- Total Revenue grew 19.1% year-over-year to
$585.1 million -
- Organic Revenue Growth Rate of 16.1%
year-over-year -
- Net Income of $83.8 million, or $0.26 per
diluted share -
- Adjusted EBITDAC grew 16.9% year-over-year to
$194.2 million -
- Adjusted Net Income increased 16.2% year over
year to $123.7 million, or $0.45 per diluted share -
Ryan Specialty Holdings, Inc. (NYSE: RYAN) (“Ryan Specialty” or
the “Company”), a leading international specialty insurance firm,
today announced results for the second quarter ended June 30,
2023.
Second Quarter 2023 Highlights
- Revenue grew 19.1% year-over-year to $585.1 million, compared
to $491.3 million in the prior-year period
- Organic Revenue Growth Rate* was 16.1% for the quarter,
compared to 22.3% in the prior-year period
- Net Income grew 19.5% year-over-year to $83.8 million, compared
to $70.1 million in the prior-year period. Diluted Earnings per
Share was $0.26
- Adjusted EBITDAC* increased 16.9% to $194.2 million, compared
to $166.1 million in the prior-year period
- Adjusted EBITDAC Margin* of 33.2%, compared to 33.8% in the
prior-year period
- Adjusted Net Income* increased 16.2% to $123.7 million,
compared to $106.4 million in the prior-year period
- Adjusted Diluted Earnings per Share* increased 15.4% to $0.45,
compared to $0.39 in the prior-year period
“We delivered another excellent quarter of strong double-digit
growth in organic revenue, adjusted EBITDAC and adjusted net
income. Our demonstrated skill, unparalleled expertise and
differentiated platform continue to enable us to outperform while
adding value for our clients and trading partners,” said Patrick G.
Ryan, Founder, Chairman and Chief Executive Officer of Ryan
Specialty. “We executed in all facets of our business in the
quarter, generating broad-based growth across our Specialties,
announcing several key acquisitions – including our first in the
employee benefits space – and making solid progress on our
ACCELERATE 2025 program. We are pleased with our efforts in the
first half of the year and remain confident that 2023 will be
another strong year for our firm. With our focus on growth and our
ability to execute, we remain well positioned to generate
sustainable and profitable growth.”
Summary of Second Quarter 2023
Results
Three Months Ended
June 30,
Change
Six Months Ended
June 30,
Change
(in thousands, except percentages and per
share data)
2023
2022
$
%
2023
2022
$
%
GAAP financial measures
Total revenue
$
585,149
$
491,292
$
93,857
19.1
%
$
1,042,748
$
878,182
$
164,566
18.7
%
Compensation and benefits
352,360
310,058
42,302
13.6
660,082
584,331
75,751
13.0
General and administrative
81,608
48,495
33,113
68.3
133,307
90,860
42,447
46.7
Total operating expenses
462,309
385,764
76,545
19.8
849,821
729,267
120,554
16.5
Operating income
122,840
105,528
17,312
16.4
192,927
148,915
44,012
29.6
Net income
83,817
70,120
13,697
19.5
120,274
88,196
32,078
36.4
Net income attributable to Ryan Specialty
Holdings, Inc.
30,078
24,501
5,577
22.8
43,238
31,412
11,826
37.6
Compensation and benefits expense ratio
(1)
60.2
%
63.1
%
63.3
%
66.5
%
General and administrative expense ratio
(2)
13.9
%
9.9
%
12.8
%
10.3
%
Net income margin (3)
14.3
%
14.3
%
11.5
%
10.0
%
Earnings per share (4)
$
0.27
$
0.23
$
0.39
$
0.30
Diluted earnings per share (4)
$
0.26
$
0.22
$
0.37
$
0.28
Non-GAAP financial measures*
Organic revenue growth rate
16.1
%
22.3
%
14.6
%
21.3
%
Adjusted compensation and benefits
expense
$
329,641
$
280,827
$
48,814
17.4
%
$
615,526
$
522,157
$
93,369
17.9
%
Adjusted compensation and benefits expense
ratio
56.3
%
57.2
%
59.0
%
59.5
%
Adjusted general and administrative
expense
$
61,347
$
44,390
$
16,957
38.2
%
$
108,046
$
82,690
$
25,356
30.7
%
Adjusted general and administrative
expense ratio
10.5
%
9.0
%
10.4
%
9.4
%
Adjusted EBITDAC
$
194,161
$
166,075
$
28,086
16.9
%
$
319,176
$
273,335
$
45,841
16.8
%
Adjusted EBITDAC margin
33.2
%
33.8
%
30.6
%
31.1
%
Adjusted net income
$
123,727
$
106,449
$
17,278
16.2
%
$
195,512
$
171,214
$
24,298
14.2
%
Adjusted net income margin
21.1
%
21.7
%
18.7
%
19.5
%
Adjusted diluted earnings per share
$
0.45
$
0.39
$
0.72
$
0.63
* For a definition and a reconciliation of Organic revenue
growth rate, Adjusted compensation and benefits expense, Adjusted
compensation and benefits ratio, Adjusted general and
administrative expense, Adjusted general and administrative expense
ratio, Adjusted EBITDAC, Adjusted EBITDAC margin, Adjusted net
income, Adjusted net income margin, and Adjusted diluted earnings
per share to the most directly comparable GAAP measure, see
“Non-GAAP Financial Measures and Key Performance Indicators”
below.
(1)
Compensation and benefits expense
ratio is defined as Compensation and benefits divided by Total
revenue.
(2)
General and administrative
expense ratio is defined as General and administrative expense
divided by Total revenue.
(3)
Net income margin is defined as
Net income divided by Total revenue.
