TWFG, Inc.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and the related notes in the IPO Prospectus. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed below and in the IPO Prospectus particularly in the sections entitled “Risk factors” and “Special note regarding forward-looking statements”.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and the related notes and other financial information included elsewhere in this Quarterly Report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed below and in the Annual Report, particularly in the section Part I, Item 1A. Risk Factors and in “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report.

Previous wording

The following discussion contains commentary on the financial results derived from the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2024 and 2023 of TWFG, Inc.

Current wording

The following discussion contains commentary on the financial results derived from the unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2025 and March 31, 2024 of TWFG, Inc.

Previous wording

Other income. Other income is comprised primarily of interest income, income earned for facilitating premium financing arrangements, fees assessed for agent conventions and other miscellaneous income.

Current wording

Other income. Other income is comprised primarily of income earned for facilitating premium financing arrangements, fees assessed for agent conventions, interest income on fiduciary funds, and other miscellaneous income.

Previous wording

Commission expense. Commission expense is our largest expense, representing the consideration paid to our agents for producing and retaining business. We expect our commission expense to continue to increase in line with our expected business growth.

Current wording

Commission expense. Commission expense is our largest expense, representing the consideration paid to our agents for producing and retaining business. We expect our commission expense to continue to increase corresponding with our expected business growth.

Previous wording

Other administrative expenses. Other administrative expenses include technology costs, legal and professional fees, office expenses and other costs associated with our operations. Fluctuations in other administrative expenses are relative to the overall scale of our business operations.

Current wording

Other administrative expenses. Other administrative expenses include technology costs, legal and professional fees, office expenses, marketing expense, survey expenses and other costs associated with our operations. Fluctuations in other administrative expenses are relative to the overall scale of our business operations.

Previous wording

Total revenues for the three months ended September 30, 2024 increased by $6.9 million, or 14.5%, compared to the same period in the prior year. The increase was primarily due to a $4.2 million, or 9.7%, increase in commission income driven primarily by higher premium rates, new business growth and continued rollout of commission income from our Book of Business acquisitions completed in 2023 into the current period. Also contributing to the increase in total revenues were the $0.8 million, or 37.2%, increase in fee income, $0.3 million, or 33.6%, increase in contingent income, and $1.6 million, or 269.9%, increase in other income. See discussions below for additional information about the changes in our revenues.

Current wording

Total revenues for the three months ended March 31, 2025 increased by$7.7 million, or 16.6%, compared to the same period in the prior year. The increase was primarily due to a$6.2 million, or 14.7%, increase in commission income driven primarily by higher premium rates and continued business growth. Also contributing to the increase in total revenues were the $0.8 million, or 34.9%, increase in fee income, $0.6 million, or 54.6%, increase in contingent income, and $0.1 million, or 25.5%, increase in other income compared to the same period in the prior year. See discussions below for additional information about the changes in our revenues.

Previous wording

Commission income for the three months ended September 30, 2024 increased by $4.2 million, or 9.7%, compared to the same period in the prior year. Higher premium rates, new business growth, and continued rollout of commission income from our Book of Business acquisitions in 2023 into the current period were the primary drivers of the increase in our commission income.

Current wording

Commission income for the three months ended March 31, 2025 increased by $6.2 million, or 14.7%, compared to the same period in the prior year. Higher premium rates and continued business growth were the primary drivers of the increase in our commission income.

Previous wording

Commission income for the nine months ended September 30, 2024 increased by $17.0 million, or 13.9%, compared to the same period in the prior year. The increase was primarily due to higher premium rates, new business growth and continued rollout of commission income from our Book of Business acquisitions completed in 2023 into the current period. See “—Key Performance Indicators—Total Written Premium” for additional information related to our written premiums.

Current wording

TWFG MGA commission income for the three months ended March 31, 2025 increased by $1.8 million, or 33.7%, compared to the same period in the prior year. An increase of $1.7 million was due to continued growth and commission rate increase of The Woodlands Insurance Company business compared to the same period in the prior year. The additional $0.1 million was driven by growth in the Company’s other MGA programs. See “Key Performance Indicators” below for additional information related to our written premiums.

