GSHD 10-K & 10-Q changes, risk factors and insider trading

•Competition in our industry is intense and,and if we are unable to compete effectively, we may lose clients and our financial results may be negatively affected.

•Our business is dependent upon information processing systems.systems and facilities. Security breaches, cyberattacks or other similar incidents with respect to our or our third-party service providers' or vendors' information processing systems or facilities may damage our reputation and negatively impact client retention and carrier, franchise, and Referral Partner relationships.

•Our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, regulatory actions, reputational harmharm, or legal liability.

•Increasing scrutiny and changing expectations from investors, clientsclients, and our employees with respect to our corporate responsibility and stakeholder interest practices may impose additional costs on us or expose us to new or additional risks.

•Non-compliance with or changes in laws, regulationsregulations, or licensing requirements applicable to us could restrict our ability to conduct our business.

•Our business may be harmed if we lose our relationships with Carriers, fail to maintain good relationships with Carriers, become dependent upon a limited number of CarriersCarriers, or fail to develop new Carrier relationships

•Failure to support our expanding franchise system could have a material adverse effect on our business, financial conditioncondition, or results of operations.

Risks relating to intellectual property, data privacyprivacy, and cybersecurity

•Failure to obtain, maintain, protect, defenddefend, or enforce our intellectual property and other proprietary rights, or allegations that we have infringed, misappropriatedmisappropriated, or otherwise violated the intellectual property and other proprietary rights of others, could harm our reputation, ability to compete effectively, financial conditioncondition, and business.

•Improper disclosure of confidential, personal or proprietary information, whether due to human error, misuse of information by employees or vendors, or as a result of security breaches, cyberattacks or other similar incidents with respect to our or our service providers' or our vendors’ systems, could result in regulatory scrutiny, legal liability or reputational harm, and could have an adverse effect on our business or operations.

Factors, such as business revenue, economic conditions, including adverse conditions resulting from uncertainty concerning government shutdowns, debt ceilings or funding, the volatility and strength of the capital markets, increased rates of inflation, uncertain levels of interest ratesrates, and public health emergencies can affect the business and economic environment. For example, in 2024,2025, the global economic environment was characterized by continuedinternational markettrade uncertainty, inflationary pressures, highsustained elevated interest rates, weak housing markets, natural disasters and extreme weather events, recessionary fears, and geopolitical uncertainty regarding the ongoing conflict in Ukraine, tensions across the Taiwan Strait, the Israel-Hamas conflict and other hostilities in the Middle East and their impact on global security and markets.

The economic activity that impacts property and casualty insurance is most closely correlated with employment levels, corporate revenuerevenue, and asset values. In addition, an increase in client preference for car- and ride-sharing services, as opposed to automobile ownership, may result in a long-term reduction in the number of vehicles per capita, and consequently the automobile insurance industry. Downward fluctuations in the year-over-year insurance premium charged by insurers to protect against the same risk, referred to in the industry as softening of the insurance market, could adversely affect our business as a significant portion of the earnings are determined as a percentage of premium charged to our clients. Insolvencies and consolidations associated with an economic downturn, especially insolvencies in the insurance industry, could adversely affect our brokerage business through the loss of clients by hampering our ability to place insurance business. Also, some of our clients may experience liquidity problems or other financial difficulties in the event of a prolonged deterioration in the economy, which could have an adverse effect on our collectability of receivables or our clients may have less need for insurance coverage, cancel existing insurance policies, modify their coveragecoverage, or not renew the policies they hold with us. In addition, error and omission claims against us, which we refer to as E&O claims, may increase in economic downturns, also adversely affecting our brokerage business. A decline in economic activity could have a material adverse effect on our business, financial conditioncondition, and results of operations.

Moreover, during inflationary periods, interest rates have historically increased, which would have a direct effect on the interest expense in caseif we decide to refinance our existing long-term borrowings, in particular the Credit Agreement, or incur any additional indebtedness. Additionally, this may impact the market for new homes, which could adversely impact our leadflow of new home purchase clients. Conversely, lower levels of inflation in the future may reduce our revenue growth by slowing the increase in insurable asset values.

We derive most of our revenue from commissions and fees for our brokerage services. We do not determine the insurance premiums on which our commissions are generally based. Moreover, insurance premiums are cyclical in nature and may vary widely based on market conditions. Because of market cycles for insurance product pricing, which we cannot predict or control, our brokerage revenues and profitability can be volatile or remain depressed for significant periods of time. In addition, there have been and may continue to be (including as a result of substantial increases in insurance premiums) various trends in the insurance industry toward alternative insurance markets including, among other things, greater levels of self-insurance, captives, rent-a-captives, risk retention groupsgroups, and non-insurance capital markets-based solutions to traditional insurance. Our ability to generate premium-based commission revenue may also be challenged by the growing desire of some clients to compensate brokers based upon flat fees rather than a percentage of premium. This could negatively impact us because fees are generally not indexed for inflation and might not increase with premiums as commissions do or with the level of service provided.

As traditional risk-bearing Carriers continue to outsource the production of premium revenue to non-affiliated brokers or agents such as us, those Carriers may seek to further minimize their expenses by reducing the commission rates payable to insurance agents or brokers. The reduction of these commission rates, along with general volatility and/or declines in premiums, may significantly affect our profitability. Because we do not determine the timing or extent of premium pricing changes, it is difficult to precisely forecast our commission revenues, including whether they will significantly decline. As a result, we may have to adjust our budgets for future acquisitions, capital expenditures, dividend payments, loan repaymentsrepayments, and other expenditures to account for unexpected changes in revenues, and any decreases in premium rates may adversely affect our business, financial conditioncondition, and results of operations.

The commission rates are set by Carriers and are based on the premiums that the Carriers charge. The potential for changes in premium rates is significant, due to pricing cyclicality in the insurance market. In addition, the insurance industry has been characterized by periods of intense price competition due to excessive underwriting capacity and periods of favorable premium levels due to shortages of capacity. Capacity could also be reduced by Carriers failing or withdrawing from writing certain coverages that we offer our customers. Commission rates and premiums can change based on prevailing legislative, economic and competitive factors that affect Carriers. These factors, which are not within our control, include the capacity of Carriers to place new business, underwriting and non-underwriting profits of Carriers, client demand for insurance products, the availability of comparable products from other Carriers at a lower costcost, and the availability of alternative insurance products, such as government benefits and self-insurance products, to clients. We cannot predict the timing or extent of future changes in commission rates or premiums or the effect any of these changes will have on our business, financial conditioncondition, and results of operations.

A portion of our revenues consists of Contingent Commissions we receive from Carriers. Contingent Commissions are paid by Carriers based upon the profitability, volumevolume, and/or growth of the business placed with such companies during the prior year. If, due to the current economic environment or for any other reason, we are unable to meet Carriers’ profitability, volume or growth thresholds, or Carriers increase their estimate of loss reserves (over which we have no control), actual Contingent Commissions we receive could be less than anticipated, which could adversely affect our business, financial condition and results of operations.

We are subject to litigation, regulatory investigationsinvestigations, and claims arising in the normal course of our business operations. The risks associated with these matters often may be difficult to assess or quantify and the existence and magnitude of potential claims often remain unknown for substantial periods of time. While we have insurance coverage for some of these potential claims, others may not be covered by insurance, insurers may dispute coverage, or any ultimate liabilities may exceed our coverage.

We may be subject to actions and claims relating to the sale of insurance, including the suitability of such products and services. Actions and claims may result in the rescission of such sales; consequently, Carriers may seek to recoup commissions paid to us, which may lead to legal action against us. The outcome of such actions cannot be predicted, and such claims or actions could have a material adverse effect on our business, financial conditioncondition, and results of operations.

We are subject to laws and regulations, as well as regulatory investigations. The insurance industry has been subject to a significant level of scrutiny by various regulatory bodies, including state attorneys general and insurance departments, concerning certain practices within the insurance industry. These practices include, without limitation, the receipt of Contingent Commissions by insurance brokers and agents from Carriers and the extent to which such compensation has been disclosed, the collection of Agency Fees, bid riggingrigging, and related matters. From time to time, our subsidiaries received informational requests from governmental authorities. We have cooperated and will continue to cooperate fully with all governmental agencies.

