- Total Revenue grew 22.5% year-over-year to
$532.9 million -
- Organic Revenue Growth Rate of 16.0%
year-over-year -
- Net Income of $58.5 million, or $0.18 per
diluted share -
- Adjusted EBITDAC grew 24.6% year-over-year to
$158.6 million -
- Adjusted Net Income increased 29.6% year over
year to $95.7 million, or $0.35 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 fourth quarter ended December 31,
2023.
Fourth Quarter 2023 Highlights
- Revenue grew 22.5% year-over-year to $532.9 million, compared
to $435.0 million in the prior-year period
- Organic Revenue Growth Rate* was 16.0%, compared to 10.3% in
the prior-year period
- Net Income grew 27.8% year-over-year to $58.5 million, compared
to $45.8 million in the prior-year period. Diluted Earnings per
Share was $0.18
- Adjusted EBITDAC* increased 24.6% to $158.6 million, compared
to $127.3 million in the prior-year period
- Adjusted EBITDAC Margin* of 29.8%, compared to 29.3% in the
prior-year period
- Adjusted Net Income* increased 29.6% to $95.7 million, compared
to $73.8 million in the prior-year period
- Adjusted Diluted Earnings per Share* increased 29.6%% to $0.35,
compared to $0.27 in the prior-year period
Full Year 2023 Highlights
- Revenue grew 20.4% year-over-year to $2,077.5 million, compared
to $1,725.2 million in the prior-year
- Organic Revenue Growth Rate* was 15.0%, compared to 16.4% in
the prior-year
- Net Income grew 19.1% year-over-year to $194.5 million,
compared to $163.3 million in the prior-year
- Diluted Earnings per Share was $0.52
- Adjusted EBITDAC* increased 20.7% to $624.7 million, compared
to $517.4 million in the prior-year
- Adjusted EBITDAC Margin* of 30.1%, compared to 30.0% in the
prior-year
- Adjusted Net Income* increased 20.4% to $375.6 million,
compared to $312.0 million in the prior-year
- Adjusted Diluted Earnings per Share* increased 20.0% to $1.38,
compared to $1.15 in the prior-year
“Our fourth quarter results capped off another great year, in
which we delivered 15% organic revenue growth, 21% adjusted EBITDAC
growth, and 20% adjusted EPS growth. Through a combination of our
differentiated business model, industry leading talent, speed to
market, innovative product development, and persistent dedication
to our clients, we offer a winning formula for success,” said
Patrick G. Ryan, Founder, Chairman and Chief Executive Officer of
Ryan Specialty. “We were very pleased with the success we had in
executing on our M&A strategy, as we had our second largest
year in acquired revenue and announced our agreement to acquire
Castel. These acquisitions expand our total addressable market and
provide valuable products and solutions to our clients.
Additionally, given our balance sheet strength, broad financial
flexibility, and strong free cash flow, we are pleased to initiate
a quarterly cash dividend program to return capital to and create
additional value for our investors. The decision by our Board to
initiate a cash dividend program reflects confidence in our ability
to continue to drive sustainable, profitable growth, generate
strong cash flow over the long term and execute on our robust
M&A program. In summary, we produced excellent results in 2023,
are well positioned for another strong year in 2024, and are
confident in our ability to deliver value to investors for years to
come.”
Summary of Fourth Quarter 2023
Results
Three Months Ended December
31,
Change
(in thousands, except percentages and per
share data)
2023
2022
$
%
GAAP financial measures
Total revenue
$
532,863
$
435,015
$
97,848
22.5
%
Compensation and benefits
331,735
270,542
61,193
22.6
General and administrative
73,586
57,120
16,466
28.8
Total operating expenses
436,526
355,766
80,760
22.7
Operating income
96,337
79,249
17,088
21.6
Net income
58,503
45,782
12,721
27.8
Net income attributable to Ryan Specialty
Holdings, Inc.
