• TWFG Announces Third Quarter 2024 Results

    ソース: Nasdaq GlobeNewswire / 12 11 2024 20:07:54   America/New_York

    – Completed IPO in July 2024, raising $192.9 million in net proceeds through the issuance of 12,650,000 shares of Class A common stock at $17.00 per share –
    – Total Written Premium increased 13.0% over the prior year period to $400.1 million –
    – Total Revenue increased 14.5% over the prior year period to $54.6 million –
    – Organic Revenue Growth Rate* of 7.6% –
    – Net Income of $6.9 million –
    – Diluted Earnings Per Share and Adjusted Diluted Earnings Per Share* of $0.08 and $0.15, respectively –
    – Adjusted EBITDA* increased 29.7% over the prior year period to $11.7 million –

    THE WOODLANDS, Texas, Nov. 12, 2024 (GLOBE NEWSWIRE) -- TWFG, Inc. (“TWFG”, the “Company” or “we”) (NASDAQ: TWFG), a high-growth insurance distribution company, today announced results for the third quarter ended September 30, 2024.

    Third Quarter 2024 Highlights

    • Total Written Premium for the quarter increased 13.0% to $400.1 million, compared to $354.1 million in the same period in the prior year
    • Total revenues for the quarter increased 14.5% to $54.6 million, compared to $47.7 million in the same period in the prior year
    • Organic Revenue Growth Rate* for the quarter was 7.6%
    • Net income for the quarter was $6.9 million, compared to $7.6 million in the same period in the prior year
    • Adjusted Net Income* for the quarter decreased 4.0% from the prior year period to $8.3 million, and Adjusted Net Income Margin* for the quarter was 15.3%
    • Adjusted EBITDA* for the quarter increased 29.7% over the prior year period to $11.7 million, and Adjusted EBITDA Margin* for the quarter increased to 21.5% over the prior year period
    • Cash flow from operating activities for the quarter was $11.7 million, compared to $7.4 million in the same period in the prior year
    • Adjusted Free Cash Flow* for the quarter was $11.5 million, compared to $4.6 million in the same period in the prior year

    *Organic Revenue Growth Rate, Adjusted Net Income, Adjusted Net Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Free Cash Flow and Adjusted Diluted Earnings Per Share are non-GAAP measures. Reconciliations of Organic Revenue Growth Rate to total revenue growth rate, Adjusted Net income and Adjusted EBITDA to net income, Adjusted Diluted Earnings Per Share to diluted earnings per share, and Adjusted Free Cash Flow to cash flow from operating activities, the most directly comparable financial measures presented in accordance with GAAP, are outlined in the reconciliation table accompanying this release.

    “Our thoughts and prayers go out to all those impacted by Hurricanes Beryl, Francine, Helene and Milton. Our agents, employees and carrier partners are working hard to help those impacted recover and rebuild,” stated Gordy Bunch, Founder, Chairman, and CEO.

    “Our third quarter results illustrate the resiliency of our agents, carriers, employees, and business model with total revenues increasing by 14.5% over the prior year period and Adjusted EBITDA increasing by 29.7%. We generated 7.6% organic growth and increased our Adjusted EBITDA margin to 21.5%.

    “In addition, our third quarter recruiting efforts continued to outpace our historical growth trends with our agency-in-a-box offering launching 86 new TWFG locations in the quarter. The 86 new agencies opened 13 new states for TWFG Branches in AL, CT, ID, IN, MO, NV, NM, OR, SC, SD, TN, WA and WY which we believe will provide future growth for our business.

    “Finally, I want to remind our fellow stockholders that experienced agents typically take between two to three years to become productive. We do not expect the 100-plus new branches we launched in 2024 to have a significant impact on revenues this year or next, but over the long term we expect the agents we are onboarding in 2024 to contribute meaningfully to our longer-term organic growth.  

    “I want to thank all our dedicated employees who contributed to our positive results this quarter while navigating multiple hurricanes and an IPO.”