(4)
See “Note 10, Earnings Per Share”
of the unaudited quarterly consolidated financial statements.
Second Quarter 2023 Review*
Total revenue for the second quarter of 2023 was $585.1 million,
an increase of 19.1% compared to $491.3 million in the prior-year
period. This increase was primarily due to continued solid Organic
revenue growth of 16.1%, driven by new client wins and expanded
relationships with existing clients, coupled with continued
expansion of the E&S market, revenue from acquisitions
completed within the trailing twelve months ended June 30, 2023,
and increased Fiduciary investment income. The largest growth
factor in the quarter was our property portfolio across our three
specialties, driven by an increase in the pricing for property
insurance as well as an increase in the flow of property risks into
the E&S market.
Total operating expenses for the second quarter of 2023 were
$462.3 million, a 19.8% increase compared to the prior-year period.
Compensation and benefits expense increased compared to the prior
year, which is heavily correlated to revenue growth, offset by a
decline in Acquisition related long-term incentive compensation as
the final payments related to the All Risks LTIP plan were made in
Q3 2022, and IPO related compensation as time passes and awards
vest. General and administrative expense also increased compared to
the prior-year period due to revenue growth, continued
normalization of business travel and client entertainment, and an
increase to Restructuring and related expenses associated with
ACCELERATE 2025.
Net income for the second quarter of 2023 increased 19.5% to
$83.8 million, compared to $70.1 million in the prior-year period.
The increase was mainly due to strong year-over-year revenue
growth, lower IPO related charges, which were partially offset by
higher Restructuring and related expenses. Diluted earnings per
share for the first quarter of 2023 was $0.26, compared to $0.22 in
the prior-year period.
Adjusted EBITDAC grew 16.9% to $194.2 million from $166.1
million in the prior-year period. Adjusted EBITDAC margin for the
quarter was 33.2%, compared to 33.8% in the prior-year period. The
increase in Adjusted EBITDAC was driven primarily by solid revenue
growth and higher Fiduciary investment income, partially offset by
increased Adjusted compensation and benefits expense, as well as
higher Adjusted general and administrative expense.
Adjusted net income for the first quarter of 2023 increased
16.2% to $123.7 million, compared to $106.4 million in the
prior-year period. Adjusted net income margin was 21.1%, compared
to 21.7% in the prior-year period. Adjusted diluted earnings per
share for the first quarter of 2023 increased 15.4% to $0.45,
compared to $0.39 in the prior-year period.
* For the definition of each of the non-GAAP measures referred
to above, as well as a reconciliation of such non-GAAP measures to
their most directly comparable GAAP measures, see “Non-GAAP
Financial Measures and Key Performance Indicators” below.
Second Quarter 2023 Revenue by Specialty
Growth in Net commissions and fees in all specialties was
primarily driven by solid organic growth.
Three Months Ended June
30,
(in thousands, except percentages)
2023
% of
total
2022
% of
total
Change
Wholesale Brokerage
$
381,616
66.6
%
$
329,225
67.2
%
$
52,391
15.9
%
Binding Authorities
69,775
12.2
59,751
12.2
10,024
16.8
Underwriting Management
121,629
21.2
101,251
20.6
20,378
20.1
Total Net commissions and fees
$
573,020
$
490,227
$
82,793
16.9
%
Six Months Ended June
30,
(in thousands, except percentages)
2023
% of
total
2022
% of
total
Change
Wholesale Brokerage
$
667,466
65.4
%
$
574,051
65.5
%
$
93,415
16.3
%
Binding Authorities
139,301
13.7
122,744
14.0
16,557
13.5
Underwriting Management
213,766
20.9
180,113
20.5
33,653
18.7
Total Net commissions and fees
$
1,020,533
$
876,908
$
143,625
16.4
%
Liquidity and Financial Condition
As of June 30, 2023, the Company had Cash and cash equivalents
of $966.0 million and outstanding debt principal of $2.0
billion.
Full Year 2023 Outlook*
The Company is updating its full year 2023 outlook for Organic
Revenue Growth Rate and maintaining its full year 2023 outlook for
Adjusted EBITDAC Margin as follows:
- Organic Revenue Growth Rate guidance for full year 2023 to be
between 13.0% – 14.5%, compared to the Company's prior guidance of
10.5% – 13.0%
- Adjusted EBITDAC Margin guidance for full year 2023 to be
between 29.0% – 30.0%
The Company is unable to provide a comparable outlook for, or a
reconciliation to, Total revenue growth rate or Net income margin
because it cannot provide a meaningful or accurate calculation or
estimation of certain reconciling items without unreasonable
effort. Its inability to do so is due to the inherent difficulty in
forecasting the timing of items that have not yet occurred and
quantifying certain amounts that are necessary for such
reconciliation, including variations in effective tax rate,
expenses to be incurred for acquisition activities, and other
one-time or exceptional items.
* For a definition of Organic revenue growth rate and Adjusted
EBITDAC margin, see “Non-GAAP Financial Measures and Key
Performance Indicators” below.
Conference Call Information
Ryan Specialty will host a conference call today at 5:00 PM ET
to discuss these results. A live audio webcast of the conference
call will be available on the Company’s website at
ryanspecialty.com in its Investors section.
The dial-in number for the conference call is (877) 451-6152
(toll-free) or (201) 389-0879 (international). Please dial the
number 10 minutes prior to the scheduled start time.
A webcast replay of the call will be available on the Company’s
website at ryanspecialty.com in its Investors section for one year
following the call.