We cannot predict the impact that any new laws, rulesrules, or regulations may have on our business and financial results. Given the current regulatory environment and the number of our subsidiaries operating in local markets throughout the country, it is possible that we will become subject to further governmental inquiries and subpoenas and have lawsuits filed against us. Regulators may raise issues during investigations, examinationsexaminations, or audits that could, if determined adversely, have a material impact on us. The interpretations of regulations by regulators may change and statutes may be enacted with retroactive impact. We could also be materially adversely affected by any new industry-wide regulations or practices that may result from these proceedings.

Our involvement in any investigations and lawsuits would cause us to incur additional legal and other costs and, if we were found to have violated any laws, we could be required to pay fines, damagesdamages, and other costs, perhaps in material amounts. Regardless of final costs, these matters could have a material adverse effect on us by exposing us to negative publicity, reputational damage, harm to client relationships, or diversion of personnel and management resources.

The business of providing insurance products and services is highly competitive and we expect competition to intensify. We compete for clients on the basis of reputation, client service, program and product offeringsofferings, and our ability to tailor products and services to meet the specific needs of a client.

We actively compete with numerous integrated financial services organizations as well as Carriers and brokers, producer groups, individual insurance agents, investment management firms, independent financial plannersplanners, and broker-dealers. Competition may reduce the fees that we can obtain for services provided, which would have an adverse effect on revenue and margins. Many of our competitors have greater financial and marketing resources than we do and may be able to offer products and services that we do not currently offer and may not offer in the future. To the extent that banks, securities firms and Carrier affiliates, theThe financial services industry may experience further consolidation (such as the acquisition by Arthur J. Gallagher & Co. of substantially all of the treaty reinsurance brokerage operations from Willis Towers Watson plc., completed in December 2021),consolidation, and we therefore may experience increased competition from Carriers and the financial services industry, as a growing number of larger financial institutions increasingly, and aggressively, offer a wider variety of financial services, including insurance intermediary services. In addition, a number of Carriers are engaged in the direct sale of insurance, primarily to individuals, and do not pay commissions to brokers or other market intermediaries. Furthermore, we compete with various other companies that provide risk-related services or alternatives to traditional insurance services, including Insurtech start-up companies, which are focused on using technology and innovation, including artificial intelligence, machine learning, digital platforms, data analytics, roboticsrobotics, and blockchain, to simplify and improve the client experience, increase efficiencies, alter business modelsmodels, and effect other potentially disruptive changes in the industries in which we operate.

In addition, in recent years, private equity sponsors have invested tens of billions of dollars into the insurance sector, transforming existing players and creating new ones to compete with large brokers. These new competitors, alliances among competitorscompetitors, or mergers of competitors could emerge and gain significant market share, and some of our competitors may have or may develop a lower cost structure, adopt more aggressive pricing policiespolicies, or provide services that gain greater market acceptance than the services that we offer or develop. Competitors may be able to respond to the need for technological changes and innovate faster, or price their services more aggressively. They may also compete for skilled professionals, finance acquisitions, fund internal growthgrowth, and compete for market share more effectively than we do. To respond to increased competition and pricing pressure, we may have to lower the cost of our services or decrease the level of service provided to clients, which could have an adverse effect on our business, financial conditioncondition, and results of operations.

•Increased competition from new market participants such as banks, accounting firms, consulting firmsfirms, and Internet or other technology firms offering risk management or insurance brokerage services, or new distribution channels for insurance such as payroll firms.

New competition as a result of these or other competitive or industry developments could cause the demand for our products and services to decrease, which could in turn adversely affect our business, financial conditioncondition, and results of operations.

Our business, financial conditioncondition, and results of operations may be negatively affected by E&O claims.

We have errors and omissions insurance coverage to protect against the risk of liability resulting from our alleged and actual errors and omissions. Prices for this insurance and the scope and limits of the coverage terms available are dependent on our claims history as well as market conditions that are outside of our control. While we endeavor to purchase coverage that is appropriate to our assessment of our risk, we are unable to predict with certainty the frequency, naturenature, or magnitude of claims for direct or consequential damages or whether our errors and omissions insurance will cover such claims.

In establishing liabilities for E&O claims, we utilize case level reviews by inside and outside counsel and an internal analysis to estimate potential losses. The liability is reviewed annually and adjusted as developments warrant. Given the unpredictability of E&O claims and of litigation that could flow from them, it is possible that an adverse outcome in a particular matter could have a material adverse effect on our results of operations, financial conditioncondition, or cash flow in a given quarterly or annual period.

Our business is dependent upon information processing systems.systems and facilities. Security breaches, cyberattackscyberattacks, or other similar incidents with respect to our or our third-party service providers' or vendors' information processing systems or facilities may damage our reputation and negatively impact client retention and carrier, franchise, and Referral Partner relationships.

Our ability to provide insurance services to clients and to create and maintain comprehensive tracking and reporting of client accounts depends on our capacity to store, retrieveretrieve, transmit, and otherwise process data, manage significant databases and data hygiene, and expand and periodically upgrade our information processing capabilities. As our operations evolve, we will need to continue to make investments in new and enhanced information systems.systems and facilities. As our information system providers revise and upgrade their hardware, softwaresoftware, and equipment technology, we may encounter difficulties in integrating these new technologies into our business. Interruption or loss of our information processing capabilities or adverse consequences from implementing new or enhanced systems and facilities could have a material adverse effect on our business, financial conditioncondition, and results of operations.

In the course of providing financial services, we may electronically store, transmitretrieve, transmit, or otherwise process personal information (including sensitive personal information), such as social security numbers or credit card or bank information, of clients or employees of clients. BreachesSecurity inbreaches, data securitycyberattacks, or other similar incidents, including infiltration by unauthorized persons of our network securitysecurity, could cause interruptions in operations and damage to our reputation, among other adverse impacts. While we maintain policies, procedures and technological safeguards designed to protect the security and privacy of this information, we cannot entirely eliminate the risk of security breaches, cyberattacks, or other similar incidents, including improper access to or disclosure of personal informationinformation, nor the related costs we incur to mitigate the consequences from such events. Techniques used to obtain unauthorized access or to sabotage systems and facilities change frequently. For example, such attackers have used artificial intelligence to launch more targeted, automatedautomated, and coordinated attacks against targets. Data privacy and cybersecurity laws, rulesrules, and regulations are matters of growing public concern and are continuously changing in the states in which we operate. The failure to adhere to or successfully implement procedures to respond to these laws, rulesrules, and regulations could result in legal liability or impairment to our reputation.

Further, despite security measures taken by us and our third-party service providers and vendors, our systems and facilities and those of our third-party service providers and vendors have been, and may in the future be vulnerable to physicalsecurity break-ins,breaches, unauthorizedcyberattacks, access,and virusesother similar incidents. Additionally, we or otherour disruptivethird-party problems.service Ifproviders and vendors may face additional strain on our or their systems and facilities due to aging or end-of-life technology that we or they have not yet updated or replaced. In the event our systems or facilitiesfacilities, wereor those of our third-party service providers and vendors, are infiltrated or damaged, we and our clients could experienceexperience, data loss, litigation, reputational harm, regulatory action, financial loss and significant business interruptioninterruption, leadingwhich may lead to a material adverse effect on our business, financial condition and results of operations. We may be required to expend significant additional resources to modify protective measures, to investigate and remediate vulnerabilities or other exposuresexposures, or to make required notifications.

We rely on the availability and performance of information technology services and systems provided by third parties.

