DEBT

3 Months Ended

Mar. 31, 2025

The following is a summary of the Company’s outstanding debt (in thousands):


	March 31, 2025		December 31, 2024
Term Loans

7-year term loan, periodic interest and monthly principal payments, Daily Simple SOFR + 0.11448% SOFR adjustment, matures December 6, 2027	$	5,446	$	5,919
Total term loans	5,446		5,919
Revolving Facility
5-year revolving credit facility, periodic interest payments, Term SOFR + 0.10% SOFR adjustment + 2% up to 2.75% applicable margin based on the consolidated leverage ratio, plus commitment fees of 0.20% up to 0.35% based on the consolidated leverage ratio, matures May 23, 2028	—		—
Deferred acquisition payable	1,573		1,723
Total debt	7,019		7,642
Current maturities	(2,526)		(2,513)
Long-term debt	$	4,493	$	5,129

Future maturities of the Company’s outstanding debt as of March 31, 2025 were as follows (in thousands):


Remainder of 2025	$	1,890
2026	2,566
2027	2,296
2028	147
2029	120
Thereafter	—
Total	$	7,019

For the three months ended March 31, 2025 and March 31, 2024, the Company incurred interest expense of $0.1 million and $0.8 million, respectively.

Term Loans

The 7-year term loan was entered into on December 4, 2020, with the original principal of $13.0 million, which matures on December 6, 2027. The Company entered into interest rate swap agreements to manage its exposure to interest rate fluctuations related to its term loans.

Revolving Credit Agreement

On May 23, 2023, the Company entered into a Revolving Credit Agreement (the “Revolving Credit Agreement”) with PNC Bank National Association (“Lender”), which 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”). The borrowings under the Revolving Facility will be used by the Company for permitted acquisitions, working capital and general corporate purposes.

The Company pays a commitment fee on undrawn amounts under the Revolving Facility of 0.20% up to 0.35% based on the consolidated leverage ratio. On August 5, 2024, the Company repaid the outstanding balance of its Revolving Facility amounting to $41.0 million using a portion of the net proceeds from the IPO. As of March 31, 2025 and December 31, 2024, the unused capacity under the Revolving Facility was $50.0 million and $50.0 million, respectively.

Borrowings under the term loans and the Revolving Facility are secured by substantially all assets constituting personal property of TWFG, Inc. and its subsidiaries, including receivables, inventory, equipment, and intellectual property, subject to certain exceptions. In addition, the term loan agreement contains covenants that restrict the Company’s ability to make certain distributions or dividend payments, incur additional debt, engage in certain asset sales, mergers, acquisitions or similar transactions, create liens on assets, engage in certain transactions with

affiliates, change the Company’s business or make investments. In addition, the term loan agreement requires the Company to maintain certain financial ratios. As of March 31, 2025 and December 31, 2024, the Company was in compliance with these covenants. The carrying amount of the Company’s variable rate debt as of March 31, 2025 and December 31, 2024 approximates fair value due to the short-term reset of the interest rate based on SOFR and the absence of a credit spread.

Deferred Acquisition Payable

In April 2023, the Company acquired customer list intangible assets for a total consideration of $4.3 million, of which $3.0 million was paid in cash at closing. The remaining balance was settled through the issuance of a note payable monthly over three years beginning in April 2024 and bears an annual interest of 3.75%.

In March 2024, the Company acquired customer list intangible assets, of which approximately $0.4 million of the purchase price was settled through the issuance of a non-interest bearing note and was recorded as deferred acquisition payable. The note is payable monthly over a period of 70 months. The deferred acquisition payable was recorded at fair value with an imputed interest rate of 5.00%.

In October 2024, the Company acquired customer list intangible assets, of which approximately $0.4 million of the purchase price was settled through the issuance of a non-interest bearing note and was recorded as deferred acquisition payable. The note is payable monthly over a period of 60 months. The deferred acquisition payable was recorded at fair value with an annual imputed interest rate of 4.69%.

The portion of the Company’s acquisition-related notes due within 12 months or less from the financial statement date is reported in the Condensed Consolidated Balance Sheets as Deferred acquisition payable, current, while the amount due after 12 months from the financial statement date is included in Deferred acquisition payable, non-current. See Note 4. Intangible Assets and Acquisitions and Note 11. Related Party Transactions for more information regarding the purchase of the customer list intangible assets.

Fair value information about financial instruments not measured at fair value

The following table presents the Company’s debt that is not measured at fair value on a recurring basis:


	March 31, 2025				December 31, 2024
	Carrying Value		Fair Value		Carrying Value		Fair Value
Debt
Current portion of long-term debt	$	1,927	$	1,927	$	1,912	$	1,912
Long-term debt(1)	$	3,519	$	3,519	$	4,007	$	4,007
Deferred acquisition payable(2)	$	2,929	$	2,887	$	1,723	$	1,669

(1) The carrying value of the Company’s borrowings under its various credit agreements approximates its fair value due to the variable interest rate based upon adjusted SOFR.

(2) The acquisition payable represents cash payments that are due to the seller paid out over a future period. The fair value of the acquisition payable is based on an estimate using a discounted cash flow analysis and current finance rates for similar types of financing arrangements.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

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+ Details

TWFG, Inc. 10-Q