3,784        12  %
Ancillary Revenues:
Other Franchise Revenues         297         -  %         222         1  %         108         -  %
Franchise revenues          $ 67,508       100  %    $ 44,390       100  %  

$30,503 100%



Revenue from Renewal Royalty Fees increase by $16.8 million, or 57%, to $46.1
million, for the year ended December 31, 2021 from $29.3 million for the year
ended December 31, 2020. The increase in revenue from Renewal Royalty Fees was
primarily attributable to an increase in the number of policies in the renewal
term, and the higher Royalty Fee rate on renewal business compared to new
business (50% vs. 20%, respectively).
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Revenue from New Business Royalty Fees increased by $4.0 million, or 38%, to
$14.6 million for the year ended December 31, 2021 from $10.6 million for the
year ended December 31, 2020. The increase in revenue from New Business Royalty
Fees was primarily attributable to an increase in the total number of operating
franchises at December 31, 2021 compared to December 31, 2020.

Initial Franchise Fee revenue increased approximately $2.3 million, or 54%, to
$6.5 million for the year ended December 31, 2021 from $4.2 million for the year
ended December 31, 2020. The primary driver of the increase in Initial Franchise
Fees was the increase in total franchises.

interest income

Interest Income increased $0.4 million, or 42% to $1.2 million for 2021 from
$0.8 million for 2020. This increase was primarily attributable to additional
Franchise Agreements signed under the payment plan option.

Expenses

Employee compensation and benefits

Employee compensation and benefits expenses increased by $26.2 million, or 39%,
to $93.0 million for 2021 from $66.8 million for 2020. This was attributable to
an increase in total headcount from 2020 to 2021, as well as additional stock
options granted during 2021.

General and administrative expenses

General and administrative expenses increased by $16.2 million, or 63%, to $41.7
million for 2021 from $25.5 million for 2020. This increase was attributable to
travel expenses related to the ease of travel restrictions in 2021 and increases
in expenses related to continued development of technology. The remainder of the
increase is attributable to higher costs associated with an increase in
operating franchises and employees.

Bad debts

Bad debts increased by $1.4 millioni.e. 90%, at $3.0 million for 2021 from $1.6 million for 2020. This increase is mainly due to increases in agency fees sold by the company.

Depreciation and amortization

Depreciation and amortization increased by $1.7 million, or 55%, to $4.9 million
for 2021 from $3.1 million for 2020. This increase was primarily attributable to
the increase in fixed assets during the same period, including a full year of
depreciation on the fixed assets put in place in connection with the additional
hiring and lease space taken during the year.

Other income (expenses)

In 2021, the Company recorded other revenues of $185,000 related to franchise transfer costs and sublease income, compared to $90,000 in 2020.

Interest expense

Interest expenses increased by $0.6 million, or 24%, to $2.9 million for 2021
from $2.3 million for 2020. This increase is attributable to an increase in the
average debt balance during the year.



Cash and capital resources

Historical liquidity and capital resources

We have managed our historical liquidity and capital requirements primarily
through the receipt of revenues from our Corporate Channel and our Franchise
Channel. Our primary cash flow activities involve: (1) generating cash flow from
Corporate Channel operations, which largely includes Renewal Revenue (Corporate)
and New Business Revenue (Corporate); (2) generating cash flow from Franchise
Channel operations, which largely includes Royalty Fees and Initial Franchise
Fees; (3) making distributions to the Goosehead Management Holders and Texas
Wasatch Holders; and (4) borrowings, interest payments and repayments under our
Credit Agreement. As of
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December 31, 2021, our unrestricted cash and cash equivalents, and restricted
cash was $30.5 million. We have used cash flow from operations primarily to pay
compensation and related expenses, general, administrative and other expenses,
debt service and distributions to our owners.

credit agreement

See “Note 9. Debt” in the consolidated financial statements included herein for a discussion of the Company’s credit facilities.

Comparative cash flows

The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated:

                                                                    Year 

Ended the 31st of December

                                                          2021               2020               2019
Net cash provided by operating activities             $  35,444          $  24,643          $  21,241
Net cash used for investing activities                  (15,375)           (10,333)            (4,078)
Net cash used for financing activities                  (15,826)            (3,334)           (20,914)
Net increase (decrease) in cash and cash equivalents      4,243             10,976             (3,751)
Cash and cash equivalents, and restricted cash,
beginning of period                                      26,236             15,260             19,011
Cash and cash equivalents, and restricted cash, end
of period                                             $  30,479          $  26,236          $  15,260


Operating activities

Net cash provided by operational activities was $35.4 million for 2021 as
compared to net cash provided by operational activities of $24.6 million for
2020. This increase in net cash provided by operational activities was primarily
attributable to a $17.6 million increase in cash provided by commissions and
fees receivable, offset by a $10.5 million decrease in net income.

Investing activities

Net cash used in business investment activities was $15.4 million for 2021 as
compared to net cash used in business investment activities of $10.3 million for
2020. This increase in net cash used in business investment activities was
primarily attributable to intangible assets growth related to investments in the
digital agent, as well as fixed asset growth directly related to headcount
increases and additional office space buildout during the year.