Previous wording

Contingent income for the three months ended September 30, 2024 was $1.4 million, reflecting a $0.3 million, or 33.6%, increase compared to the same period in the prior year. The increase in contingent income was primarily due to underlying carrier profitability and growth in our business. Contingent income is unpredictable and dependent upon the target financial and performance metrics established by the insurance carriers.

Current wording

Contingent income for the three months ended March 31, 2025 was $1.7 million, reflecting a $0.6 million, or 54.6%, increase compared to the same period in the prior year. The increase in contingent income was primarily due to underlying growth in our business. Contingent income is unpredictable and dependent upon the target financial and performance metrics established by the insurance carriers.

Previous wording

Fee income for the three months ended September 30, 2024 increased by $0.8 million, or 37.2%, compared to the same period in the prior year. Changes to individual components of fee income are discussed in detail below:

Current wording

Fee income for the three months ended March 31, 2025 increased by$0.8 million, or 34.9%, compared to the same period in the prior year. Changes to individual components of fee income are discussed in detail below:

Previous wording

•Policy fees for the three months ended September 30, 2024 increased by $0.5 million, or 83.4%, compared to the same period in the prior year. The increase in policy fees was primarily due to higher policy count in our TWFG MGA offering. The increase in policy count was driven primarily by new business growth.

Current wording

•Policy fees for the three months ended March 31, 2025 increased by $0.5 million, or 104.9%, compared to the same period in the prior year. The increase in policy fees was primarily due to higher policy count in our TWFG MGA offering. The increase in policy count was driven primarily by new business growth.

Previous wording

•Branch fees for the three months ended September 30, 2024 increased by $0.3 million, or 42.2%, compared to the same period in the prior year. The increase in branch fees was primarily due to increased branch fee rates to cover technology-based user fees.

Current wording

•Branch fees for the three months ended March 31, 2025 increased by $0.1 million, or 11.1%, compared to the same period in the prior year. The increase in branch fees was primarily driven by increased agent growth.

Previous wording

•License fees for the three months ended September 30, 2024 decreased by $0.1 million, or 10.8%, compared to the same period in the prior year. The decrease in license fees was primarily due to the amendment to the licensing agreement with one of our customers effective January 1, 2024 to switch from usage-based fees to fixed monthly fees. The switch capped the fees we earned at a maximum monthly amount.

Current wording

•License fees for the three months ended March 31, 2025 increased by $0.1 million, or 18.1%, compared to the same period in the prior year. The increase in license fees was primarily due to the increased fees associated with a licensing agreement for software.

Previous wording

Other non-operating expense for the three months ended September 30, 2024 was $0.4 million compared to $0.3 million for the same period in the prior year, reflecting an increase of $0.1 million, or 41.2%.

Current wording

Other income for the three months ended March 31, 2025 was $0.4 million compared to $0.3 million in the same period in the prior year, reflecting an increase of $0.1 million, or 25.5%. Overall, the account balance is deemed comparable to the same period in the prior year.

Previous wording

Commission expense for the three months ended September 30, 2024 decreased by $1.7 million, or 5.2%, compared to the same period in the prior year. The decrease was primarily due to the lower commission expenses in Insurance Services of $1.1 million, or 3.4%, of the total decrease, driven by the previously discussed branch conversions and a decrease in our TWFG MGA offering of $0.6 million, or 1.8%, of the total decrease in commission expense. See commission income discussion above for additional information regarding the driver of changes.

Current wording

Commission expense for the three months ended March 31, 2025 increased by $5.4 million, or 20.3%, compared to the same period in the prior year. The increase was primarily due to the increased growth in business of$3.9 million consistent with commission income and the one-time favorable adjustment of$1.5 million related to the branch conversion that occurred in 2024. See commission income discussion above for additional information regarding the driver of changes.

Previous wording

Insurance Services Agency-in-a-Box commission expense for the three months ended September 30, 2024 decreased by $2.2 million, or 8.1%, compared to the same period in the prior year. The decrease was primarily due to the branch conversions resulting in a decrease of $4.8 million offset by an increase in commission expense related to the growth of the business of $2.6 million. The expenses of our Branches are primarily commission expense, which is determined as a percentage of commission income. The profitability of our Branches, as determined by the difference between commission income and commission expense, is consistent.