    Third Quarter 2024 Results

    For the third quarter of 2024, Total Written Premium was $400.1 million, a 13% increase compared to the same period in the prior year. Revenues were $54.6 million, an increase of 14.5% compared to the same period in the prior year. Organic Revenues, a non-GAAP measure that excludes contingent income, fee income, and other income, for the third quarter of 2024 were $47.3 million compared to $42.8 million in the same period in the prior year. Organic Revenue Growth Rate in the third quarter was 7.6%, driven by strong new business growth, offset by normalizing premium retention and the impact of a change in one of our MGA programs that switched from a commission based on written premium to a flat fee starting in the first quarter of this year, with the greatest impact being felt in the current quarter.

    Total commission expense for the third quarter of 2024 was $30.8 million, a 5.2% decrease from $32.5 million in the same period in the prior year. Commission expenses decreased despite 9.7% growth in commission income due to the conversion of nine branches to corporate branches, which transitioned our non-employee commission-based colleagues to employees. Upon conversion, these corporate branch employees received salaries, employee benefits, and bonuses for services rendered instead of commissions. Salaries and employee benefits for the third quarter of 2024 were $8.3 million, up 146% from $3.4 million in the same period in the prior year. Approximately $1.0 million of the increase was due to equity compensation expense, while $3.9 million of the increase was due to the branch conversions and 2023 corporate branch acquisitions, along with the growth in the business. Other administrative expenses for the third quarter of 2024 were $4.8 million, a 71.2% increase compared to the same period in the prior year. The increase was due to growth in the business, increase in corporate branches and the absorption of public company costs.

    For the third quarter of 2024, net income was $6.9 million, and net income margin was 12.6%, compared to $7.6 million of net income and net income margin of 15.9%, in the same period in the prior year. Adjusted Net Income for the third quarter of 2024 was $8.3 million, compared to $8.7 million in the same period in the prior year. Adjusted Net Income Margin for the third quarter was 15.3%, compared to 18.2% in the same period in the prior year.

    Adjusted EBITDA for the third quarter was $11.7 million, an increase of 29.7% over the prior year period. Our Adjusted EBITDA Margin was 21.5% in the third quarter of 2024 compared to 19.0% in the same period in the prior year.

    Cash flow from operating activities for the third quarter was $11.7 million, compared to $7.4 million in the same period in the prior year.

    Adjusted Free Cash Flow for the third quarter of 2024 was $11.5 million, compared to $4.6 million in the same period in the prior year.

    Liquidity and Capital Resources

    As of September 30, 2024, the Company had cash and cash equivalents of $191.2 million. We had $50.0 million unused capacity on our revolving credit facility of $50.0 million as of September 30, 2024. The total outstanding term notes payable balance was $6.4 million as of September 30, 2024.

    Adjusted Net Income Calculation Methodology

    Since the second quarter of 2024, we have used the revised calculation methodology for Adjusted Net Income, which includes amortization expenses among the add-back adjustments to our net income when calculating our Adjusted Net Income. Our legacy calculation methodology reflected the impact of intangible asset amortization as a reduction to our Adjusted Net Income. The revised calculation methodology excludes the effect of intangible asset amortization when calculating our Adjusted Net Income by reflecting it among the add-back adjustments to our net income. We believe that the revised calculation of Adjusted Net Income is more consistent with the method and presentation used by most of our peers and will allow management to better evaluate our performance relative to our peer companies. We believe that the revised calculation more effectively represents what our stakeholders consider useful in assessing our performance.

    Conference Call Information

    TWFG will host a conference call and webcast tomorrow at 9:00 AM ET to discuss these results.

    To access the call by phone, participants should register at this link, where they will be provided with the dial in details. A live webcast of the conference call will also be available on TWFG’s investor relations website at investors.twfg.com. A webcast replay of the call will be available at investors.twfg.com for one year following the call.

    About TWFG

    TWFG (NASDAQ: TWFG) is a high-growth, independent distribution platform for personal and commercial insurance in the United States and represents hundreds of insurance carriers that underwrite personal lines and commercial lines risks. For more information, please visit twfg.com.