About Ryan Specialty
Founded in 2010, Ryan Specialty (NYSE: RYAN) is a service
provider of specialty products and solutions for insurance brokers,
agents, and carriers. Ryan Specialty provides distribution,
underwriting, product development, administration, and risk
management services by acting as a wholesale broker and a managing
underwriter with delegated authority from insurance carriers. Our
mission is to provide industry-leading innovative specialty
insurance solutions for insurance brokers, agents, and carriers.
Learn more at ryanspecialty.com.
Forward-Looking Statements
All statements in this release and in the corresponding earnings
call that are not historical are “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995 and involve substantial risks and uncertainties. For
example, all statements the Company makes relating to its estimated
and projected costs, expenditures, cash flows, growth rates and
financial results, its plans, anticipated amount and timing of cost
savings relating to the ACCELERATE 2025 program, or its plans and
objectives for future operations, growth initiatives, or strategies
and the statements under the caption “Full Year 2023 Outlook” are
forward-looking statements. Words such as “anticipate,” “estimate,”
“expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,”
“should,” “can have,” “likely” and variations of such words and
similar expressions are intended to identify such forward-looking
statements. All forward-looking statements are subject to risks and
uncertainties, known and unknown, that may cause actual results to
differ materially from those that the Company expected. Specific
factors that could cause such a difference include, but are not
limited to, those disclosed previously in the Company’s filings
with the Securities and Exchange Commission (“SEC”) that include,
but are not limited to: the Company’s potential failure to develop
a succession plan for the senior management team, including Patrick
G. Ryan; the Company’s failure to recruit and retain revenue
producers; the impact of breaches in security that cause
significant system or network disruptions; the impact of improper
disclosure of confidential, personal or proprietary data; the
potential loss of the Company’s relationships with insurance
carriers or its clients, becoming dependent upon a limited number
of insurance carriers or clients or the failure to develop new
insurance carrier and client relationships; the potential that the
Company’s underwriting models contain errors or are otherwise
ineffective; any damage to the Company’s reputation; the Company's
failure to achieve the intended results of our restructuring
program, ACCELERATE 2025; any failure to maintain the valuable
aspects of our Company’s culture; the Company's inability to
successfully recover upon experiencing a disaster or other business
continuity problem; the impact of third parties that perform key
functions of the Company's business operations acting in ways that
harm our business; the cyclicality of, and the economic conditions
in, the markets in which the Company operates; conditions that
result in reduced insurer capacity; significant competitive
pressures in each of the Company’s businesses; decreases in the
premiums or commission rates set by insurers, or actions by
insurers seeking repayment of commissions; decreases in the amounts
of supplemental or contingent commissions the Company receives; the
Company’s inability to collect its receivables; decreases in
current market share as a result of disintermediation within the
insurance industry; impairment of goodwill; the impact on our
operations and financial condition from the effects of a pandemic
or the outbreak of a contagious disease and resulting governmental
and societal responses; the inability to maintain rapid growth or
to generate sufficient revenue to achieve and maintain
profitability; the impact if the Company’s MGU programs are
terminated or changed; the risks associated with the evaluation of
potential acquisitions and the integration of acquired businesses
as well as introduction of new products, lines of business and
markets; the occurrence of natural or man-made disasters; being
subject to E&O claims as well as other contingencies and legal
proceedings; not being able to generate sufficient cash flow to
service all of the Company’s indebtedness and being forced to take
other actions to satisfy its obligations under such indebtedness;
the impact of being unable to refinance the Company’s indebtedness;
and risks relating to the Company's organizational structure that
could result in conflicts of interest between the holders of the
LLC units and the holders of our Class A common stock.
For more detail on the risk factors that may affect the
Company’s results, see the section entitled "Risk Factors" in our
most recent annual report on Form 10-K filed with the SEC, and in
other documents filed with, or furnished to, the SEC. Should one or
more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary
materially from those indicated or anticipated by such
forward-looking statements. Given these factors, as well as other
variables that may affect the Company’s operating results, you are
cautioned not to place undue reliance on these forward-looking
statements, not to assume that past financial performance will be a
reliable indicator of future performance, and not to use historical
trends to anticipate results or trends in future periods. The
forward-looking statements included in this press release and on
the related earnings call relate only to events as of the date
hereof. The Company does not undertake, and expressly disclaims,
any duty or obligation to update publicly any forward-looking
statement after the date of this release, whether as a result of
new information, future events, changes in assumptions, or
otherwise.
Non-GAAP Financial Measures and Key Performance
Indicators
In assessing the performance of the Company’s business, non-GAAP
financial measures are used that are derived from the Company’s
consolidated financial information, but which are not presented in
the Company’s consolidated financial statements prepared in
accordance with GAAP. The Company considers these non-GAAP
financial measures to be useful metrics for management and
investors to facilitate operating performance comparisons from
period to period by excluding potential differences caused by
variations in capital structures, tax positions, depreciation,
amortization, and certain other items that the Company believes are
not representative of its core business. The Company uses the
following non-GAAP measures for business planning purposes, in
measuring performance relative to that of its competitors, to help
investors to understand the nature of the Company's growth, and to
enable investors to evaluate the run-rate performance of the
Company. Non-GAAP financial measures should be viewed as
supplementing, and not as an alternative or substitute for, the
consolidated financial statements prepared and presented in
accordance with GAAP. The footnotes to the reconciliation tables
below should be read in conjunction with the audited consolidated
financial statements in our Annual Report on form 10-K filed with
the SEC. Industry peers may provide similar supplemental
information but may not define similarly-named metrics in the same
way and may not make identical adjustments.