While we maintain some of our critical information technology systems, we are also dependent on third partythird-party service providers,providers and vendors, including Salesforce.com, to provide important information technology services and systems relating to, among other things, agency management services, sales and service support, electronic communicationscommunications, and certain finance functions. If the service providers and vendors to which we outsource these functions do not perform effectively, we may not be able to achieve the expected cost savings and may have to incur additional costs to correct errors made by such service providers.providers and vendors. Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies, the loss of or damage to intellectual property through a security breach, or the loss of confidential proprietary or personal data (including sensitive personal data) through a security breach, or otherwise. While we or our third-party service providers or vendors have not experienced any significant disruption, failurefailure, or breach impacting our or their information technology systems, any such disruption, failurefailure, or breach could adversely affect our business, financial condition, reputationreputation, and results of operations. Any contractual protections we may have from our third-party service providers and vendors may not be sufficient to adequately protect us from any liabilities or losses, and we may be unable to enforce any such contractual protections. Moreover, while we generally perform cybersecurity due diligence on our key service providers and vendors, because we do not control our service providers and vendors and our ability to monitor their cybersecurity is limited, we cannot ensure the cybersecurity measures they take will be sufficient to protect any information we share with them. Due to applicable laws, regulations, rules, industry standards or contractual obligations, we may be held responsible for security breaches, cyberattacks or other similar incidents attributed to our service providers and vendors as they relate to the information we share with them. This could cause harm to our reputation, create legal exposure, or subject us to liability under applicable laws, regulations, rules, industry standards, and contracts, resulting in increased costs or loss of revenue.

Our inability to successfully recover should we experience a disaster or other business continuity problem could cause material financial loss, loss of human capital, regulatory actions, reputational harmharm, or legal liability.

Our operations are dependent upon our ability to protect our personnel, offices, and technology infrastructure against damage from business continuity events that could have a significant disruptive effect on our operations. Should we experience a local or regional disaster or other business continuity problem, such as an earthquake, hurricane, terrorist attack, public health crises such as the COVID-19 pandemic, protest or riot, security breach, cyberattack or other similar incident, power loss, telecommunications failurefailure, or other natural or man-made disaster, our continued success will depend, in part, on the availability of personnel, office facilities, and the proper functioning of computer, telecommunication and other related systems and operations. In events like these, while our operational size, the multiple locations from which we operate, and our existing backup systems provide us with some degree of flexibility, we still can experience near-term operational challenges in particular areas of our operations. We could potentially lose key executives, personnel, or client data or experience material adverse interruptions to our operations or delivery of services to clients in a disaster recovery scenario. We may experience additional disruption due to system upgrades, outagesoutages, or an increase in remote work. Our inability to successfully recover should we experience a disaster or other business continuity problem, could materially interrupt our business operations and cause material financial loss, loss of human capital, regulatory actions, reputational harm, damaged client relationships, or legal liability. Our insurance coverage with respect to natural disasters is limited and is subject to deductibles and coverage limits. Such coverage may not be adequate,adequate or may not continue to be available at commercially reasonable rates and terms.

We utilize artificial intelligence, machine learning, and similar tools and technologies that collect, aggregate, analyzeanalyze, or generate data or other materials or content (collectively, “AI”) in connection with our business. There are significant risks involved in utilizing AI and no assurance can be provided that our use of such AI will enhance our products or services or produce the intended results. For example, the data and algorithms on which AI algorithmsrelies, as well as the output generated by AI, may be flawed, insufficient, of poor quality, reflect unwanted forms of bias, or contain other errors or inadequacies, any of which may not be easily detectable; AI has been known to produce false or “hallucinatory” inferences or outputs; AI can present ethical issues and may subject us to new or heightened legal, regulatory, ethical, operational, reputational, or other challenges; the use of AI has resulted in, and may in the future result in, security breaches, cyberattacks and other similar incidents; and inappropriate or controversial data practices by developers and end-users, or other factors adversely affecting public opinion of AI, could impair the acceptance of AI solutions, including those incorporated in our products and services. Additionally, if any of our employees, service providers or vendors use any third-party AI-powered tools in connection with our business or the services they provide to us, it may lead to the inadvertent disclosure of our confidential information into publicly available or other third-party training sets, which may impact our ability to realize the benefit of our confidential information. Further, any output generated by us using AI may not be subject to copyright protection which may adversely affect our intellectual property rights in, or ability to commercialize or use, any such output. If the AI tools that we use are deficient, inaccurateinaccurate, or controversial, we could incur operational inefficiencies, competitive harm, legal liability, brand or reputation harm, or other adverse impacts on our business and financial results. If we do not have sufficient rights to use the data or other material or content on which the AI tools we use rely, or the output of such AI tools, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, privacyprivacy, or other rights, or contracts to which we are a party.

In addition, regulation of AI is rapidly evolving as legislators and regulators are increasingly focused on these powerful emerging technologies and as they remain the object of intense geostrategic competition. The technologies underlying AI and its uses are subject to a variety of laws and regulations, including intellectual property, data privacy and cybersecurity, client protection, trade and export controls, competition, and equal opportunity laws,laws and regulations, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations. AI is the subject of ongoing review by various U.S. governmental and regulatory agencies, and various U.S. states are applying, or are considering applying, their platform moderation, data privacyprivacy, and cybersecurity laws and regulations to AI or are considering general legal frameworks for AI. We may not be able to anticipate how to respond to these rapidly evolving frameworks, and we may need to expend resources to adjust our operations or offerings in certain jurisdictions if the legal frameworks are inconsistent across jurisdictions.

Furthermore, because AI technology itself is highly complex and rapidly developing, it is not possible to predict all of the legal, operationaloperational, or technological risks that may arise relating to the use of AI.

If we are unable to effectively apply technology effectivelyand inrelated drivingtools to drive value for our clients through technology-based solutions or gain internal efficiencies and effective internal controls through the application of technology and related tools,controls, our operating results, client relationships, growthgrowth, and compliance programs could be adversely affected.

Our future success depends, in part, on our ability to anticipate and respond effectively to the threat of, and the opportunity presented by, digital disruption and other technology change. These may include new applications or insurance-related services based on AI, machine learning, robotics, blockchainblockchain, or new approaches to data mining. We may be exposed to competitive risks related to the adoption and application of new technologies by established market participants (for example, through disintermediation) or new entrants such as technology companies, Insurtech start-up companiescompanies, and others. We must also develop and implement technology solutions and technical expertise among our employees that anticipate and keep pace with rapid and continuing changes in technology, industry standards, client preferencespreferences, and internal control standards. We may not be successful in anticipating or responding to these developments on a timely and cost-effective basis, and our ideas may not be accepted in the marketplace. Additionally, the effort to gain technological expertise and develop new technologies in our business requires us to incur significant expenses. Our technological development projects may also not deliver the benefits we expect once they are completed or may be replaced or become obsolete more quickly than expected, which could result in the accelerated recognition of expenses. If we cannot offer new technologies as quickly as our competitors, or if our competitors develop more cost-effective technologies or product offerings, we could experience a material adverse effect on our operating results, client relationships, growthgrowth, and compliance programs.

Our reputation is one of our key assets. We advise our clients on and provide services related to a wide range of subjectssubjects, and our ability to attract and retain clients is highly dependent upon the external perceptions of our level of service, trustworthiness, business practices, financial condition and other subjective qualities. If a client is not satisfied with our services, it could cause us to incur additional costs and impair profitability or lose the client relationship altogether, which may negatively impact other clients’ perception regarding us. Our success is also dependent on maintaining a good reputation with existing and potential employees, investors, regulatorsregulators, and the communities in which we operate. Negative perceptions or publicity regarding these or other matters, including our association with clients or business partners who themselves have a damaged reputation, or from actual or alleged conduct by us or our employees, could damage our reputation. Any resulting erosion of trust and confidence among existing and potential clients, regulators and other parties important to the success of our business could make it difficult for us to attract new clients and maintain existing ones, which could have a material adverse effect on our business, financial conditioncondition, and results of operations.

Increasing scrutiny and changing expectations from investors, clientsclients, and our employees with respect to our corporate responsibility and stakeholder interest practices may impose additional costs on us or expose us to new or additional risks.