    Forward-Looking Statements

    This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve substantial risks and uncertainties. All statements, other than statements of historical fact included in this report, are forward-looking statements. Forward-looking statements give our current expectations relating to our financial condition, results of operations, plans, objectives, future performance, and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed under the captions entitled “Risk factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our prospectus (the “IPO Prospectus”) relating to our Registration Statement on Form S-1, as amended (Registration No. 333-280439), filed with the U.S. Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933, as amended, and in our other filings with the SEC. You should specifically consider the numerous risks outlined under “Risk factors” in the IPO Prospectus.

    Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

    Non-GAAP Financial Measures and Key Performance Indicators

    Non-GAAP Financial Measures

    Organic Revenue, Organic Revenue Growth, Adjusted Net Income, Adjusted Net Income Margin, Adjusted Diluted Earnings Per Share, Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow included in this release are not measures of financial performance in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and should not be considered substitutes for GAAP measures, including revenues (for Organic Revenue and Organic Revenue Growth), net income (for Adjusted Net Income, Adjusted Net Income Margin, Adjusted Diluted Earnings Per Share, Adjusted EBITDA and Adjusted EBITDA Margin), and cash flow from operating activities (for Adjusted Free Cash Flow) which we consider to be the most directly comparable GAAP measures. These non-GAAP financial measures have limitations as analytical tools, and when assessing our operating performance, you should not consider these non-GAAP financial measures in isolation or as substitutes for revenues, net income, operating cash flow or other consolidated financial statement data prepared in accordance with GAAP. Other companies may calculate any or all of these non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.

    Organic Revenue. Organic Revenue is total revenue (the most directly comparable GAAP measure) for the relevant period, excluding contingent income, fee income, other income and those revenues generated from acquired businesses with over $0.5 million in annualized revenue that have not reached the twelve-month owned mark.

    Organic Revenue Growth. Organic Revenue Growth is the change in Organic Revenue period-to-period, with prior period results adjusted to include revenues that were excluded in the prior period because the relevant acquired businesses had not reached the twelve-month-owned mark but have reached the twelve-month owned mark in the current period. We believe Organic Revenue Growth is an appropriate measure of operating performance because it eliminates the impact of acquisitions, which affects the comparability of results from period to period.

    Adjusted Net Income. Adjusted Net Income is a supplemental measure of our performance and is defined as net income (the most directly comparable GAAP measure) before amortization, non-recurring or non-operating income and expenses, including equity-based compensation, adjusted to assume a single class of stock (Class A) and assuming noncontrolling interests do not exist. We believe Adjusted Net Income is a useful measure because it adjusts for the after-tax impact of significant one-time, non-recurring items and eliminates the impact of any transactions that do not directly affect what management considers to be our ongoing operating performance in the period. These adjustments generally eliminate the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.

    We are subject to U.S. federal income taxes, in addition to state, and local taxes, with respect to our allocable share of any net taxable income of TWFG Holding Company, LLC. Adjusted Net Income pre-IPO did not reflect adjustments for income taxes since TWFG Holding Company, LLC is a limited liability company and is classified as a partnership for U.S. federal income tax purposes. Post-IPO, the calculation will incorporate the impact of federal and state statutory tax rates on 100% of our adjusted pre-tax income as if the Company owned 100% of TWFG Holding Company, LLC.

    Adjusted Net Income Margin. Adjusted Net Income Margin is Adjusted Net Income divided by total revenues. We believe that Adjusted Net Income Margin is a useful measurement of operating profitability for the same reasons we find Adjusted Net Income useful and also because it provides a period-to-period comparison of our after-tax operating performance.