Organic revenue growth rate: Organic revenue growth rate
is defined as the percentage change in Total revenue, as compared
to the prior-year period, adjusted for revenue attributable to
acquisitions during their first 12 months of the Company’s
ownership, and other adjustments such as contingent commissions,
Fiduciary investment income, and the impact of changes in foreign
exchange rates. The most directly comparable GAAP financial metric
is Total revenue growth rate.
Adjusted compensation and benefits expense: Adjusted
compensation and benefits expense is defined as Compensation and
benefits expense adjusted to reflect items such as (i) equity-based
compensation, (ii) acquisition and restructuring related
compensation expenses, and (iii) other exceptional or non-recurring
compensation expenses, as applicable. The most directly comparable
GAAP financial metric is Compensation and benefits expense.
Adjusted general and administrative expense: Adjusted
general and administrative expense is defined as General and
administrative expense adjusted to reflect items such as (i)
acquisition and restructuring related general and administrative
expenses, and (ii) other exceptional or non-recurring general and
administrative expenses, as applicable. The most directly
comparable GAAP financial metric is General and administrative
expense.
Adjusted compensation and benefits expense ratio:
Adjusted compensation and benefits expense ratio is defined as the
Adjusted compensation and benefits expense as a percentage of Total
revenue. The most directly comparable GAAP financial metric is
Compensation and benefits expense ratio.
Adjusted general and administrative expense ratio:
Adjusted general and administrative expense ratio is defined as the
Adjusted general and administrative expense as a percentage of
Total revenue. The most directly comparable GAAP financial metric
is General and administrative expense ratio.
Adjusted EBITDAC: Adjusted EBITDAC is defined as Net
income before Interest expense, net, Income tax expense,
Depreciation, Amortization, and Change in contingent consideration,
adjusted to reflect items such as (i) equity-based compensation,
(ii) acquisition-related expenses, and (iii) other exceptional or
non-recurring items, as applicable. Acquisition-related expense
includes one-time diligence, transaction-related, and integration
costs. Acquisition related long-term incentive compensation arises
from long-term incentive plans associated with acquisitions. In
2023, Restructuring and related expense consists of compensation
and benefits, occupancy, contractors, professional services, and
license fees related to the ACCELERATE 2025 program. The
compensation and benefits expense included severance as well as
employment costs related to services rendered between the
notification and termination dates. See “Note 4, Restructuring” of
the unaudited quarterly consolidated financial statements for
further discussion of ACCELERATE 2025. The remaining costs that
preceded the restructuring plan were associated with professional
services costs related to program design and licensing costs. In
2022, Restructuring and related expense represent costs associated
with the 2020 restructuring plan. Amortization and expense consists
of charges related to discontinued prepaid incentive programs. For
the three months ended June 30, 2023, Other non-operating loss
(income) consisted of sublease income offset TRA contractual
interest. For the three months ended June 30, 2022, Other
non-operating loss (income) includes a change in the TRA liability
caused by an update in our blended state tax rates. For the six
months ended June 30, 2023, Other non-operating loss (income)
included sublease income offset by TRA contractual interest. For
the six months ended June 30, 2022, Other non-operating loss
(income) included a charge related to the change in the TRA
liability caused by a change in our blended state tax rates.
Equity-based compensation reflects non-cash equity-based expense.
IPO related expenses include general and administrative expense
associated with the preparations for Sarbanes-Oxley compliance,
tax, and accounting advisory services and compensation-related
expense primarily related to the revaluation of existing equity
awards at IPO as well as expense for new awards issued at IPO.
Total revenue less Adjusted compensation and benefits expense and
Adjusted general and administrative expense is equivalent to
Adjusted EBITDAC. For a breakout of compensation and general and
administrative costs for each addback refer to the Adjusted
compensation and benefits expense and Adjusted general and
administrative expense tables below. The most directly comparable
GAAP financial metric to Adjusted EBITDAC is Net income.
Adjusted EBITDAC margin: Adjusted EBITDAC margin is
defined as Adjusted EBITDAC as a percentage of Total revenue. The
most directly comparable GAAP financial metric is Net income
margin.
Adjusted net income: Adjusted net income is defined as
tax-effected earnings before amortization and certain items of
income and expense, gains and losses, equity-based compensation,
acquisition related long-term incentive compensation,
acquisition-related expenses, costs associated with our Initial
Public Offering (the “IPO”), and certain exceptional or
non-recurring items. The Company will be subject to United States
federal income taxes, in addition to state, local, and foreign
taxes, with respect to its allocable share of any net taxable
income of Ryan Specialty, LLC (together with its parent New Ryan
Specialty, LLC and their subsidiaries, the “LLC”). For
comparability purposes, this calculation incorporates the impact of
federal and state statutory tax rates on 100% of the Company's
adjusted pre-tax income as if the Company owned 100% of Ryan
Specialty, LLC. The most directly comparable GAAP financial metric
is Net income.
Adjusted net income margin: Adjusted net income margin is
defined as Adjusted net income as a percentage of Total revenue.
The most directly comparable GAAP financial metric is Net income
margin.
Adjusted diluted earnings per share: Adjusted diluted
earnings per share is defined as Adjusted net income divided by
diluted shares outstanding after adjusting for the effect if 100%
of the outstanding non-voting common interest units of New Ryan
Specialty, LLC (“LLC Common Units”), together with the shares of
Class B common stock, were exchanged into shares of Class A common
stock and the effect of unvested equity awards. The most directly
comparable GAAP financial metric is Diluted earnings per share.
The reconciliation of the above non-GAAP measures to each of
their most directly comparable GAAP financial measure is set forth
in the reconciliation table accompanying this release.