Fundraising activities

Net cash used in financing activities was $15.8 million for 2021 as compared to
net cash used by financing activities of $3.3 million for 2020. This increase in
net cash used financing activities is due to the $20.2 million decrease in
proceeds received from notes payable during 2021, offset by a $23.5 million
decrease in repayments made on notes payable and a $15.3 million increase in
distributions and dividends paid during 2021.

Sources and future uses of liquidity

Our initial sources of liquidity will be (1) cash on hand, (2) net working
capital, (3) cash flows from operations and (4) our Revolving Credit Facility.
Based on our current expectations, we believe that these sources of liquidity
will be sufficient to fund our working capital requirements and to meet our
commitments in the foreseeable future.

We expect that our primary liquidity needs will comprise cash to (1) provide
capital to facilitate the organic growth of our business, (2) pay operating
expenses, including cash compensation to our employees, (3) make payments under
the tax receivable agreement, (4) pay interest and principal due on borrowings
under our Credit Agreement and (5) pay income taxes.

Dividend policy

Assuming Goosehead Financial, LLC makes distributions to its members in any
given year, the determination to pay dividends, if any, to our Class A common
stockholders out of the portion, if any, of such distributions remaining after
our payment of taxes, tax receivable agreement payments and expenses (any such
portion, an "excess
                                       63
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distribution") will be made at the sole discretion of our board of directors.
Our board of directors may change our dividend policy at any time. See "Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities - Dividend policy".

Tax claim agreement

We entered into a tax receivable agreement with the Pre-IPO LLC Members on May
1, 2018 that provides for the payment by us to the Pre-IPO LLC Members of 85% of
the amount of cash savings, if any, in U.S. federal, state and local income tax
or franchise tax that we actually realize as a result of (i) any increase in tax
basis in Goosehead Insurance, Inc.'s assets and (ii) tax benefits related to
imputed interest deemed arising as a result of payments made under the tax
receivable agreement. See "Item 13. Certain relationships and related
transactions, and director independence".

Holders of Goosehead Financial, LLC Units (other than Goosehead Insurance, Inc.)
may, subject to certain conditions and transfer restrictions described above,
redeem or exchange their LLC Units for shares of Class A common stock of
Goosehead Insurance, Inc. on a one-for-one basis. Goosehead Financial, LLC has
made an election under Section 754 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder (the "Code") effective for each taxable
year in which a redemption or exchange of LLC Units for shares of Class A common
stock occurs, which has resulted and is expected to result in increases to the
tax basis of the assets of Goosehead Financial, LLC at the time of a redemption
or exchange of LLC Units. Prior redemptions and exchanges have resulted, and we
expect future redemptions and exchanges will result in increases in the tax
basis of the tangible and intangible assets of Goosehead Financial, LLC. These
increases in tax basis have reduced the amount of tax we are required to pay,
and may reduce the amount of tax that Goosehead Insurance, Inc. would otherwise
be required to pay in the future. We have entered into a tax receivable
agreement with the Pre-IPO LLC Members that provides for the payment by us to
the Pre-IPO LLC Members of 85% of the amount of cash savings, if any, in U.S.
federal, state and local income tax or franchise tax that we actually realize as
a result of (i) any increase in tax basis in Goosehead Insurance, Inc.'s assets
resulting from (a) the purchase of LLC Units from any of the Pre-IPO LLC Members
using the net proceeds from any future offering, (b) redemptions or exchanges by
the Pre-IPO LLC Members of LLC Units for shares of our Class A common stock or
(c) payments under the tax receivable agreement and (ii) tax benefits related to
imputed interest deemed arising as a result of payments made under the tax
receivable agreement. This payment obligation is an obligation of Goosehead
Insurance, Inc. and not of Goosehead Financial, LLC. For purposes of the tax
receivable agreement, the cash tax savings in income tax will be computed by
comparing the actual income tax liability of Goosehead Insurance, Inc.
(calculated with certain assumptions) to the amount of such taxes that Goosehead
Insurance, Inc. would have been required to pay had there been no increase to
the tax basis of the assets of Goosehead Financial, LLC as a result of the
redemptions or exchanges and had Goosehead Insurance, Inc. not entered into the
tax receivable agreement. Estimating the amount of payments that may be made
under the tax receivable agreement is by its nature imprecise, insofar as the
calculation of amounts payable depends on a variety of factors. While the actual
increase in tax basis from future purchases, redemptions or exchanges, as well
as the amount and timing of any payments under the tax receivable agreement,
will vary depending upon a number of factors, including the timing of
redemptions or exchanges, the price of shares of our Class A common stock at the
time of the redemption or exchange, the extent to which such redemptions or
exchanges are taxable and the amount and timing of our income. See "Item 13.
Certain relationships and related transactions, and director independence". We
historically accounted, and anticipate that we will continue to account for the
effects of these increases in tax basis and associated payments under the tax
receivable agreement arising from redemptions or exchanges as follows:

•we will record an increase in deferred tax assets for the estimated income tax
effects of the increases in tax basis based on enacted federal and state tax
rates at the date of the redemption or exchange;

•to the extent we estimate that we will not realize the full benefit represented
by the deferred tax asset, based on an analysis that will consider, among other
things, our expectation of future earnings, we will reduce the deferred tax
asset with a valuation allowance; and

• we will recognize 85% of the estimated realizable tax benefit (which is the deferred tax asset recorded less any valuation allowance recorded) as an increase in the liability due under the tax receivable agreement and the remaining 15% of the realizable tax benefit estimated as an increase in share premium.