    Adjusted Diluted Earnings Per Share. Adjusted Diluted Earnings Per Share is Adjusted Net Income divided by diluted shares outstanding after adjusting for the effect of (i) the exchange of 100% of the outstanding Class B common stock of the Company (the “Class B Common Stock”) and Class C common stock of the Company (the “Class C Common Stock”) (together with the related limited liability units in TWFG Holding Company, LLC (the “LLC Units”)) into shares of Class A common stock of the Company (“Class A Common Stock”) and (ii) the vesting of 100% of the unvested equity awards and exchange into shares of Class A Common Stock. This measure does not deduct earnings related to the noncontrolling interests in TWFG Holding Company, LLC for the period prior to July 19, 2024, when we did not own 100% of the business. The most directly comparable GAAP financial metric is diluted earnings per share. We believe Adjusted Diluted Earnings Per Share may be useful to an investor in evaluating our operating performance and efficiency because this measure is widely used by investors to measure a company’s operating performance without regard to items excluded from the calculation of such measure, which can vary substantially from company to company depending upon acquisition activity and capital structure. This measure also eliminates the impact of expenses that do not relate to core business performance, among other factors.

    Adjusted EBITDA. Adjusted EBITDA is a supplemental measure of our performance and is defined as EBITDA adjusted to exclude equity-based compensation and other non-operating items, including, certain nonrecurring or non-operating gains or losses, including equity-based compensation. EBITDA is defined as net income (the most directly comparable GAAP measure) before interest, income taxes, depreciation, and amortization. We believe that Adjusted EBITDA is an appropriate measure of operating performance because it adjusts for significant one-time, non-recurring items and eliminates the ongoing accounting effects of certain capital spending and acquisitions, such as depreciation and amortization, that do not directly affect what management considers to be our ongoing operating performance in the period. These adjustments eliminate the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.

    Adjusted EBITDA Margin. Adjusted EBITDA Margin is Adjusted EBITDA divided by total revenue. We believe that Adjusted EBITDA Margin is a useful measurement of operating profitability for the same reasons we find Adjusted EBITDA useful and also because it provides a period-to-period comparison of our operating performance.

    Adjusted Free Cash Flow. Adjusted Free Cash Flow is a supplemental measure of our performance. We define Adjusted Free Cash Flow as cash flow from operating activities (the most directly comparable GAAP measure) less cash payments for tax distributions, purchases of property, plant, and equipment and acquisition-related costs. We believe Adjusted Free Cash Flow is a useful measure of operating performance because it represents the cash flow from the business that is within our discretion to direct to activities including investments, debt repayment, and returning capital to stockholders.

    The reconciliation of the above non-GAAP measures to their most comparable GAAP financial measure is outlined in the reconciliation table accompanying this release.

    Key Performance Indicators

    Total Written Premium. Total Written Premium represents, for any reported period, the total amount of current premium (net of cancellation) placed with insurance carriers. We utilize Total Written Premium as a key performance indicator when planning, monitoring, and evaluating our performance. We believe Total Written Premium is a useful metric because it is the underlying driver of the majority of our revenue.

    Contacts
    Investor Contact:
    Jeff Arricale for TWFG
    Email: jeff.arricale@twfg.com

    PR Contact:
    Alex Bunch for TWFG
    Email: alex@twfg.com


    Condensed Consolidated Statements of Operations (Unaudited)
    (Amounts in thousands, except share and per share data)

     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
     2024
    		 2023
    		 2024
    		 2023
    Revenues       
    Commission income (related party of $3,026 and $1,167 for the three months ended and $6,047 and $3,064 for the nine months ended September 30, 2024 and 2023, respectively)$48,240  $43,993  $139,447  $122,451 
    Contingent income 1,383   1,035   3,717   3,023 
    Fee income (related party of $884 and $419 for the three months ended and $1,799 and $1,258 for the nine months ended September 30, 2024 and 2023, respectively) 2,890   2,107   7,811   6,343 
    Other income 2,127   575   3,244   1,125 
    Total revenues 54,640   47,710   154,219   132,942 
    Expenses       
    Commission expense 30,766   32,461   89,171   90,853 
    Salaries and employee benefits 8,331   3,390   21,401   10,096 
    Other administrative expenses (related party of $339 and $178 for the three months ended and $1,122 and $270 for the nine months ended September 30, 2024 and 2023, respectively) 4,813   2,812   11,687   8,043 
    Depreciation and amortization 2,985   1,145   8,966   3,340 
    Total operating expenses 46,895   39,808   131,225   112,332 
    Operating income 7,745   7,902   22,994   20,610 
    Interest expense (411)  (295)  (2,125)  (553)
    Other non-operating income (expense), net (4)  1   8   (10)
    Income before tax 7,330   7,608   20,877   20,047 
    Income tax expense 437   —   437   — 
    Net income from continuing operations 6,893   7,608   20,440   20,047 
    Net income from discontinued operation, net of tax —   —   —   834 
    Net income 6,893   7,608   20,440   20,881 
    Less: net income attributable to noncontrolling interests 5,739   —   19,286   — 
    Net income attributable to TWFG, Inc.$1,154  $7,608  $1,154  $20,881 
            