With respect to the Organic revenue growth rate and Adjusted
EBITDAC margin outlook presented in the “Full Year 2023 Outlook”
section of this press release, the Company is unable to provide a
comparable outlook for, or a reconciliation to, Total revenue
growth rate or Net income margin because it cannot provide a
meaningful or accurate calculation or estimation of certain
reconciling items without unreasonable effort. Its inability to do
so is due to the inherent difficulty in forecasting the timing of
items that have not yet occurred and quantifying certain amounts
that are necessary for such reconciliation, including variations in
effective tax rate, expenses to be incurred for acquisition
activities, and other one-time or exceptional items.
Consolidated Statements of Income
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except percentages and per
share data)
2023
2022
2023
2022
Revenue
Net commissions and fees
$
573,020
$
490,227
$
1,020,533
$
876,908
Fiduciary investment income
12,129
1,065
22,215
1,274
Total revenue
$
585,149
$
491,292
$
1,042,748
$
878,182
Expenses
Compensation and benefits
352,360
310,058
660,082
584,331
General and administrative
81,608
48,495
133,307
90,860
Amortization
24,368
26,233
49,553
52,896
Depreciation
2,177
1,229
4,369
2,440
Change in contingent consideration
1,796
(251
)
2,510
(1,260
)
Total operating expenses
$
462,309
$
385,764
$
849,821
$
729,267
Operating income
$
122,840
$
105,528
$
192,927
$
148,915
Interest expense, net
28,881
24,846
58,349
46,598
Loss (income) from equity method
investment in related party
(1,616
)
16
(3,611
)
558
Other non-operating loss (income)
108
(622
)
(30
)
6,898
Income before income taxes
$
95,467
$
81,288
$
138,219
$
94,861
Income tax expense
11,650
11,168
17,945
6,665
Net income
$
83,817
$
70,120
$
120,274
$
88,196
GAAP financial measures
Revenue
$
585,149
$
491,292
$
1,042,748
$
878,182
Compensation and benefits
352,360
310,058
660,082
584,331
General and administrative
81,608
48,495
133,307
90,860
Net income
83,817
70,120
120,274
88,196
Compensation and benefits expense
ratio
60.2
%
63.1
%
63.3
%
66.5
%
General and administrative expense
ratio
13.9
%
9.9
%
12.8
%
10.3
%
Net income margin
14.3
%
14.3
%
11.5
%
10.0
%
Earnings per share
$
0.27
$
0.23
$
0.39
$
0.30
Diluted earnings per share
$
0.26
$
0.22
$
0.37
$
0.28
Non-GAAP Financial Measures
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except percentages and per
share data)
2023
2022
2023
2022
Non-GAAP financial measures
Organic revenue growth rate
16.1
%
22.3
%
14.6
%
21.3
%
Adjusted compensation and benefits
expense
$
329,641
$
280,827
$
615,526
$
522,157
Adjusted compensation and benefits expense
ratio
56.3
%
57.2
%
59.0
%
59.5
%
Adjusted general and administrative
expense
$
61,347
$
44,390
$
108,046
$
82,690
Adjusted general and administrative
expense ratio
10.5
%
9.0
%
10.4
%
9.4
%
Adjusted EBITDAC
$
194,161
$
166,075
$
319,176
$
273,335
Adjusted EBITDAC margin
33.2
%
33.8
%
30.6
%
31.1
%
Adjusted net income
$
123,727
$
106,449
$
195,512
$
171,214
Adjusted net income margin
21.1
%
21.7
%
18.7
%
19.5
%
Adjusted diluted earnings per share
$
0.45
$
0.39
$
0.72
$
0.63
Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share
data)
June 30,
2023
December 31,
2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
965,987
$
992,723
Commissions and fees receivable – net
301,030
231,423
Fiduciary cash and receivables
3,327,695
2,611,647
Prepaid incentives – net
8,002
8,584
Other current assets
56,656
49,690
Total current assets
$
4,659,370
$
3,894,067
NON-CURRENT ASSETS
Goodwill
1,379,100
1,314,984
Other intangible assets
493,859
486,444
Prepaid incentives – net
18,008
20,792
Equity method investment in related
party
43,762
38,514
Property and equipment – net
32,539
31,271
Lease right-of-use assets
136,457
143,870
Deferred tax assets
415,070
396,814
Other non-current assets
57,632
56,987
Total non-current assets
$
2,576,427
$
2,489,676
TOTAL ASSETS
$
7,235,797
$
6,383,743
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
liabilities
95,923
119,022
Accrued compensation
337,455
350,369
Operating lease liabilities
19,142
22,744
Tax Receivable Agreement liabilities
16,697
—
Short-term debt and current portion of
long-term debt
30,587
30,587
Fiduciary liabilities
3,327,695
2,611,647
Total current liabilities
$
3,827,499
$
3,134,369
NON-CURRENT LIABILITIES
Accrued compensation
18,007
10,048
Operating lease liabilities
161,917
151,944
Long-term debt
1,948,786
1,951,900
Deferred tax liabilities
208
562
Tax Receivable Agreement liabilities
310,124
295,347
Other non-current liabilities
25,338
21,761
Total non-current liabilities
$
2,464,380
$
2,431,562
TOTAL LIABILITIES
$
6,291,879
$
5,565,931
STOCKHOLDERS' EQUITY
Class A common stock ($0.001 par value;
1,000,000,000 shares authorized, 115,208,931 and 112,437,825 shares
issued and outstanding at June 30, 2023 and December 31, 2022,
respectively)
115
112
Class B common stock ($0.001 par value;
1,000,000,000 shares authorized, 144,571,839 and 147,214,275 shares
issued and outstanding at June 30, 2023 and December 31, 2022,
respectively)
144
147
Class X common stock ($0.001 par value;
10,000,000 shares authorized, 640,784 shares issued and 0
outstanding at June 30, 2023 and December 31, 2022)
—
—
Preferred stock ($0.001 par value;
500,000,000 shares authorized, 0 shares issued and outstanding at
June 30, 2023 and December 31, 2022)
—
—
Additional paid-in capital
452,925
418,123
Retained earnings
97,226
53,988
Accumulated other comprehensive income
8,525
6,035
Total stockholders' equity attributable
to Ryan Specialty Holdings, Inc.
