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United States securities and exchange commission logo
October 25, 2023
Mark Jones Jr.
Chief Financial Officer
Goosehead Insurance, Inc.
1500 Solana Blvd.
Building 4, Suite 4500
Westlake, TX 76262
Re: Goosehead
Insurance, Inc.
Form 10-K for
Fiscal Year Ended December 31, 2022
Response dated
October 13, 2023
File No. 001-38466
Dear Mark Jones Jr.:
We have reviewed your October 13, 2023 response to our comment
letter and have the
following comments.
Please respond to this letter within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe a
comment applies to your facts and circumstances, please tell us why in
your response.
After reviewing your response to this letter, we may have
additional comments. Unless
we note otherwise, any references to prior comments are to comments in
our September 18,
2023 letter.
Form 10-K filed February 27, 2023
Company overview, page 5
1. Please refer to prior
comment 1. We note you state in your response that it is difficult to
determine exact
profitability of each agent network (i.e., corporate vs. franchise). We also
note in your June 30,
2023 earnings conference call you state that, As we continue to
launch more corporate
agents into franchises, this creates a near-term trade-off on revenue
growth because of the
differences in revenue recognition but significantly benefits longer-
term revenue and
profitability as the productive life of the agent increases and they
duplicate themselves
through producer hiring. Please clarify the meaning of this
statement for us
specific to the reference to the longer-term profitability of an agent. Also,
to the extent that
there are material differences in the longer-term profitability or margin
in an agent network
(i.e., corporate vs. franchise), please revise your business section in
Mark Jones Jr.
FirstName
GooseheadLastNameMark
Insurance, Inc. Jones Jr.
Comapany
October 25,NameGoosehead
2023 Insurance, Inc.
October
Page 2 25, 2023 Page 2
FirstName LastName
future filings to discuss this.
3. Revenues - Commissions and agency fees, page 79
2. Please refer to prior comment 2. We note your disclosure on page 79
that you earn new
and renewal commissions paid by insurance carriers for the binding of
insurance coverage
and that these commissions are earned at a point in time upon the
effective date of bound
insurance coverage, as no performance obligation exists after coverage
is bound. We also
note disclosure in the critical audit matter on page 69 related to
management s estimates
to constrain renewal commissions. Please clarify for us if renewal
commissions represent
variable consideration, are included in the transaction price and are
fully constrained and
revise your accounting policy disclosure in future filings to more
clearly state this, if true.
If not true, please more clearly tell us how you determined that
renewal commissions are a
separate performance obligation, why you disclose that no performance
obligations exist
after coverage is bound, why renewal commissions are not variable
consideration, and
why they should not be included in the transaction price based on the
guidance in ASC
606-10-05-4 and ASC 606-10-32-5. Please include the guidance you
considered and the
relevant terms of the contract(s) with insurance carriers in making
your accounting
determinations.
3. Please refer to prior comment 2. If true, please tell us how you
determined renewal
commissions should be fully constrained when determining the
transaction price on the
effective date a policy is placed into service. Please tell us how you
considered the
guidance in ASC 606-10-32-11 and 12 in your determination. Also tell
us whether:
any policies automatically renew,
a new policy is signed at each renewal, and
how you considered your disclosure on page 53 that renewal
commissions are highly
predictable, your disclosure on page 57 that client retention was
88% at December
31, 2022 and 89% at December 31, 2021 and disclosure on page 16
that you a 100%
premium retention rate in 2022.
11. Stockholder's equity, page 86
4. Please refer to prior comment 3. Please provide us your calculation of
diluted EPS using
the if-converted method for the years ended 2020, 2021 and 2022, so
that we may better
understand your accounting and diluted EPS calculation. Please include
appropriate detail
and commentary to allow us to understand each adjustment to the
numerator and
denominator.
5. Please refer to prior comment 3. Based on your attribution of net
income to non-
controlling interests (i.e., GF LLC unit holders) and Goosehead
Insurance Inc. in your
statement of operations, it appears that all tax expense (benefit) is
attributed to Class A
common stockholders of Goosehead Insurance Inc. This appears to result
in different
diluted EPS under the if-converted method, assuming conversion of all
GF LLC unit
Mark Jones Jr.
Goosehead Insurance, Inc.
October 25, 2023
Page 3
holders, with no attributed tax expense (benefit), to Class A shares,
which has attributed
tax expense (benefit). Please explain why this structure would not
result in different
diluted EPS.
Please contact William Schroeder at 202-551-3294 or Michael Volley at
202-551-3437 if
you have questions regarding comments on the financial statements and related
matters.
FirstName LastNameMark Jones Jr. Sincerely,
Comapany NameGoosehead Insurance, Inc.
Division of
Corporation Finance
October 25, 2023 Page 3 Office of
Finance
FirstName LastName