There is increased focus, including from governmental organizations, investors, employeesemployees, and clients, on corporate responsibility and stakeholder interest issues such as environmental stewardship, climate change, diversity and workplace inclusion, pay equity, racial justice, workplace conductconduct, and cybersecurity and data privacy. There can be no certainty that we will manage such issues successfully, or that we will successfully meet society’s expectations as to our proper role. Negative public perception, adverse publicitypublicity, or negative comments in social media, including as a result of actions taken by companies we acquire before acquisition, could damage our reputation,reputation or harm our relationships with regulators and the communities in which we operate,operate if we do not, or are not perceived to, adequately address these issues. Any harm to our reputation could impact employeesemployee engagement and retention and the willingness of clients and Carriers to do business with us. In addition, there exists certain negative sentiment about some individuals and government institutions related to corporate responsibility and stakeholder interests, and we may also face scrutiny, reputational risk, lawsuitslawsuits, or market access restrictions from these parties regarding these initiatives.

In 2024, we released a report on our corporate responsibility and stakeholder interest activities that incorporates the guidelines of the Sustainability Accounting Standards Board (SASB) and our own assessments and priorities. Over time, weWe expect to expandcontinue ourto publicmake disclosuresimilar disclosures in thesethe areas.future. It is possible that stakeholders may not be satisfied with our corporate responsibility and stakeholder interest practices or the speed of their adoption. Actual or perceived shortcomings with respect to such initiatives and reporting could negatively impact our business. We could also incur additional costs and require additional resources to monitor, report, and comply with various corporate responsibility and stakeholder interest practices.

•Net income increaseddecreased by $25.4$4.7 million from 20232024 to $49.1$44.5 million, or 16%12% of total revenues

•Policies in Force increased 13%14% from December 31, 20232024 to 1,674,0001.9 million at December 31, 2024.2025.

•Continued penetration of Franchisees into existing markets. We will continue to market actively for new franchises in our established markets, which represent over 98%97% 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.

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

•New Business Royalty Fees - predictable based on franchise agent count and consistent ramp-up of franchises, but lower margin than Renewal Royalty Fees because the Company only receives a royalty fee of 20% on the commissions paid by the Carrier in the first term of every policy and higher back-office costs associated with policies in their first term. This revenue stream has predictably converted into higher-margin Renewal Royalty Fees historically, and we expect this to continue moving forward.

•Initial Franchise Fees - Cost Recovery Revenue stream charged one time per franchise unit that covers the Company's costs to recruit, train, onboard,and onboard the franchisee, and to provide ongoing support over the life of the franchise for the first year.agreement. These fees are fully earned and non-refundable when a franchise attends our initial training and are recognized in revenue over the life of the franchise agreement.

The Company's primary source of revenue is through the placement of insurance policies. We are paid a percentage of the premium from the Carriers in the form of New Business Commissions and, in states which allow it, we charge Agency Fees for the placement of the policy. For policies placed through franchise sales, we receive 20% of the commissions and fees received as New Business Royalties during the first term of the policy. All clients are serviced by our world-class service centers, allowing for predictable retention of our Book of Business,Business. whichClient hasretention historicallywas been85% 84%.as of December 31, 2025. All commissions received in corporate sales after the first term of the policy are recognized as Renewal Commissions, which are higher margin due to lower commissions and servicing costs. For all policies that renew related to franchise sales, we receive as Renewal Royalty Fees 50% of the commissions received from the Carrier, creating a mechanical increase in revenue of 150% in the first renewal term. Renewal Royalty Fees are higher margin compared to New Business Royalty Fees due to lower servicing costs on higher revenue. Because of the lower royalty fees on New Business Commissions as compared to Renewal Commissions, and because we are placing an increasing percentage of Total Written Premium in franchise sales, Core Revenue growth will lag that of Total Written Premium.

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

With certain Carriers, the Company has the opportunity to earn additional revenue in the form of Contingent Commissions, typically based on the volume, growth, and loss ratioratios of the business placed with the select Carriers. The Contingent Commissions are extremely difficult to predict in any given period and can vary greatly from year to year. Although the Company can control the amount of business placed with the Carriers, loss ratios depend on many factors that are outside of our control, such as weather events and Carrier underwriting accuracy. The Company estimates the amount to be received during the period over which the Contingent Commissions are earned.

Contingent Commissions can vary significantly from year-to-year and should be viewed over several years. Since 2022,2023, revenue from Contingent Commissions have historicallyhas represented approximately 0.54%0.71% of Total Written Premium at year-end. Most of our Contingent Commissions are earned in the year prior to when they are received. For the year ended December 31, 2022, $7.7 million of Contingent Commissions were earned (below our historical average as a percentage of premium), of which $7.4 million was still receivable at December 31, 2022. For the year ended December 31, 2023, $13.7 million of Contingent Commissions were earned (below our historical average as a percentage of premium), of which $6.9 million was still receivable at December 31, 2023. For the year ended December 31, 2024, $31.4 million of Contingent Commissions were earned (above our historical average as a percentage of premium), of which $25.5 million was still receivable at December 31, 2024. For the year ended December 31, 2025, $38.4 million of Contingent Commissions were earned (above our historical average as a percentage of premium), of which $29.1 million was still receivable at December 31, 2025.

Due to our organic-focused growth strategy, virtually all of our investments in future growth are in people and technology. The majority of our investments in people, such as in sales and service functions, are not capitalizable and are recognized immediately on our statement of operations, while investments in software are capitalized as intangible assets and recognized as expense over the useful life of the software.

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

General and administrative expenses. General and administrative expenses include technology, travel, accounting,professional legalservices, marketing and otheradvertising, professional fees, placement fees, office expenses,occupancy, depreciation and other costs associated with our operations. Our occupancy-related costs and professional services expenses, in particular, generally increase or decrease in relative proportion to the number of our employees and the overall size and scale of our business operations.

Net Promoter Score (NPS) is calculated based on a single question: “How likely are you to refer Goosehead Insurance to a friend, family member or colleague?” Clients that respond with a 6 or below are Detractors, with a 7 or 8 are Passives, and with a 9 or 10 are Promoters. NPS is calculated by subtracting the percentage of Detractors from the percentage of Promoters. For example, if 50% of respondents were Promoters and 10% were Detractors, NPS is a 40. NPS is a useful gauge of the loyalty of client relationships and can be compared across companies and industries. NPS is calculated on a trailing twelve-month basis.

NPS has decreased modestly to 8977 as of December 31, 20242025 from 9289 at December 31, 2023, primarily driven by rapid premium increases offset by our service team's consistent delivery.2024.

Client Retention decreasedincreased modestlyto 85% at December 31, 2025 when compared to 84% at December 31, 20242024, whenreflecting comparedcontinued to 86% at December 31, 2023, impacted modestlyexecution by premium rate increases yet supported by theour service team’steams continued focus onin delivering highly differentiated service levels.levels and moderating premium rate increases. Our retention rate is even stronger on a premium basis, driven from increases in premium taken by our Carriers and additional coverages sold by our sales agents. In 2024,2025, we retained 98%90% of the premiums we distributed in 2023,2024, a decrease from premium retention in 20232024 of 101%.98%.

For the year ended December 31, 2024,2025, New Business Revenue grew 9%15% to $59.9$68.5 million, from $54.8$59.9 million for the year ended December 31, 2023.2024. Growth in New Business Revenue is primarily attributable to increases in the number of sales agents, increasedgrowth Newin BusinessFranchise Production per Agency,productivity, and rising premium rates.

Any diminished capacity of Carriers to place new business (including as a result of the recent2025 wildfires in Southern CaliforniaCalifornia, andsevere hurricanesfloods in FloridaCentral Texas, or other natural disasters) could slow the growth of our New Business Revenue in the future.