$
558,935
$
478,405
Non-controlling interests
384,983
339,407
Total stockholders' equity
$
943,918
$
817,812
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
7,235,797
$
6,383,743
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June
30,
(in thousands)
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income
$
120,274
$
88,196
Adjustments to reconcile net income to
cash flows provided by operating activities:
Loss (income) from equity method
investment in related party
(3,611
)
558
Amortization
49,553
52,896
Depreciation
4,369
2,440
Prepaid and deferred compensation
expense
4,374
18,341
Non-cash equity-based compensation
36,528
43,028
Amortization of deferred debt issuance
costs
6,080
5,984
Amortization of interest rate cap
premium
3,477
1,159
Deferred income tax expense (benefit)
11,853
(6,866
)
Loss on Tax Receivable Agreement
216
7,173
Change (net of acquisitions) in:
Commissions and fees receivable – net
(67,525
)
(33,755
)
Accrued interest liability
(330
)
7,456
Other current assets and accrued
liabilities
(31,807
)
(5,565
)
Other non-current assets and accrued
liabilities
11,385
(16,334
)
Total cash flows provided by operating
activities
$
144,836
$
164,711
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures
(5,362
)
(6,797
)
Business combinations – net of cash
acquired and cash held in a fiduciary capacity
(103,927
)
—
Repayments of prepaid incentives
15
7
Total cash flows used for investing
activities
$
(109,274
)
$
(6,790
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from senior secured notes
—
394,000
Payment of interest rate cap premium
—
(25,500
)
Repayment of term debt
(8,250
)
(8,250
)
Debt issuance costs paid
—
(2,369
)
Finance lease and other costs paid
—
(18
)
Payment of contingent consideration
(4,477
)
(6,241
)
Tax distributions to LLC Unitholders
(34,529
)
(26,222
)
Receipt of taxes related to net share
settlement of equity awards
1,895
1,062
Taxes paid related to net share settlement
of equity awards
(1,895
)
(1,062
)
Net change in fiduciary liabilities
198,073
54,357
Total cash flows provided by financing
activities
$
150,817
$
379,757
Effect of changes in foreign exchange
rates on cash, cash equivalents, and cash held in a fiduciary
capacity
(657
)
352
NET CHANGE IN CASH, CASH EQUIVALENTS,
AND CASH HELD IN A FIDUCIARY CAPACITY
$
185,722
$
538,030
CASH, CASH EQUIVALENTS, AND CASH HELD
IN A FIDUCIARY CAPACITY—Beginning balance
1,767,385
1,139,661
CASH, CASH EQUIVALENTS, AND CASH HELD
IN A FIDUCIARY CAPACITY—Ending balance
$
1,953,107
$
1,677,691
Reconciliation of cash, cash
equivalents, and cash held in a fiduciary capacity
Cash and cash equivalents
965,987
866,669
Cash held in a fiduciary
capacity
987,120
811,022
Total cash, cash equivalents, and cash
held in a fiduciary capacity
$
1,953,107
$
1,677,691
Reconciliation of Organic Revenue
Growth Rate to Total Revenue Growth Rate
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
Total revenue growth rate (GAAP)
(1)
19.1
%
26.0
%
18.7
%
25.2
%
Less: Mergers and acquisitions (2)
(1.2
)
(2.8
)
(1.4
)
(3.1
)
Change in other (3)
(1.8
)
(0.9
)
(2.7
)
(0.8
)
Organic revenue growth rate
(Non-GAAP)
16.1
%
22.3
%
14.6
%
21.3
%
(1)
For the three months ended June
30, 2023, June 30, 2023 revenue of $585.1 million less June 30,
2022 revenue of $491.3 million is a $93.8 million
period-over-period change. The change, $93.8 million, divided by
the June 30, 2022 revenue of $491.3 million, is a total revenue
change of 19.1%. For the three months ended June 30, 2022, June 30
2022 revenue of $491.3 million less June 30, 2021 revenue of $390.0
million is a $101.3 million period-over-period change. The change,
$101.3 million, divided by the June 30, 2021 revenue of $390.0
million, is a total revenue change of 26.0%. For the six months
ended June 30, 2023, June 30, 2023 revenue of $1,042.7 million less
June 30, 2022 revenue of $878.2 million is a $164.5 million
period-over-period change. The change, $164.5 million, divided by
June 30, 2022 revenue of $878.2 million, is a total revenue change
of 18.7%. For the six months ended June 30, 2022, June 30, 2022
revenue of $878.2 million less June 30, 2021 revenue of $701.5
million is a $176.7 million period-over-period change. The change,
176.7 million, divided by the June 30, 2021 revenue of $701.5
million, is a total revenue change of 25.2%.
(2)
The acquisitions adjustment
excludes net commission and fees revenue generated during the first
12 months following an acquisition. The total adjustment for the
three months ended June 30, 2023 and 2022 was $6.1 million and
$11.0 million, respectively. The total adjustment for the six
months ended June 30, 2023 and 2022 was $12.2 million and $21.6
million, respectively.