    Weighted average shares of common stock outstanding (see Note 13):       
    Basic 14,722,685     14,722,685   
    Diluted 14,890,382     14,890,382   
    Earnings per share (see Note 13):       
    Basic$0.08    $0.08   
    Diluted$0.08    $0.08   


    The following table presents the disaggregation of our revenues by offerings (in thousands):

     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
     2024 2023 2024 2023
    Insurance Services       
    Agency-in-a-box$34,000 $35,895 $100,418 $102,539
    Corporate Branches 9,234  1,755  25,861  4,259
    TWFG MGA 9,490  9,538  25,213  24,417
    Other 1,916  522  2,727  1,727
    Total revenues$54,640 $47,710 $154,219 $132,942
            


    The following table presents the disaggregation of our commission income by offerings (in thousands):

     Three Months Ended September 30,
     2024
    		 2023
     Amount % of Total Amount % of Total
    Insurance Services       
    Agency-in-a-Box$31,543 65% $34,255 78%
    Corporate Branches 9,300 19   1,770 4 
    Total Insurance Services 40,843 84   36,025 82 
    TWFG MGA 7,397 16   7,968 18 
    Total commission income$48,240 100% $43,993 100%
            


    The following table presents the disaggregation of our fee income by major sources (in thousands):

     Three Months Ended September 30,
     2024
    		 2023
     Amount % of Total Amount % of Total
    Policy fees$1,064 37% $580 28%
    Branch fees 1,172 40   824 39 
    License fees 495 17   555 26 
    TPA fees 159 6   148 7 
    Total fee income$2,890 100% $2,107 100%
            


    The following table presents the disaggregation of our commission expense by offerings (in thousands):

     Three Months Ended September 30,
     2024 2023
     Amount % of Total Amount % of Total
    Insurance Services       
    Agency-in-a-Box$25,092 82% $27,297 84%
    Corporate Branches 1,304 4   209 1 
    Total Insurance Services 26,396 86   27,506 85 
    TWFG MGA 4,346 14   4,937 15 
    Other 24 —   18 — 
    Total commission expense$30,766 100% $32,461 100%
            


    Condensed Consolidated Statements of Financial Position (Unaudited)
    (Amounts in thousands, except share/unit data)

     September 30,
    2024    		 December 31,
    2023
    Assets   
    Current assets   
    Cash and cash equivalents$191,196 $39,297
    Restricted cash 9,709  7,171
    Commissions receivable, net 22,901  19,082
    Accounts receivable 8,782  5,982
    Deferred offering costs —  2,025
    Other current assets, net 1,539  1,551
    Total current assets 234,127  75,108
    Non-current assets   
    Intangible assets - net 75,024  36,436
    Property and equipment - net 682  597
    Lease right-of-use assets - net 2,625  2,459
    Other non-current assets 635  837
    Total assets$313,093 $115,437
        