For the year ended December 31, 2024,2025, Renewal Revenue grew 20%17% to $213.9$249.4 million, from $178.3$213.9 million for the year ended December 31, 2023.2024. Growth in Renewal Revenue was driven primarily by an increase in the number of policies in a renewal term assisted by Client Retention of 84%85% at December 31, 2024,2025, and premium rate increases over the prior year. AsThe ourincrease agent force matures,during the year ended December 31, 2025 also reflects the release of the constraint on certain variable consideration related to policies theyplaced wroteand made effective in priorprevious years begin to convert from New Business Revenue to more profitable Renewal Revenue.periods.

Continued declines in client retention caused by increasesIncreases in premium rates may continue to exert pressure on client retention and could slow the growth of our Renewal Revenue in the future.

Core Revenue increased by $40.7$44.2 million, or 17%,16%, to $317.9 million for the year ended December 31, 2025 from $273.7 million for the year ended December 31, 2024 from $233.0 million for the year ended December 31, 2023.2024. The primary drivers of the increase from December 31, 20232024 to December 31, 20242025 are an increase in policies in their renewal term, assisted by Client Retention of 85% at December 31, 2025; the release of the constraint on certain variable consideration related to policies placed and made effective in previous periods; more new policies written driven by increases in the number of sales agents and increased New Business Production per Agency, an increasegrowth in policiesFranchise in the renewal term assisted by client retention of 84%,productivity; and rising premium rates.

Cost Recovery Revenue decreased by $5.1$1.3 million, or 40%,17%, to $6.3 million for the year ended December 31, 2025 from $7.6 million for the year ended December 31, 2024 from $12.7 million for the year ended December 31, 2023.2024. The primary driverdrivers of the decrease waswere a decrease in total franchises and fewer franchise terminations ofduring franchises,the whichperiod, resultedresulting in less accelerated recognitionacceleration of initial franchise fee revenue.

Ancillary Revenue increased by $17.6$7.9 million, or 113%,24%, to $41.1 million for the year ended December 31, 2025 from $33.2 million for the year ended December 31, 2024 from $15.6 million for the year ended December 31, 2023.2024. The primary drivers of the increase from December 31, 20232024 to December 31, 20242025 were improvedan loss ratios as well as growthincrease in Total Written PremiumsPremium leadingand toreceiving attainingand higherqualifying for additional Contingent Commissions.Commissions, assisted by improved loss ratios.

Adjusted EBITDA increased by $30.1$13.7 million, or 43%,14%, to $113.6 million for the year ended December 31, 2025, from $99.9 million for the year ended December 31, 2024, from $69.8 million for the year ended December 31, 2023, driven by a 17%16% increase in Core RevenueRevenue, witha slower$7.0 million increase in high-margin Contingent Commissions, partially offset by growth of 13%19% in employee compensation and benefits excluding equity-based compensation and of 14%15% in general and administrative expenses excluding impairmentimpairment. asAdditionally, wellthe asincrease for the year ended December 31, 2025 included $4.0 million of Renewal Revenues recognized due to the release of a $17.6constraint millionon increasecertain variable consideration related to policies placed and made effective in high-marginprevious Contingent Commissions.periods.

For the year ended December 31, 2024,2025, Adjusted EBITDA Margin was 32%31% compared to 27%32% for the year ended December 31, 2023.2024. The Adjusted EBITDA margin increasedecrease came fromas a 17% increase in Core Revenue with slower growthresult of 13% in employee compensation and benefitsbenefits, excluding equity-based compensationcompensation, andgrowing offaster 14%than intotal general and administrative expenses excluding impairment as well as a $17.6 million increase in high-margin Contingent Commissions.revenue.

(1) Net Income Margin is calculated as Net Income divided by Total Revenue ($44,451 / $365,304), ($49,113 / $314,505), and ($23,696 / $261,276), and ($2,630 / $209,390) for the years ended December 31, 2025, 2024, and 2023, and 2022.respectively.

(2) Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by Total Revenue excluding other non-operating items ($113,599 / $365,304), ($99,911 / $314,505), and ($69,817 /$261,276) for the yearyears ended December 31, 2025, 2024, ($69,817 / $261,276) for the year ended December 31,and 2023, and ($36,654 /$209,390) for the year ended December 31, 2022.respectively.

(1) Calculated as equity-based compensation divided by the sum of the weighted average number of shares of Class A common stock and Class B common stock outstanding during the period 2025 - [$23.4 million / ( 25.0 million + 12.2 million )] 2024 - [ $28.0 million / ( 24.7 million + 12.7 million )] 2023 - [ $24.0 million / ( 23.9 million + 13.8 million )] 2022 - [ $19.6 million / ( 21.0 million + 16.2 million )] (2) Calculated as impairment expenseand other gains and losses divided by the sum of the weighted average number of shares of Class A common stock and Class B common stock [ $4.5 million / ( 25.0 million + 12.2 million )] for the year ended December 31, 2025, [ $0.3 million / ( 24.7 million + 12.7 million )] for the year ended December 31, 20242024, and [ $3.6 million/ ( 23.9 million + 13.8 million )]. No impairment was recorded for the year ended December 31, 2022.2023.

Renewal Commissions increased by $4.2$3.7 million, or 6%,5%, to $78.6 million for the year ended December 31, 2025 from $74.9 million for the year ended December 31, 2024 from $70.7 million for the year ended December 31, 2023.2024. This increase is primarily attributable to the recognition of $3.0 million due to the release of the constraint on certain variable consideration related to policies placed and made effective in previous periods as well as an increase in the number of policies in the renewal term from December 31, 20232024 to December 31, 2024,2025, assisted by client retention of 84%,85% and premium rate increases.

New Business Commissions increased by $1.2$3.4 million, or 5%,14%, to $28.0 million for the year ended December 31, 2025 from $24.6 million for the year ended December 31, 2024 from $23.4 million for the year ended December 31, 2023.2024. This increase in New Business Commissions was primarily attributable to an increase in total sales agent head count to 489 at December 31, 2025, from 417 at December 31, 2024, from 300 at December 31, 2023, a 39%17% increase. Revenue from Agency Fees decreasedincreased by $0.1$2.3 million, or 1%,28%, to $10.4 million for the year ended December 31, 2025 from $8.1 million for the year ended December 31, 2024 from $8.2 million for the year ended December 31, 2023.2024. This decreaseincrease in Agency Fees was primarily attributable to slight decreasesincreases in boththe average fee charged as well as an increase in the percentagenumber of policies written where an agency fee was charged and the average amount of an agency fee charge.charged.

Revenue from Contingent Commissions increased by $17.6$7.0 million, or 128%,22%, to $38.4 million for the year ended December 31, 2025, from $31.4 million for the year ended December 31, 2024, from $13.7 million for the year ended December 31, 2023.2024. The increase is primarily attributable to growth in totalTotal writtenWritten premiumsPremium as well as receiving and qualifying for additional Contingent Commissions.

Revenue from Renewal Royalty Fees increased by $31.4$31.8 million, or 29%,23%, to $138.9$170.8 million, for the year ended December 31, 20242025 from $107.5$138.9 million for the year ended December 31, 2023.2024. The increase in revenue from Renewal Royalty Fees was primarily attributable to an increase in the number of policies in the renewal term from December 31, 20232024 to December 31, 2024,2025, assisted by client retention of 84%,85% and premium rate increases. The increase was also impacted by the recognition of $1.0 million due to the release of the constraint on certain variable consideration related to policies placed and made effective in previous periods.

Revenue from New Business Royalty Fees increased by $4.0$3.0 million, or 17%,11%, to $30.2 million for the year ended December 31, 2025 from $27.1 million for the year ended December 31, 2024 from $23.2 million for the year ended December 31, 2023.2024. The increase in revenue from New Business Royalty Fees was driven primarily by an increase in Newthe Businessnumber Productionof perfranchise Agencyagents, an increase in Franchise productivity, and rising premium rates.

Initial Franchise Fee revenue decreased approximatelyby $4.6$1.0 million, or 41%,15%, to $5.6 million for the year ended December 31, 2025 from $6.6 million for the year ended December 31, 2024 from $11.2 million for the year ended December 31, 2023.2024. The primary driverdrivers of the decrease in Initial Franchise Fees waswere a decrease in terminationstotal franchises and lower turnover of franchises,franchises during the period, which reduced theavoids accelerated recognition of initialInitial franchiseFranchise feeFees revenue.for terminated franchises.