Any effects of changes in any of our estimates after the date of redemption or exchange will be included in net income. Similarly, the effect of subsequent changes in enacted tax rates will be included in net income.

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Contractual obligations, commitments and contingencies

The following table represents our contractual obligations as of December 31, 2021aggregated by type.

                                                                                       Contractual obligations, commitments and contingencies
                                                                        Less than 1                                               More than 5
(in thousands)                                             Total               year          1-3 years          3-5 years               years
Operating leases(1)                  $      59,673                     $   5,680          $  14,974          $  15,000          $   24,019
Debt obligations payable(2)                 98,750                         4,375             26,250             68,125                   -
Interest expense(3)                          1,460                           115              1,345                  -                   -
Liabilities under tax receivable
agreement(4)                               100,959                             -             10,521             11,436              79,002
Total                                $     260,842                     $  10,170          $  53,090          $  94,561          $  103,021


(1)The Company leases its facilities under non-cancelable operating leases. In
addition to monthly lease payments, the lease agreements require the Company to
reimburse the lessors for its portion of operating costs each year. Rent expense
was $4.8 million, $1.9 million, and $1.6 million for year ending December 31,
2021, 2020, and 2019.

(2)The Company refinanced its credit facilities on July 21, 2021 in the form of
a $100 million term loan and $50 million revolving credit facility, of which $25
million was drawn as of December 31, 2021.

(3)Interest payments on our outstanding debt obligations under our Credit
Agreement. Our debt obligations have variable interest rates. We have calculated
future interest obligations based on the interest rate for our debt obligations
as of December 31, 2021.

(4)See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Tax Claim Agreement”.

Significant Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with GAAP. In
applying many of these accounting principles, we need to make assumptions,
estimates or judgments that affect the reported amounts of assets, liabilities,
revenues and expenses in our consolidated financial statements. We base our
estimates and judgments on historical experience and other assumptions that we
believe are reasonable under the circumstances. These assumptions, estimates or
judgments, however, are both subjective and subject to change, and actual
results may differ from our assumptions and estimates. If actual amounts are
ultimately different from our estimates, the revisions are included in our
results of operations for the period in which the actual amounts become known.
We believe the following critical accounting policies could potentially produce
materially different results if we were to change underlying assumptions,
estimates or judgments. See "Item 8. Financial statements and supplementary data
- Summary of significant accounting policies" for a summary of our significant
accounting policies, and discussion of recent accounting pronouncements.

Revenue recognition

The adoption of the new revenue standard on January 1, 2019 has increased the
significance of judgments and estimates management must make to apply the
guidance. In particular, judgments related to the amount of variable revenue
consideration to ultimately be received on commission revenue, royalty fees, and
contingent commissions, which were previously recognized when the Company
received notification from the insurance carrier, now require significant
judgments and estimates. The Company adjusts its estimates of revenue recognized
for commissions and royalty fees based on cash collections during the terms of
the policies.

Under the new standard, certain costs to obtain or fulfill a contract that were
previously expensed as incurred have been capitalized. The Company capitalizes
the incremental costs to obtain contracts primarily related to commission
payments. These deferred costs are amortized over the expected life of the
underlying franchise fee, and are included in Other assets in the Company's
consolidated balance sheet as of December 31, 2021.

Debts under an agreement on tax claims

In connection with the Offering we entered into a tax receivable agreement with
the Pre-IPO LLC Members that will provide for the payment by us to the Pre-IPO
LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state
and local income tax or franchise tax that we actually realize as a result of
(i) any increase in tax basis in Goosehead Financial, LLC's assets resulting
from (a) the acquisition of LLC Units using the net proceeds from any future
offering, (b) redemptions or exchanges by the Pre-IPO LLC Members of LLC Units
and the corresponding number of shares of Class B common stock for shares of our
Class A common stock or (c) payments under the tax receivable agreement, and
(ii) tax benefits related to imputed interest deemed arising as a result of
payments made under the tax receivable agreement.
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————————————————– ——————————

The actual increase in tax basis from future redemptions and exchanges, as well
as the amount and timing of any payments under the tax receivable agreement,
will vary depending on a number of factors, including, but not limited to, the
timing of any future redemptions, exchanges or purchases of the LLC Units held
by Pre-IPO LLC Members, the price of our Class A common stock at the time of the
purchase, redemption or exchange, the extent to which redemptions or exchanges
are taxable, the amount and timing of the taxable income that we generate in the
future, the tax rates then applicable and the portion of our payments under the
tax receivable agreement constituting imputed interest.

As of December 31, 2021, as a result of the prior redemptions of LLC Units, we
recognized liabilities totaling $101.0 million relating to our obligations under
the Tax Receivable Agreement.

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