Current wording

Insurance Services Agency-in-a-Box commission expense for the three months ended March 31, 2025 increased by $3.9 million, or 17.8%, compared to the same period in the prior year. The increase was primarily due to the increase in business of$2.4 million consistent with commission income and the one-time favorable adjustment of$1.5 million. The expenses of our Branches are primarily commission expense, which is determined as a percentage of commission income. The profitability of our Branches, as determined by the difference between commission income and commission expense, is consistent.

Previous wording

Insurance Services Corporate Branches commission expense for the three months ended September 30, 2024 increased by $1.1 million, or 523.9%, compared to the same period in the prior year. The increase was primarily due to the branch conversions, as previously discussed, and the Book of Business acquisitions in 2023. The expenses of our Corporate Branches are mainly salaries and benefits, and are primarily fixed expenses, which are not directly related to commission income. The profitability of our Corporate Branches varies mainly based on changes in commission income. In addition, since the commission expense of our Corporate Branches represents a smaller percentage of their operating expenses, we expect revenue growth, both organic and through future acquisitions, to positively impact our operating income in the future.

Current wording

Insurance Services Corporate Branches commission expense for the three months ended March 31, 2025 increased by $0.2 million, or 28.2%, compared to the same period in the prior year. The expenses of our Corporate Branches are mainly salaries and benefits, and are primarily fixed expenses, which are not directly related to commission income. The profitability of our Corporate Branches varies mainly based on changes in commission income. In addition, since the commission expense of our Corporate Branches represents a smaller percentage of their operating expenses, we expect revenue growth, both organic and through future acquisitions, to positively impact our operating income in the future.

Previous wording

Depreciation and amortization for the three months ended September 30, 2024 was $3.0 million compared to $1.1 million in the same period in the prior year, reflecting an increase of $1.9 million, or 160.7%. The increase was primarily due to the amortization of intangible assets from our recent asset acquisitions and branch conversions.

Current wording

Depreciation and amortization for the three months ended March 31, 2025 was $3.4 million compared to $3.0 million in the same period in the prior year, reflecting an increase of$0.3 million, or 11.5%. The increase was primarily due to the amortization of intangible assets from our recent asset acquisitions.

Previous wording

Income tax expense for the three months ended September 30, 2024 was $0.4 million compared to zero for the same period in the prior year as after consummation of the Reorganization Transactions and IPO, the Company became subject to U.S. federal, state, and local income taxes with respect to its allocable share of taxable income of TWFG Holding Company, LLC assessed at the prevailing corporate tax rates.

Current wording

Income tax expense for the three months ended March 31, 2025 was $0.7 million compared to zero for the same period in the prior year as after consummation of the Reorganization Transactions and IPO, the Company became subject to U.S. federal, state, and local income taxes with respect to its allocable share of taxable income of TWFG Holding assessed at the prevailing corporate tax rates.

Previous wording

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.

Current wording

Organic Revenue. Since the first quarter of 2025, we have utilized the revised calculation methodology for Organic Revenue to include policy fee income as it is directly correlated to MGA commission income. Our legacy calculation methodology removed policy fee income from Organic Revenue. Organic Revenue is total revenue (the most directly comparable GAAP measure) for the relevant period, excluding contingent income, non-policy 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.

Previous wording

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.

Current wording

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 milestone, but have reached the twelve-month owned milestone 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.

Previous wording

(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.

Current wording

(2)Organic Revenue for the three months ended March 31, 2024 and 2023, used to calculate Organic Revenue Growth for the three months ended March 31, 2025 and 2024, was $42.5 million and $36.3 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 three months ended March 31, 2025 and 2024, 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.

Previous wording

Revenue growth rate, representing the year-over-year change in total revenues, was 14.5% for the three months ended September 30, 2024 compared to the same period in 2023 and 16.5% for the three months ended September 30, 2023 compared to the same period in 2022. Revenue growth for both periods reflected the impact of higher premium rates, growing Books of Business and the mix of the new and renewal businesses. Revenue growth for the three months ended September 30, 2024 compared to the same period in 2023 included the impact of the continued rollout of commission income from our Book of Business acquisitions in 2023 into the current period, higher fee income and higher interest income on bank deposits, including the $192.9 million of net proceeds received from the IPO. See “—Consolidated Results of Operations” for additional discussions regarding the changes in our revenues.