Employee compensation and benefits expenses increased by $20.3$23.4 million, or 13%,14%, to $196.4 million for 2025 from $172.9 million for 20242024. fromThe $152.6 million for 2023. Thisincrease was primarily related to investments in corporate producers and our service and technology functions, andpartially increasesoffset by a decrease in equity-based compensation of 17% related to additional stock options granted during 2024.compensation.

General and administrative expenses increased by $5.0$14.3 million, or 8%,21%, to $81.4 million for 2025 from $67.1 million for 2024 from $62.1 million for 2023.2024. This increase was primarily attributable to increasedincreases spendingin spend on softwaretechnology offsetand byprofessional aservices decreaseas well as an increase of $4.3 million in asset impairment charges.

Interest expensesexpense increased by $0.8$16.5 million, or 12%,224%, to $23.8 million for 2025 from $7.3 million for 2024 from $6.6 million for 2023.2024. This increase is attributable to an increase in total borrowings outstanding.

Other income (expense) consists of interest earned on cash deposits, loss on debt extinguishment, debt modification expense, and operating remeasurements of our tax receivable agreement liability and interest income.liability. Other income (expense) decreasedincreased by $7.1$7.3 million to $0.2 million for 2024 to $(7.1) million,2025, primarily due to remeasurements of our tax receivable agreement liability during 2024 due to an increaseincreases in theour effective tax rate resultingas fromwe changesidentified in state apportionment and relatedadditional state filing requirements, offset by interest income generated by cash held in interest-bearing checking accounts.requirements.

Tax expense (benefit) decreasedincreased by $5.1$8.8 million, or 190%,365%, to $(2.4)$6.4 million expense for 20242025 from $2.7$2.4 million benefit for 2023.2024. This decreaseincrease is primarily attributable to the increase in income before taxes during 2025 and the benefit in 2024 attributable to the remeasurement of our deferred tax impactassets ofdue changesto increases in stateour apportionmenteffective andtax relatedrate as we identified additional state filing requirements.

We have managed our historical liquidity and capital requirements primarily through the receipt of revenues from our corporate and franchise sales. Our primary cash flow activities involve: (1) generating cash flow from Commissions and Fees, which largely includes New Business Commissions, Renewal Commissions and Agency Fees; (2) generating cash flow from Franchise Revenue operations, which largely includes Royalty Fees and Initial Franchise Fees; (3) borrowings, interest payments and repayments under our credit agreement; and (4) issuing shares of Class A common stock. As of December 31, 2024,2025, our unrestricted cash and cash equivalents, and restricted cash was $58.0$37.9 million. We have used cash flow from operations primarily to pay compensation and related expenses; general, administrative and other expenses; andinvestments in strategic technologies; debt service.service; special dividends, share repurchases, and distributions to our owners.

Net cash provided by operating activities was $71.5$91.8 million for 20242025 as compared to net cash provided by operating activities of $50.8$71.5 million for 2023.2024. ThisThe increase in net cash provided by operating activities was primarily attributable to a $25.4 millionan increase in netrevenues income,of with$50.8 anmillion, $(15.0)including millionimproved adjustmentcash due to a non-cash losscollections on the remeasurement of our tax receivable agreement liability,commissions and aagency $10.8fees. millionThis lowerincrease decrease in our contract liabilities driven by fewer franchise terminations in 2024. These increases werewas partially offset by a $19.9$37.5 million increase in commissionsoperating and agency fees receivable,expenses, which isincluded primarilynoncash relatedimpairment toexpense anof $4.7 million. Operating activities also reflected a $9.6 million operating increase in contingentour commissionsdeferred receivable.tax assets.

Net cash used for business investment activities was $12.4$23.5 million for 20242025 as compared to net cash used for business investment activities of $19.2$12.4 million for 2023.2024. This decreaseincrease in net cash used in business investment activities was primarily attributable to a $6.9$4.9 million decreaseincrease in purchases of books of business and a $3.5$4.7 million decreaseincrease in cash purchases of property and equipment offset by a $3.5 million increase in cash paid for software development.equipment.

Net cash used for financing activities was $45.2$88.3 million for 20242025 as compared to net cash used for financing activities of $18.0$45.2 million for 2023.2024. This increase in net cash used for financing activities was primarily driven by repurchasesissuance of oura Class A common stock for $63.2$300.0 million andterm aloan, $5.4which millionwas increaseused into tax receivable agreement payments, offset by new borrowings underrepay our previous term loan of $25.0$93.1 million,million and fund a $7.5special milliondistribution decreaseand individend paymentsof on$205.0 ourmillion. termWe loan due to an additional $10 million principal paymentalso made inshare 2023repurchases offsetduring bythe higheryear quarterlyof payments$81.7 in 2024, and a $6.1 million decrease in member distributions.million.

Our primary liquidity needs comprise cash to (1) provide capital to facilitate the organic growth of our business, (2) pay operating expenses, including cash compensation to our employees, (3) make payments under the tax receivable agreement, (4) pay interest and principal due on borrowings under our Credit Agreement (5) pay income taxes, (6) repurchase shares under our Share Repurchase Program, and (7) pay dividends when deemed advisable by our board of directors, pay dividends.directors.

(2)The Company furtherentered amendedinto itsa new credit facilitiesagreement on AprilJanuary 24,8, 20242025 increasingfor a $300 million term loan borrowingsand bya $25$75 million and increasing the revolving credit facility by $25 million to $75 million,facility, of which nothing was drawn on the revolving credit facility as of December 31, 2024.2025. See "Note 9. Debt" under Part II, Item 8 of this Form 10-K.

Financial Highlights for the FirstSecond Quarter of 2026:

•Total revenue increased 23%21% from the firstsecond quarter of 2025 to $93.1$113.4 million

•Core Revenue* increased by 15%10% from the firstsecond quarter of 2025 to $79.5$95.6 million

•Net income increased by $5.4$8.7 million from the firstsecond quarter of 2025 to $8.0$17.0 million, or 9%15% of total revenues

•Adjusted EBITDA* increased 57%30% from the firstsecond quarter of 2025 to $24.4$37.9 million, or 26%33% of total revenues

•Basic and diluted earnings per share were $0.20$0.42 and $0.19,$0.41, respectively, and Adjusted EPS* was $0.37$0.64 per share for the three months ended MarchJune 31,30, 2026

•Policies in Force increased 14%15% from MarchJune 31,30, 2025 to 1,973,000approximately 2.1 million at MarchJune 31,30, 2026

•Corporate sales headcount increased 13%22% from MarchJune 31,30, 2025 to 482583 at MarchJune 31,30, 2026 ◦As of MarchJune 31,30, 2026, 275323 of these Corporate sales agents had less than one year of tenure and 207260 had greater than one year of tenure

•Total operating franchises decreased 13%16% from MarchJune 31,30, 2025 to 956898 at MarchJune 31,30, 2026 ◦As of MarchJune 31,30, 2026, 7769 operating Franchisees had less than one year of tenure and 879829 operating Franchisees had greater than one year of tenure

•Total Franchise agents increased 3%5% from MarchJune 31,30, 2025 to 2,1502,190 at MarchJune 31,30, 2026

ForDuring the three months ended MarchJune 31,30, 2026, total revenue increased by 23%21% to $93.1$113.4 million from $75.6$94.0 million for the three months ended MarchJune 31,30, 2025. For the six months ended June 30, 2026, total revenue increased by 22% to $206.5 million from $169.6 million for the six months ended June 30, 2025. Total Written Premium, which we believe is the best leading indicator of future revenue, increased 13% for the three months ended March 31, 202614% to $1.1 billion from $1.0$1.34 billion for the three months ended MarchJune 31,30, 2026 from $1.18 billion for the three months ended June 30, 2025. Total Written Premium increased 13% for the six months ended June 30, 2026 to $2.47 billion from $2.18 billion for the six months ended June 30, 2025. Total Written Premiums drive our current and future Core Revenue and give us potential opportunities to earn Ancillary Revenue in the form of Contingent Commissions.