    Liabilities and Equity   
    Current liabilities   
    Commissions payable$14,438 $12,487
    Carrier liabilities 13,278  8,731
    Operating lease liabilities, current 1,070  882
    Short-term bank debt 1,897  2,437
    Deferred acquisition payable, current 506  5,369
    Other current liabilities 6,908  5,006
    Total current liabilities 38,097  34,912
    Non-current liabilities   
    Operating lease liabilities, net of current portion 1,448  1,518
    Long-term bank debt 4,490  46,919
    Deferred acquisition payable, non-current 924  1,037
    Total liabilities 44,959  84,386
    Commitment and contingencies (see Note 15)   
    Stockholders'/Members' Equity   
    Members’ Equity (631,750 common units issued and outstanding at December 31, 2023) —  632
    Class A common stock ($0.01 par value per share - 300,000,000 authorized, 14,811,874 shares issued and outstanding at September 30, 2024) 148  —
    Class B common stock ($0.00001 par value per share - 100,000,000 authorized, 7,277,651 shares issued and outstanding at September 30, 2024) —  —
    Class C common stock ($0.00001 par value per share - 100,000,000 authorized, 33,893,810 shares issued and outstanding at September 30, 2024) —  —
    Additional paid-in capital 57,159  25,114
    Retained earnings 13,697  4,805
    Accumulated other comprehensive income 82  500
    Total stockholders' equity attributable to TWFG, Inc. /members’ equity 71,086  31,051
    Noncontrolling interests 197,048  —
    Total stockholders'/members' equity 268,134  31,051
    Total liabilities and equity$313,093 $115,437
        


    Non-GAAP Financial Measures

    A reconciliation of Organic Revenue and Organic Revenue Growth Rate to Total Revenue and Total Revenue Growth Rate, the most directly comparable GAAP measures, is as follows (in thousands):

     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
     2024
    		 2023
    		 2024
    		 2023
    Total revenues$54,640  $47,710  $154,219  $132,942 
    Acquisition adjustments(1) (898)  (1,153)  (3,582)  (2,648)
    Contingent income (1,383)  (1,035)  (3,717)  (3,023)
    Fee income (2,890)  (2,107)  (7,811)  (6,343)
    Other income (2,127)  (575)  (3,244)  (1,125)
    Organic Revenue$47,342  $42,840  $135,865  $119,803 
    Organic Revenue Growth(2)$3,349  $5,048  $14,206  $12,986 
    Total Revenue Growth Rate(3) 14.5%  16.5%  16.0%  13.6%
    Organic Revenue Growth Rate(2) 7.6%  13.4%  11.7%  12.2%
            

    (1)  Represents revenues generated from the acquired businesses during the first 12 months following an acquisition.
    (2)  Organic Revenue for the three months ended September 30, 2023 and 2022, and for the nine months ended September 30, 2023 and 2022, used to calculate Organic Revenue Growth for the three months ended September 30, 2024 and 2023, and for the nine months ended September 30, 2024 and 2023, was $44.0 million, $37.8 million, $121.7 million and $106.8 million, respectively, which is adjusted to reflect revenues from acquired businesses with over $0.5 million in annualized revenue that reached the twelve-month owned mark during the year ended December 31, 2023 and 2022, respectively. Organic Revenue Growth Rate represents the period-to-period change in Organic Revenue divided by the total adjusted Organic Revenue in the prior period.
    (3)  Represents the period-to-period change in total revenues divided by the total revenues in the prior period.

    A reconciliation of Adjusted Net Income and Adjusted Net Income Margin to Net income and Net income Margin, the most directly comparable GAAP measures, for each of the periods indicated is as follows (in thousands):

    Revised Calculation Methodology Applied to Current Period
     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
     2024
    		 2023
    		 2024
    		 2023
    Total revenues$54,640  $47,710  $154,219  $132,942 
    Net income$6,893  $7,608  $20,440  $20,881 
    Acquisition-related expenses —   —   —   168 
    Restructuring and related expenses —   —   —   17 
    Discontinued operation income —   —   —   (834)
    Equity-based compensation 1,012   —   1,012   — 
    Other non-recurring items(1) —   —   (1,477)  — 
    Amortization expense 2,920   1,078   8,771   3,143 
    Adjusted income before income taxes 10,825   8,686   28,746   23,375 
    Adjusted income tax expense(2) (2,482)  —   (6,591)  — 
    Adjusted Net Income$8,343  $8,686  $22,155  $23,375 
    Net Income Margin 12.6%  15.9%  13.3%  15.7%
    Adjusted Net Income Margin 15.3%  18.2%  14.4%  17.6%
            