Current wording

Revenue growth rate, representing the year-over-year change in total revenues, was 16.6% for the three months ended March 31, 2025 compared to the same period in 2024 and 15.8% for the three months ended March 31, 2024 compared to the same period in 2023. Revenue growth for the periods reflected the growth in our Books of Business and the mix of the new and renewal businesses. Revenue growth for the three months ended March 31, 2025 compared to the same period in 2024 included the continued growth of commission and fee income during the period. See “Consolidated Results of Operations” for additional discussions regarding the changes in our revenues.

Previous wording

Organic Revenue Growth Rate was 7.6% for the three months ended September 30, 2024 compared to the same period in 2023 and 13.4% for the three months ended September 30, 2023 compared to the same period in 2022. Organic Revenue Growth for both periods reflects ongoing, but normalizing rate increases being implemented by carriers, the underlying growth of our business, and healthy economic growth offset by a decrease in commission income in our MGA offering. Effective January 1, 2024, the MGA agreement with one of our insurance carriers was renegotiated and amended, which shifted our volume based commission to a flat monthly fee. The switch capped the income we earned at a maximum monthly amount. See “—Consolidated Results of Operations—Commission Income” for additional discussions regarding the changes in our commission income.

Current wording

Organic Revenue Growth Rate was 14.3% for the three months ended March 31, 2025 compared to the same period in 2024 and 13.0% for the three months ended March 31, 2024 compared to the same period in 2023. Organic Revenue Growth for both periods reflects ongoing, but normalizing rate increases being implemented by carriers, the underlying growth of our business, and healthy economic growth and an increase in commission income in our MGA offering. See “Consolidated Results of Operations—Commission Income” for additional discussions regarding the changes in our commission income.

Previous wording

Adjusted Net Income. 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 the 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.

Current wording

Adjusted Net Income. Since the second quarter of 2024, we have utilized 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 the 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. In addition, we believe that the revised calculation more effectively represents what our stakeholders consider useful in assessing our performance.

Previous wording

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.

Current wording

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. Pre-IPO, Adjusted Net Income did not reflect adjustments for income taxes since TWFG Holding is a limited liability company and is classified as a partnership for U.S. federal income tax purposes. Post-IPO, the calculation incorporates 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.

Previous wording

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.

Current wording

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 in addition, it also provides a period-to-period comparison of our after-tax operating performance.

Previous wording

(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.

Current wording

(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. For the three months ended March 31, 2025, the calculation of adjusted income tax expense is based on a federal statutory rate of 21% and a blended state income tax rate of 1.88% on 100% of our adjusted income before income taxes as if we owned 100% of the TWFG Holding.

Previous wording

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 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 of time 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.

Current wording

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 and Class C Common Stock (together with the related LLC Units) into shares of 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 for the period of time 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.

Previous wording

(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. See Note 13, “Earnings Per Share” to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information about the earnings per share.

Current wording

(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 months ended March 31, 2025, this includes $5.5 million of net income on 56,227,014 weighted-average shares of common stock outstanding - diluted, for the three months ended March 31, 2025. For the three months ended March 31, 2025, 41,260,844 weighted average outstanding Class B Common Stock and Class C Common Stock were considered dilutive and included in the 56,227,014 weighted-average shares of common stock outstanding - diluted within diluted earnings per share calculation. See Note 12. Earnings Per Share to our Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for more information about the earnings per share.

Previous wording

(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.

Current wording

(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 millionand Adjusted Net Income of $9.2 million for the three months ended March 31, 2025. For the three months ended March 31, 2025, Adjusted Diluted Earnings Per Share include adjustments of$2.4 million to Adjusted Net Income on 56,227,014 weighted-average shares of common stock outstanding - diluted for the period presented.

Previous wording

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 generally eliminate the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.

Current wording

Adjusted EBITDA. Adjusted EBITDA is a supplemental measure of our performance and is defined as EBITDA adjusted to reflect items such as equity-based compensation, interest income, other non-operating and certain nonrecurring items. 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. Our measure of Adjusted EBITDA is not necessarily comparable to other similarly titled measures of other companies due to potential inconsistencies in the methods of calculation.

Previous wording

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.

Current wording

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 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.

Previous wording

(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.

Current wording

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

Previous wording

Income Margin, Adjusted EBITDA and Adjusted EBITDA Margin), cash flow from operating activities (for Adjusted Free Cash Flow) and diluted earnings per share (for Adjusted Diluted Earnings Per Share), 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.