•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.

The following is a discussion of our consolidated results of operations for each of the three and six months ended MarchJune 31,30, 2026 and 2025. This information is derived from our accompanying condensed consolidated financial statements prepared in accordance with GAAP.

For the three months ended MarchJune 31,30, 2026 revenuetotal revenues increased 23%21% to $93.1$113.4 million from $75.6$94.0 million for the three months ended MarchJune 31,30, 2025. For the six months ended June 30, 2026, total revenues increased 22% to $206.5 million from $169.6 million for the six months ended June 30, 2025.

Revenue from ContingentRenewal Commissions increaseddecreased by $6.2$2.1 millionmillion, or 9%, to $10.7$21.0 million for the three months ended MarchJune 31,30, 2026 from $4.5$23.1 million for the three months ended MarchJune 31,30, 2025. TheRenewal increaseCommissions decreased by $0.9 million, or 2%, to $39.2 million for the six months ended June 30, 2026 from $40.1 million for the six months ended June 30, 2025.The decrease during the three and six months ended MarchJune 31,30, 2026 was primarily attributabledriven toby changes$3.0 million recognized in the estimatedprior transactionyear pricefrom forthe release of the constraint on certain variable consideration underrelated contingentto commissionpolicies arrangements which was previously constrainedplaced and recognizedmade effective in previous periods, partially offset by an increase in the number of policies in their renewal term as compared to the uncertaintyprior-year was resolved.period.

Revenue from New BusinessRenewal Royalty Fees increased by $1.0$7.1 million, or 14%,16%, to $7.9$52.5 million for the three months ended MarchJune 31,30, 2026 from $6.9$45.4 million for the three months ended MarchJune 31,30, 2025. Renewal Royalty Fees increased by $13.5 million, or 16%, to $96.1 million for the six months ended June 30, 2026 from $82.6 million for the six months ended June 30, 2025. The increase in revenue from New BusinessRenewal Royalty Fees during the three and six months ended MarchJune 31,30, 2026 was primarily attributable to an increase in the number of franchisepolicies agentsin the renewal term, assisted by client retention of 86%, partially offset by $1.0 million recognized in the prior year from the release of the constraint on certain variable consideration related to policies placed and anmade increaseeffective in franchiseprevious productivity.periods.

RevenueNew fromBusiness Initial FranchiseRoyalty Fees increased atby $0.3$1.6 million, or 20%, to $1.6$9.4 million for the three months ended MarchJune 31,30, 2026 from $1.3$7.8 million for the three months ended MarchJune 31,30, 2025. New Business Royalty Fees increased by $2.5 million, or 17%, to $17.3 million for the six months ended June 30, 2026 from $14.7 million for the six months ended June 30, 2025. The increase in RevenueNew fromBusiness Initial FranchiseRoyalty Fees during the three and six months ended MarchJune 31,30, 2026 was primarily attributable to higheran turnoverincrease in the number of franchisesfranchise duringagents theand period,an whichincrease acceleratesin recognitionfranchise of Initial Franchise Fees for franchises that were terminated or transferred during the period.productivity.

Interest income decreased by $0.1 million, or 38%,47%, to $0.1 million for the three months ended MarchJune 31,30, 2026 from $0.2 million for the three months ended MarchJune 31,30, 2025. Interest income decreased by $0.2 million, or 42%, to $0.2 million for the six months ended June 30, 2026 from $0.4 million for the six months ended June 30, 2025. The decrease in interest income during the three and six months ended MarchJune 31,30, 2026 was primarily attributable to fewer franchises operating under the payment plan option during the period.

Employee compensation and benefits expenses increased by $2.2$3.9 million, or 5%,8%, to $50.5$54.3 million for the three months ended MarchJune 31,30, 2026 from $48.3$50.4 million for the three months ended MarchJune 31,30, 2025. Employee compensation and benefits increased by $6.1 million, or 6%, to $104.9 million for the six months ended June 30, 2026 from $98.7 million for the six months ended June 30, 2025. The increase in employeeEmployee compensation and benefits during the three and six months ended MarchJune 31,30, 2026 was primarily related to investments in corporate producers and technology functions.talent.

General and administrative expenses increased by $6.4$3.8 million, or 37%,15%, to $24.0$28.4 million for the three months ended MarchJune 31,30, 2026 from $17.6$24.6 million for the three months ended MarchJune 31,30, 2025. General and administrative expenses increased by $10.2 million, or 24%, to $52.4 million for the six months ended June 30, 2026 from $42.2 million for the six months ended June 30, 2025. The increase was primarily attributable to increased spending on professional services and technologies,technologies. includingAdditionally, AIduring technologies.the three and six months ended June 30, 2026, we incurred $3.1 million of exit and disposal costs for early termination of a telecommunications contract while during the three and six months ended June 30, 2025 we incurred $4.7 million in impairment charges.

Depreciation and amortization increased by $0.5$0.8 million, or 20%,27%, to $3.2$3.5 million for the three months ended MarchJune 31,30, 2026 from $2.7$2.8 million for the three months ended MarchJune 31,30, 2025. ThisDepreciation and amortization increased by $1.3 million, or 24%, to $6.8 million for the six months ended June 30, 2026 from $5.5 million for the six months ended June 30, 2025. The increase during the three and six months ended MarchJune 31,30, 2026 was primarily attributable to increased spending on software development since MarchJune 31,30, 2025.

Interest expense decreased by $0.4$0.6 million, or 6%,9%, for the three months ended MarchJune 31,30, 2026 to $5.5$5.7 million from $5.8$6.3 million for the three months ended MarchJune 31,30, 2025. Interest expense decreased $0.9 million, or 8%, to $11.2 million for the six months ended June 30, 2026 from $12.1 million for the six months ended June 30, 2025. The primary driver of the decrease during the three and six months ended MarchJune 31,30, 2026 was our entering into Amendment No. 1 to the 2025 Credit Agreement on July 9, 2025, which reduced the applicable interest rate on our term loan borrowings under the facility by 0.50%.

Other income consists of interest earned on cash deposits, loss on debt extinguishment, debt modification expense, interest expense on current TRA payments, and remeasurements of our TRA liability. Other income increaseddecreased by $0.1$0.6 million for the three months ended MarchJune 31,30, 2026, primarily related to a decrease in interest earned on cash deposits. Other income decreased by $0.5 million for the six months ended June 30, 2026 primarily attributable to a decrease in interest earned on cash deposits, partially offset by an increase due to a loss on debt extinguishment in the threesix months ended MarchJune 31,30, 2025 related to the Company's repayment of the Second Amended and Restated Credit Agreement, offset by a decrease in interest earned on cash deposits.Agreement.

Tax expense (benefit)

Tax expense (benefit) increased by $3.4$2.2 million for the three months ended MarchJune 31,30, 2026, to a tax expense of $1.7$4.1 million from a tax (benefit) of $(1.7)$1.9 million for the three months ended MarchJune 31,30, 2025. Tax expense increased by $5.7 million for the six months ended June 30, 2026 to an expense of $5.9 million from a benefit of $0.2 million for the six months ended June 30, 2025. The increase in tax expense (benefit) for the three and six months ended MarchJune 31,30, 2026 was primarily attributable to increasesan increase in income before taxes and a decrease in excess tax benefits recognized on stock option exercises as compared to the threesix months ended MarchJune 31,30, 2025.

The following tables show Total Written Premium placed by corporate agents and franchisees for the three and six months ended MarchJune 31,30, 2026 and 2025 (in thousands).

As of MarchJune 31,30, 2026, we had 2.02.1 million Policies in Force compared to 1.9 million as of December 31, 2025 and 1.71.8 million as of MarchJune 31,30, 2025, representing aan 4%8% and a 14%15% increase, respectively.