    Legacy Calculation Methodology Applied to Current Period
     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
     2024 2023 2024 2023
    Total revenues$54,640  $47,710  $154,219  $132,942 
    Net income$6,893  $7,608  $20,440  $20,881 
    Acquisition-related expenses —   —   —   168 
    Restructuring and related expenses —   —   —   17 
    Discontinued operation income —   —   —   (834)
    Equity-based compensation 1,012   —   1,012   — 
    Other non-recurring items(1) —   —   (1,477)  — 
    Adjusted income before income taxes 7,905   7,608   19,975   20,232 
    Adjusted income tax expense(2) (1,813)  —   (4,580)  — 
    Adjusted Net Income$6,092  $7,608  $15,395  $20,232 
    Net Income Margin 12.6%  15.9%  13.3%  15.7%
    Adjusted Net Income Margin 11.2%  15.9%  10.0%  15.2%
            

    (1)   Represents a one-time adjustment reducing commission expense, which resulted from the branch conversions. In January 2024, nine of our Branches converted to Corporate Branches. Upon conversion, agents of the newly converted Corporate Branches became employees and received salaries, employee benefits, and bonuses for services rendered instead of commissions. As a result, we released a portion of the unpaid commissions related to the converted branches that we no longer are required to settle.
    (2)   Post-IPO, we are subject to United States federal income taxes, in addition to state, local, and foreign taxes, with respect to our allocable share of any net taxable income of TWFG Holding Company, LLC. For the three and nine months ended September 30, 2024, the calculation of adjusted income tax expense is based on a federal statutory rate of 21% and a blended state income tax rate of 1.93% on 100% of our adjusted income before income taxes as if we owned 100% of the TWFG Holding Company, LLC.

    A reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin to Net income and Net income margin, the most directly comparable GAAP measures, for each of the periods indicated is as follows (in thousands):

     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
     2024
    		 2023
    		 2024
    		 2023
    Total revenues$54,640  $47,710  $154,219  $132,942 
    Net income$6,893  $7,608  $20,440  $20,881 
    Interest expense 411   295   2,125   553 
    Depreciation and amortization 2,985   1,145   8,966   3,340 
    Income tax expense 437   —   437   — 
    EBITDA 10,726   9,048   31,968   24,774 
    Acquisition-related expenses —   —   —   168 
    Restructuring and related expenses —   —   —   17 
    Equity-based compensation 1,012   —   1,012   — 
    Discontinued operation income —   —   —   (834)
    Other non-recurring items(1) —   —   (1,477)  — 
    Adjusted EBITDA$11,738  $9,048  $31,503  $24,125 
    Net Income Margin 12.6%  15.9%  13.3%  15.7%
    Adjusted EBITDA Margin 21.5%  19.0%  20.4%  18.1%
            

    (1)   Represents a one-time adjustment reducing commission expense, which resulted from the branch conversions. In January 2024, nine of our Branches converted to Corporate Branches. Upon conversion, agents of the newly converted Corporate Branches became employees and received salaries, employee benefits, and bonuses for services rendered instead of commissions. As a result, we released a portion of the unpaid commissions related to the converted branches that we no longer are required to settle.

    A reconciliation of Adjusted Free Cash Flow to Cash Flow from Operating Activities, the most directly comparable GAAP measure, for each of the periods indicated is as follows (in thousands):

     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
     2024 2023 2024 2023
    Cash Flow from Operating Activities$11,725  $7,394  $28,879  $24,103 
    Purchase of property and equipment (233)  (163)  (280)  (217)
    Tax distribution to members(1) —   (2,599)  (6,104)  (9,526)
    Acquisition-related expenses —   —   —   168 
    Net cash flow provided by operating activities from discontinued operation —   —   —   (839)
    Adjusted Free Cash Flow$11,492  $4,632  $22,495  $13,689 
            

    (1)   Tax distributions to members represents the amount distributed to the members of TWFG Holding Company, LLC in respect of their income tax liability related to the net income of TWFG Holding Company, LLC allocated to its members.