Current wording

Organic Revenue, Organic Revenue Growth, Adjusted Net Income, Adjusted Net Income Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Free Cash Flow and Adjusted Diluted Earnings Per Share are not measures of financial performance under 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 EBITDA and Adjusted EBITDA Margin), cash flow from operating activities (for Adjusted Free Cash Flow) and diluted earnings per share (for Adjusted Diluted Earnings Per Share), 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.

Previous wording

We have managed our historical liquidity and capital requirements primarily through the receipt of revenues from our operations. Prior to the IPO, our primary cash flow activities involved: (1) generating cash flow from our operations; (2) making strategic acquisitions; (3) making distributions to GHC Woodlands Holdings, LLC, Bunch Family Holdings, LLC, RenaissanceRe Ventures U.S. LLC, and TWFG, Inc. (collectively, and together with each of their permitted transferees, the “Pre-IPO LLC Members”); and (4) making borrowings, interest payments and repayments under our Credit Agreements. On July 19, 2024, we completed the IPO of 11,000,000 shares of Class A Common Stock at an IPO price of $17.00 per share. On July 23, 2024, the underwriters purchased an additional 1,650,000 shares of Class A Common Stock in connection with the underwriters’ full exercise of their option to purchase additional shares. We received approximately $192.9 million of net proceeds from the IPO, including from the full exercise of the underwriters’ option, after deducting underwriting discounts and commissions and related offering expenses. As of September 30, 2024, and December 31, 2023, our cash and cash equivalents were$191.2 million, and $39.3 million, respectively. We have used cash flow from operations primarily to pay compensation and related expenses, general, administrative and other expenses, debt service and distributions to our owners.

Current wording

We have managed our historical liquidity and capital requirements primarily through cash generated from our operations. Prior to the IPO, our primary cash flow activities involved: (1) generating cash flow from our operations; (2) making strategic acquisitions; (3) making distributions to Bunch Family Holdings, LLC, RenaissanceRe Ventures U.S. LLC and GHC Woodlands Holdings LLC; and (4) making borrowings, interest payments and repayments under our Credit Agreements (as defined below). On July 19, 2024, we completed the IPO of 11,000,000 shares of Class A Common Stock at an IPO price of$17.00 per share. On July 23, 2024, the underwriters purchased an additional 1,650,000 shares of Class A Common Stock in connection with the underwriters’ full exercise of their option to purchase additional shares. We received approximately$192.9 million of net proceeds from the IPO, including from the full exercise of the underwriters’ option, after deducting underwriting discounts and commissions and related offering expenses. As of March 31, 2025 and December 31, 2024, our cash and cash equivalents were$196.4 million and$195.8 million, respectively. We have used cash flow from operations primarily to pay compensation and related expenses, general, administrative and other expenses, debt service and distributions to our owners.

Previous wording

On June 5, 2017, TWFG Holding Company, LLC, as borrower, entered into a credit agreement (as subsequently amended, the “Term Loan Credit Agreement”) with PNC Bank, National Association, as lender. On July 30, 2019, TWFG Holding Company, LLC entered into a third amendment to the Term Loan Credit Agreement pursuant to which it borrowed $4.0 million pursuant to a Term Loan B and used these proceeds for permitted acquisitions. On December 4, 2020, TWFG Holding Company, LLC entered into a fifth amendment to the Term Loan Credit Agreement pursuant to which it borrowed an additional $13.0 million pursuant to a Term Loan C and used these proceeds for permitted acquisitions (such amount, together with the amount borrowed on July 30, 2019, the “Term Loans”). On May 23, 2023, TWFG Holding Company, LLC entered into a ninth amendment to the Term Loan Credit Agreement to, among other things, provide additional flexibility under the covenants contained therein. The Term Loan B was fully repaid by its maturity on July 30, 2024. The aggregate principal amounts of the Term Loan C as of September 30, 2024 is $6.4 million as follows (in thousands):