(3)
The other adjustments exclude the
period-over-period change in contingent commissions, fiduciary
investment income, and foreign exchange rates. The total adjustment
for the three months ended June 30, 2023 and 2022 was $8.8 million
and $3.7 million, respectively. The total adjustment for the six
months ended June 30, 2023 and 2022 was $23.6 million and $6.0
million, respectively.
Reconciliation of Adjusted Compensation
and Benefits Expense to Compensation and Benefits Expense
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except percentages)
2023
2022
2023
2022
Total revenue
$
585,149
$
491,292
$
1,042,748
$
878,182
Compensation and benefits
expense
$
352,360
$
310,058
$
660,082
$
584,331
Acquisition-related expense
(769
)
(43
)
(1,785
)
(101
)
Acquisition related long-term incentive
compensation
(574
)
(7,101
)
(1,152
)
(14,798
)
Restructuring and related expense
(1,139
)
(547
)
(1,869
)
(705
)
Amortization and expense related to
discontinued prepaid incentives
(1,588
)
(1,760
)
(3,222
)
(3,542
)
Equity-based compensation
(8,191
)
(5,676
)
(14,826
)
(12,480
)
Initial public offering related
expense
(10,458
)
(14,104
)
(21,702
)
(30,548
)
Adjusted compensation and benefits
expense (1)
$
329,641
$
280,827
$
615,526
$
522,157
Compensation and benefits expense
ratio
60.2
%
63.1
%
63.3
%
66.5
%
Adjusted compensation and benefits
expense ratio
56.3
%
57.2
%
59.0
%
59.5
%
(1)
Adjustments made to Compensation
and benefits expense are described in the definition of Adjusted
EBITDAC in “Non-GAAP Financial Measures and Key Performance
Indicators.”
Reconciliation of Adjusted General and
Administrative Expense to General and Administrative
Expense
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except percentages)
2023
2022
2023
2022
Total revenue
$
585,149
$
491,292
$
1,042,748
$
878,182
General and administrative
expense
$
81,608
$
48,495
$
133,307
$
90,860
Acquisition-related expense
(4,232
)
(1,600
)
(6,406
)
(2,051
)
Restructuring and related expense
(16,029
)
(2,027
)
(18,855
)
(4,993
)
Initial public offering related
expense
—
(478
)
—
(1,126
)
Adjusted general and administrative
expense (1)
$
61,347
$
44,390
$
108,046
$
82,690
General and administrative expense
ratio
13.9
%
9.9
%
12.8
%
10.3
%
Adjusted general and administrative
expense ratio
10.5
%
9.0
%
10.4
%
9.4
%
(1)
Adjustments made to General and
administrative expense are described in definition of Adjusted
EBITDAC in “Non-GAAP Financial Measures and Key Performance
Indicators.”
Reconciliation of Adjusted EBITDAC to
Net Income
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except percentages)
2023
2022
2023
2022
Total revenue
$
585,149
$
491,292
$
1,042,748
$
878,182
Net income
$
83,817
$
70,120
$
120,274
$
88,196
Interest expense, net
28,881
24,846
58,349
46,598
Income tax expense
11,650
11,168
17,945
6,665
Depreciation
2,177
1,229
4,369
2,440
Amortization
24,368
26,233
49,553
52,896
Change in contingent consideration
1,796
(251
)
2,510
(1,260
)
EBITDAC
$
152,689
$
133,345
$
253,000
$
195,535
Acquisition-related expense
5,001
1,643
8,191
2,152
Acquisition related long-term incentive
compensation
574
7,101
1,152
14,798
Restructuring and related expense
17,168
2,574
20,724
5,698
Amortization and expense related to
discontinued prepaid incentives
1,588
1,760
3,222
3,542
Other non-operating loss (income)
108
(622
)
(30
)
6,898
Equity-based compensation
8,191
5,676
14,826
12,480
IPO related expenses
10,458
14,582
21,702
31,674
(Income) / loss from equity method
investments in related party
(1,616
)
16
(3,611
)
558
Adjusted EBITDAC (1)
$
194,161
$
166,075
$
319,176
$
273,335
Net income margin
14.3
%
14.3
%
11.5
%
10.0
%
Adjusted EBITDAC margin
33.2
%
33.8
%
30.6
%
31.1
%
(1)
Adjustments made to Net income
are described in definition of Adjusted EBITDAC in “Non-GAAP
Financial Measures and Key Performance Indicators.”
Reconciliation of Adjusted Net Income
to Net Income
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except percentages)
2023
2022
2023
2022
Total revenue
$
585,149
$
491,292
$
1,042,748
$
878,182
Net income
$
83,817
$
70,120
$
120,274
$
88,196
Income tax expense
11,650
11,168
17,945
6,665
Amortization
24,368
26,233
49,553
52,896
Amortization of deferred debt issuance
costs (1)
3,041
3,173
6,080
5,984
Change in contingent consideration
1,796
(251
)
2,510
(1,260
)
Acquisition-related expense
5,001
1,643
8,191
2,152
Acquisition related long-term incentive
compensation
574
7,101
1,152
14,798
Restructuring and related expense
17,168
2,574
20,724
5,698
Amortization and expense related to
discontinued prepaid incentives
1,588
1,760
3,222
3,542
Other non-operating loss (income)
108
(622
)
(30
)
6,898
Equity-based compensation
8,191
5,676
14,826
12,480
IPO related expenses
10,458
14,582
21,702
31,674
(Income) / loss from equity method
investments in related party
(1,616
)
16
(3,611
)
558
Adjusted income before income taxes
(2)
$
166,144
$
143,173
$
262,538
$
230,281
Adjusted tax expense (3)
(42,417
)
(36,724
)
(67,026
)
(59,067
)
Adjusted net income
$
123,727
$
106,449
$
195,512
$
171,214
Net income margin
14.3
%
14.3
%
11.5
%
10.0
%
Adjusted net income margin
21.1
%
21.7
%
18.7
%
19.5
%
(1)
Interest expense, net includes
amortization of deferred debt issuance costs.