    A reconciliation of Adjusted Diluted Earnings Per Share to diluted earnings per share, the most directly comparable GAAP measure, is as follows:

     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
     2024 2024
    Earnings per share of common stock – diluted$0.08 $0.08
    Plus: Impact of all LLC Units exchanged for Class A Common Stock(1) 0.04  0.29
    Plus: Adjustments to Adjusted net income(2) 0.03  0.03
    Adjusted Diluted Earnings Per Share$0.15 $0.40
        
    Weighted average common stock outstanding – diluted 14,890,382  14,890,382
    Plus: Impact of all LLC Units exchanged for Class A Common Stock(1) 41,171,461  41,171,461
    Adjusted Diluted Earnings Per Share diluted share count 56,061,843  56,061,843
        

    (1)   For comparability purposes, this calculation incorporates the net income that would be distributable if all shares of Class B Common Stock and Class C Common Stock, together with the related LLC Units, were exchanged for shares of Class A Common Stock. For the three and nine months ended September 30, 2024, this includes $5.7 million and $19.3 million of net income, respectively, on 56,061,843 weighted-average shares of common stock outstanding - diluted, for both the three and nine months ended September 30, 2024. For both the three and nine months ended September 30, 2024, 41,171,461 weighted average outstanding Class B Common Stock and Class C Common Stock were considered dilutive and included in the 56,061,843 weighted-average shares of common stock outstanding - diluted within diluted earnings per share calculation.
    (2)    Adjustments to Adjusted Net Income are described in the footnotes of the reconciliation of Adjusted Net Income to Net Income in “Adjusted Net Income and Adjusted Net Income Margin”, which represent the difference between Net Income of $6.9 million and $20.4 million and Adjusted Net Income of $8.3 million and $22.1 million for the three and nine months ended September 30, 2024, respectively. For the three and nine months ended September 30, 2024, Adjusted Diluted Earnings Per Share include adjustments of $1.4 million and $1.7 million to Adjusted Net Income, respectively, on 56,061,843 weighted-average shares of common stock outstanding - diluted for both periods presented.

    Key Performance Indicators

    The following presents the disaggregation of Total Written Premium by offerings, business mix and line of business (in thousands):

     Three Months Ended September 30, Nine Months Ended September 30,
     2024
    		 2023
    		 2024
    		 2023
     Amount % of Total Amount % of Total Amount % of Total Amount % of Total
    Offerings:               
    Insurance Services               
    Agency-in-a-Box$261,560 65% $284,442 80% $736,699 66% $761,260 80%
    Corporate Branches 77,636 20   14,286 4   213,689 19   35,156 4 
    Total Insurance Services 339,196 85   298,728 84   950,388 85   796,416 84 
    TWFG MGA 60,903 15   55,361 16   164,612 15   150,233 16 
    Total written premium$400,099 100% $354,089 100% $1,115,000 100% $946,649 100%
                    
    Business Mix:               
    Insurance Services               
    Renewal business$265,026 66% $242,258 68% $739,624 66% $623,773 66%
    New business 74,170 19   56,470 16   210,764 19   172,643 18 
    Total Insurance Services 339,196 85   298,728 84   950,388 85   796,416 84 
    TWFG MGA               
    Renewal business 46,075 11   47,818 14   125,364 11   127,552 14 
    New business 14,828 4   7,543 2   39,248 4   22,681 2 
    Total TWFG MGA 60,903 15   55,361 16   164,612 15   150,233 16 
    Total written premium$400,099 100% $354,089 100% $1,115,000 100% $946,649 100%
                    
    Written Premium Retention:               
    Insurance Services  89%   98%   93%   96%
    TWFG MGA  83    88    83    90 
    Consolidated  88    97    91    95 
                    
    Line of Business:               
    Personal lines$327,159 82% $289,032 82% $904,372 81% $758,297 80%
    Commercial lines 72,940 18   65,057 18   210,628 19   188,352 20 
    Total written premium$400,099 100% $354,089 100% $1,115,000 100% $946,649 100%
                    

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