Current wording

On June 5, 2017, TWFG Holding, as borrower, entered into a credit agreement (as subsequently amended, the “Term Loan Credit Agreement”) with PNC Bank, National Association, as lender. On July 30, 2019, TWFG Holding entered into a third amendment to the Term Loan Credit Agreement pursuant to which it borrowed $4.0 million pursuant to a Term Loan B and used these proceeds for permitted acquisitions. On December 4, 2020, TWFG Holding entered into a fifth amendment to the Term Loan Credit Agreement pursuant to which it borrowed an additional $13.0 million pursuant to a Term Loan C and used these proceeds for permitted acquisitions (such amount, together with the amount borrowed on July 30, 2019, the “Term Loans”). On May 23, 2023, TWFG Holding entered into a ninth amendment to the Term Loan Credit Agreement to, among other things, provide additional flexibility under the covenants contained therein. The Term Loan B was fully repaid by its maturity on July 30, 2024. The aggregate principal amounts of the Term Loan C as of March 31, 2025 is $5.4 million asfollows (in thousands):

Previous wording

On May 23, 2023, TWFG Holding Company, LLC, the guarantors party thereto, the lenders party thereto, PNC Bank, National Association and PNC Capital Markets LLC entered into a credit agreement that provides a revolving credit facility to the Company, with commitments in an aggregate principal amount not to exceed $50.0 million (as amended on June 20, 2024, the “Revolving Facility,” and together with the Term Loan Credit Agreement, the “Credit Agreements”).

Current wording

On May 23, 2023, TWFG Holding, the guarantors party thereto, the lenders party thereto, PNC Bank, National Association and PNC Capital Markets LLC entered into a credit agreement that provides a revolving credit facility to the Company, with commitments in an aggregate principal amount not to exceed $50.0 million (as amended on June 20, 2024, the “Revolving Facility,” and together with the Term Loan Credit Agreement, the “Credit Agreements”).

Previous wording

The Revolving Facility provides for a revolving credit facility to TWFG Holding Company, LLC, in an aggregate principal amount not to exceed $50.0 million that matures on May 23, 2028. The proceeds from borrowings under the Revolving Facility have been used for permitted acquisitions, and may in the future be used for acquisitions, working capital and general corporate purposes. On August 5, 2024, we repaid the outstanding balance of the Revolving Facility amounting to $41.0 million using a portion of the net proceeds from the IPO. As of September 30, 2024, there was no outstanding balance under the Revolving Facility.

Current wording

The Revolving Facility provides for a revolving credit facility to TWFG Holding, in an aggregate principal amount not to exceed $50.0 million that matures on May 23, 2028. The proceeds from borrowings under the Revolving Facility have been used for permitted acquisitions, and may in the future be used for acquisitions, working capital and general corporate purposes. On August 5, 2024, we repaid the outstanding balance of the Revolving Facility amounting to $41.0 million using a portion of the net proceeds from the IPO. On August 6, 2024, in accordance with the Revolving Facility, we became a guarantor of, and granted a security interest to secure, the Revolving Facility. TWFG Holding and the guarantors to the Revolving Facility entered into a letter agreement, dated October 3, 2024, with the agent and the lenders party thereto to make changes relating to the debt covenant calculation. As of March 31, 2025, there was no outstanding balance under the Revolving Facility.

Previous wording

The Credit Agreements contain covenants that, among other things and subject to certain exceptions, restrict our ability to make restricted payments, incur additional debt, engage in asset sales, mergers, acquisitions or similar transactions, create liens on assets, engage in transactions with affiliates, change our business or make investments. We may voluntarily prepay in whole or in part the outstanding principal under our Term Loans at any time prior to the maturity date. In addition, the Credit Agreements contain financial covenants that require us, subject to certain exceptions, to maintain a Consolidated Debt Service Coverage Ratio (as defined in the Credit Agreement) of at least 1.50 to 1.00 and a Consolidated Leverage Ratio (as defined in the Credit Agreement) of not more than 2.00 to 1.00, in each case, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, and as of September 30, 2024, we are in compliance with each such covenant.

Current wording

We may voluntarily prepay in whole or in part the outstanding principal under our Term Loans at any time prior to the maturity date. In addition, the Credit Agreements contain financial covenants that require us, subject to certain exceptions, to maintain a Consolidated Debt Service Coverage Ratio (as defined in the Credit Agreement) of at least 1.50 to 1.00 and a Consolidated Leverage Ratio (as defined in the Credit Agreement) of not more than 2.00 to 1.00, in each case, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, and as of March 31, 2025, we are in compliance with each such covenant.