(2)
Adjustments made to Net income
are described in definition of Adjusted EBITDAC in “Non-GAAP
Financial Measures and Key Performance Indicators.”
(3)
The Company is 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 the LLC. For the three and six months ended June
30, 2023, this calculation of adjusted tax expense is based on a
federal statutory rate of 21% and a combined state income tax rate
net of federal benefits of 4.53% on 100% of our adjusted income
before income taxes as if the Company owned 100% of the LLC. For
the three and six months ended June 30, 2022, this calculation of
adjusted tax expense is based on a federal statutory rate of 21%
and a combined state income tax rate net of federal benefits of
4.65% on 100% of our adjusted income before income taxes as if the
Company owned 100% of the LLC.
Reconciliation of Adjusted Diluted
Earnings per Share to Diluted Earnings per Share
Three Months Ended
June 30,
Six Months Ended
June 30,
2023
2022
2023
2022
Earnings per share of Class A common
stock – diluted
$
0.26
$
0.22
$
0.37
$
0.28
Less: Net income attributed to dilutive
shares and substantively vested RSUs (1)
(0.02
)
(0.02
)
(0.02
)
(0.16
)
Plus: Impact of all LLC Common Units
Exchanged for Class A shares (2)
0.07
0.06
0.10
0.21
Plus: Adjustments to Adjusted net income
(3)
0.15
0.14
0.28
0.32
Plus: Dilutive impact of unvested equity
awards (4)
(0.01
)
(0.01
)
(0.01
)
(0.02
)
Adjusted diluted earnings per
share
$
0.45
$
0.39
$
0.72
$
0.63
(Share count in '000)
Weighted-average shares of Class A common
stock outstanding – diluted
123,846
120,205
123,685
264,417
Plus: Impact of all LLC Common Units
Exchanged for Class A shares (2)
143,835
144,495
143,627
—
Plus: Dilutive impact of unvested equity
awards (4)
4,252
5,090
4,546
5,386
Adjusted diluted earnings per share
diluted share count
271,933
269,791
271,857
269,804
(1)
Adjustment removes the impact of
Net income attributed to dilutive awards and substantively vested
RSUs to arrive at Net income attributable to Ryan Specialty
Holdings, Inc. For the three months ended June 30, 2023 and 2022,
this removes $2.0 million and $1.9 million of Net income,
respectively, on 123.8 million and 120.2 million weighted-average
shares of Class A common stock outstanding - diluted, respectively.
For the six months ended June 30, 2023 and 2022, this removes $3.0
million and $42.3 million of Net income, respectively, on 123.7
million and 264.4 million weighted-average shares of Class A common
stock outstanding - diluted, respectively. See “Note 10, Earnings
Per Share” of the unaudited quarterly consolidated financial
statements.
(2)
For comparability purposes, this
calculation incorporates the Net income that would be outstanding
if all LLC Common Units (together with shares of Class B common
stock) were exchanged for shares of Class A common stock. For the
three months ended June 30, 2023 and 2022, this includes $53.7
million and $45.6 million of Net income, respectively, on 267.7
million and 264.7 million weighted-average shares of Class A common
stock outstanding - diluted, respectively. For the six months ended
June 30, 2023 and 2022, this includes $77.0 million and $56.8
million of Net income, respectively, on 267.3 million and 264.4
million weighted-average shares of Class A common stock outstanding
- diluted, respectively. For the six months ended June 30, 2022,
144.0 million weighted average outstanding LLC Common Units were
considered dilutive and included in the 264.4 million
Weighted-average shares outstanding within Diluted EPS. See “Note
10, Earnings Per Share” of the unaudited quarterly consolidated
financial statements.
(3)
Adjustments to Adjusted net
income are described in the footnotes of the reconciliation of
Adjusted net income to Net income (loss) in “Adjusted Net Income
and Adjusted Net Income Margin” on 267.7 million and 264.7 million
weighted-average shares of Class A common stock outstanding -
diluted for the three months ended June 30, 2023 and 2022,
respectively, and on 267.3 million and 264.4 million shares of
Class A common stock outstanding - diluted for the six months ended
June 30, 2023 and 2022, respectively.
(4)
For comparability purposes and to
be consistent with the treatment of the adjustments to arrive at
Adjusted net income, the dilutive effect of unvested equity awards
is calculated using the treasury stock method as if the weighted
average unrecognized cost associated with the awards was $0 over
the period, less any unvested equity awards determined to be
dilutive within the Diluted EPS calculation disclosed in “Note 10,
Earnings Per Share” of the unaudited quarterly consolidated
financial statements. For the three months ended June 30, 2023 and
2022, 4.3 million and 5.1 million shares were added to the
calculation, respectively, and for the six months ended June 30,
2023 and 2022, 4.5 million and 5.4 million shares were added to the
calculation, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230803763409/en/
Investor Relations Nicholas Mezick Director, Investor
Relations Ryan Specialty IR@ryanspecialty.com Phone: (312)
784-6152
Media Relations Alice Phillips Topping SVP, Chief
Marketing & Communications Officer Ryan Specialty
Alice.Topping@ryanspecialty.com Phone: (312) 635-5976
Ryan Specialty (NYSE:RYAN)
Historical Stock Chart
From Aug 2024 to Sep 2024
Ryan Specialty (NYSE:RYAN)
Historical Stock Chart
From Sep 2023 to Sep 2024