Client Retention of 85%86% at MarchJune 31,30, 2026 increased when compared to 85% at December 31, 2025, and 84% at MarchJune 31,30, 2025 assisted by moderating premium rate increases. For the trailing twelve months ended MarchJune 31,30, 2026, we retained 89%88% of the premiums we distributed in the trailing twelve months ended MarchJune 31,30, 2025, which decreased from the 90% premium retention at December 31, 2025. The decline in premium retention is primarily attributable to moderating premium rate increases offset by increasing client retention. 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.

For the three months ended MarchJune 31,30, 2026, New Business Revenue grew 19%21% to $17.7$22.1 million, from $14.9$18.3 million for the three months ended MarchJune 31,30, 2025. For the six months ended June 30, 2026, New Business Revenue grew 20% to $39.8 million, from $33.2 million for the six months ended June 30, 2025. Growth in New Business Revenue during the three and six months ended MarchJune 31,30, 2026 was primarily driven by an increase in the number of Corporate and Franchise sales agents and growth in Corporate and Franchise productivity.

For the three months ended MarchJune 31,30, 2026, Renewal Revenue grew 14%7% to $61.8$73.5 million, from $54.2$68.5 million for the three months ended MarchJune 31,30, 2025. For the six months ended June 30, 2026, Renewal Revenue grew 10% to $135.3 million, from $122.7 million for the six months ended June 30, 2025. Growth in Renewal Revenue during the three and six months ended MarchJune 31,30, 2026 was driven by an increase in the number of policies in the renewal term assisted by Client Retention of 85%86% at MarchJune 31,30, 2026.2026, and partially offset by the recognition of $4.0 million in the prior-year period due to the release of the constraint on certain variable consideration related to policies placed and made effective in previous periods.

Core Revenue increased by $10.4$8.8 million, or 15%,10%, to $79.5$95.6 million for the three months ended MarchJune 31,30, 2026 from $69.1$86.8 million for the three months ended MarchJune 31,30, 2025. Core Revenue increased by $19.2 million, or 12%, to $175.1 million for the six months ended June 30, 2026 from $155.9 million for the six months ended June 30, 2025. The primary drivers of the increase during each of the three and six months ended MarchJune 31,30, 2026 were an increase in policies in their renewal term, assisted by Client Retention of 85%86%; more new policies written, driven by an increase in the number of Corporate and Franchise sales agents and growth in Franchise productivity.productivity; partially offset by the recognition of $3.0 million in renewal commissions and $1.0 million of renewal royalty fees in the prior-year period due to the release of the constraint on certain variable consideration related to policies placed and made effective in previous periods.

Cost Recovery Revenue increased by $0.1 million, or 2%, to $1.5 million for the three months ended June 30, 2026 from $1.4 million for the three months ended June 30, 2025. Cost Recovery Revenue increased by $0.2 million, or 13%,8%, to $1.7$3.2 million for the threesix months ended MarchJune 31,30, 2026 from $1.5$3.0 million for the threesix months ended MarchJune 31,30, 2025. The primary driver was an increase in terminations and transfers of franchises, resulting in acceleration of initial franchise fee revenue.

Ancillary Revenue increased by $6.9$10.5 million to $11.9$16.3 million for the three months ended MarchJune 31,30, 2026 from $4.9$5.8 million for the three months ended MarchJune 31,30, 2025. TheAncillary Revenue increased by $17.4 million to $28.2 million for the six months ended June 30, 2026 from $10.7 million for the six months ended June 30, 2025.The increase during the three months ended MarchJune 31,30, 2026 was attributable to an increase in Total Written PremiumPremium, new contingent commission agreements executed during the period, and favorable experience against the recognitionunderlying performance requirements of Contingentsuch Commissionsarrangements such as loss ratios and growth rates. The increase during the six months ended June 30, 2026 was attributable to thean yearincrease endedin DecemberTotal 31,Written 2025,Premium, fornew whichcontingent commission agreements executed during the estimateperiod, favorable experience against the underlying performance requirements of such arrangements such as loss ratios and growth rates, and changes in the estimated transaction price hadfor beenvariable consideration under contingent commission arrangements which was previously constrained and revenue was recognized as the uncertainty was resolved.

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 business performance. Adjusted EBITDA is defined as net income (the most directly comparable GAAP measure) before interest, income taxes, depreciation and amortization, adjusted to exclude equity-based compensation, impairment expense, contract termination costs, and other non-operating items, including, among other things, certain non-cash charges and certain non-recurring or non-operating gains or losses.

Adjusted EBITDA increased by $8.9$8.8 million, or 57%,30%, to $24.4$37.9 million for the three months ended MarchJune 31,30, 2026 from $15.5$29.2 million for the three months ended MarchJune 31,30, 2025. Adjusted EBITDA increased by $17.7 million, or 40%, to $62.4 million for the six months ended June 30, 2026 from $44.7 million for the six months ended June 30, 2025. The primary driver of the increase in Adjusted EBITDA during the three and six months ended MarchJune 31,30, 2026 was growth in total revenue partially offset by an increase in generalinvestments in corporate producers, technology talent, professional services, and administrative expenses excluding impairment expense.technologies.

For the three months ended MarchJune 31,30, 2026, Adjusted EBITDA Margin was 33% compared to 31% for the three months ended June 30, 2025 as a result of growth in total revenue outpacing growth in spending on operating expenses such as growth in corporate producers, technology talent, professional services, and technologies. For the six months ended June 30, 2026, Adjusted EBITDA Margin of 26%30% increased when compared to 21%26% for the threesix months ended MarchJune 31,30, 2025 as a result of total revenue growing at a faster rate than employee compensation and benefits and general and administrative expenses, excluding equity-based compensation, impairment expense, and other non-operating items.

(1) Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by Total Revenue ($24,424$37,948/$93,076$113,389) and ($15,520$29,152/$75,583$94,027) for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by Total Revenue ($62,372/$206,465), and ($44,672/$169,611) for the six months ended June 30, 2026 and 2025, respectively.

The following tables show a reconciliation from basic earnings per share to Adjusted EPS. Note that totals may not sum due to roundingEPS:

(1) Calculated as equity-based compensation divided by sum of weighted average Class A and Class B shares [$6.2$4.8 million/(24.323.7 million + 11.8 million)] for the three months ended June 30, 2026 and [$6.0 million/ (25.2 million + 12.3 million)] for the three months ended June 30, 2025. Calculated as equity-based compensation divided by sum of weighted average Class A and Class B shares [$11.0 million/(24.0 million + 11.9 million)] for the threesix months ended MarchJune 31,30, 2026 and [$6.2$12.3 million/ (24.825.0 million + 12.612.5 million)] for the threesix months ended MarchJune 31,30, 2025.

We have managed our historical liquidity and capital requirements primarily through the receipt of revenues. Our primary cash flow activities involve: (1) generating cash flow from Commissions and Agency Fees, which largely includes New Business Commissions, Renewal Commissions, and Agency Fees; (2) generating cash flow from Franchise Revenues operations, which largely includes Initial Franchise Fees and Royalty Fees; (3) borrowings, interest payments and repayments under our credit agreement; and (4) issuing shares of Class A common stock. As of MarchJune 31,30, 2026, our cash and cash equivalents balance was $25.7$23.7 million. We have used cash flow from operations primarily to pay compensation and related expenses; general, administrative and other expenses; debt service; special dividends; share repurchases; and distributions to our owners.

Net cash provided by operating activities was $22.9$38.8 million for the threesix months ended MarchJune 31,30, 2026 as compared to net cash provided by operating activities of $15.5$44.4 million for the threesix months ended MarchJune 31,30, 2025. This increasedecrease in net cash provided by operating activities was primarily attributable a $5.4$9.5 million decrease related to cash received for commissions and agency fees, a $6.2 million decrease related to receivable from franchisees, and a $4.7 decrease related to impairment, offset by a $14.1 million increase related to net income and an $8.0 million increase related to a reduction in outflows for prepaid expenses.income.