22,846
17,895
4,951
27.7
Compensation and benefits expense ratio
(1)
62.3
%
62.2
%
General and administrative expense ratio
(2)
13.8
%
13.1
%
Net income margin (3)
11.0
%
10.5
%
Earnings per share (4)
$
0.19
$
0.16
Diluted earnings per share (4)
$
0.18
$
0.14
Non-GAAP financial measures*
Organic revenue growth rate
16.0
%
10.3
%
Adjusted compensation and benefits
expense
$
310,416
$
252,571
$
57,845
23
%
Adjusted compensation and benefits expense
ratio
58.3
%
58.1
%
Adjusted general and administrative
expense
$
63,862
$
55,182
$
8,680
15.7
%
Adjusted general and administrative
expense ratio
12.0
%
12.7
%
Adjusted EBITDAC
$
158,585
$
127,262
$
31,323
24.6
%
Adjusted EBITDAC margin
29.8
%
29.3
%
Adjusted net income
$
95,672
$
73,833
$
21,839
29.6
%
Adjusted net income margin
18.0
%
17.0
%
Adjusted diluted earnings per share
$
0.35
$
0.27
* 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.
- Compensation and benefits expense ratio is defined as
Compensation and benefits divided by Total revenue.
- General and administrative expense ratio is defined as General
and administrative expense divided by Total revenue.
- Net income margin is defined as Net income divided by Total
revenue.
- See “Note 12, Earnings (Loss) Per Share” of the annual
consolidated financial statements.
Ryan Specialty Initiates Quarterly Dividend
Today, Ryan Specialty’s board of directors (“Board”) declared a
one-time special cash dividend of $0.23 per share on the Company's
outstanding Class A common stock. In addition, the Board initiated
a regular quarterly dividend of $0.11 per share on the Company's
outstanding Class A common stock. Both the special and regular
quarterly dividend will be payable on March 27, 2024 to
stockholders of record as of the close of business on March 13,
2024.
The special dividend of $0.23 and $0.07 of the regular quarterly
dividend will be funded by current and prior tax distributions from
Ryan Specialty, LLC that are in excess of both the corporate income
taxes payable by the Company as well as the Company's obligations
pursuant to the Tax Receivable Agreement. The remaining $0.04 of
the regular quarterly dividend will be funded by free cash flow
from Ryan Specialty, LLC and will be payable to all holders of the
Company's Class A common stock and the common units of Ryan
Specialty, LLC. We intend to pay the regular cash dividend on a
quarterly basis going forward, subject to market conditions,
contractual agreements, and approval by our Board.
Fourth Quarter 2023 Review*
Total revenue for the fourth quarter of 2023 was $532.9 million,
an increase of 22.5% compared to $435.0 million in the prior-year
period. This increase was primarily due to continued solid Organic
revenue growth of 16.0%, 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 December 31,
2023, and increased Fiduciary investment income. We experienced
growth across the majority of our property and casualty lines.
Total operating expenses for the fourth quarter of 2023 were
$436.5 million, a 22.7% increase compared to the prior-year period.
This increase was primarily due to an increase in Compensation and
benefits expense compared to the prior year resulting from higher
compensation due to revenue growth and higher Restructuring and
related expenses associated with ACCELERATE 2025, partially offset
by a decline in Acquisition related long-term incentive
compensation. General and administrative expense also increased
compared to the prior-year period due to an increase in
professional services in connection with revenue generating
activities, higher Acquisition-related expenses, higher
Restructuring and related expenses associated with ACCELERATE 2025,
and continued normalization of business travel and client
entertainment.
Net income for the fourth quarter of 2023 increased 27.8% to
$58.5 million, compared to $45.8 million in the prior-year period.
The increase was mainly due to stronger year-over-year revenue
growth.
Adjusted EBITDAC grew 24.6% in the fourth quarter of 2023 to
$158.6 million from $127.3 million in the prior-year period.
Adjusted EBITDAC margin for the quarter was 29.8%, compared to
29.3% 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 fourth quarter of 2023 increased
29.6% to $95.7 million, compared to $73.8 million in the prior-year
period. Adjusted net income margin was 18.0%, compared to 17.0% in
the prior-year period. Adjusted diluted earnings per share for the
fourth quarter of 2023 increased 29.6% to $0.35, compared to $0.27
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.
Fourth Quarter and Year to Date 2023 Net Commissions and Fees
by Specialty
Growth in Net commissions and fees in all specialties was
primarily driven by solid organic growth.
Three Months Ended December
31,
Period over Period
(in thousands, except percentages)
2023
% of total
2022
% of total
Change
Wholesale Brokerage
$
342,718
66.1
%
$
287,968
67.4
%
$
54,750
19.0
%
Binding Authority
67,414
13.0
52,697
12.3
14,717
27.9
Underwriting Management
108,586
20.9
86,737
20.3
21,849
25.2
Total Net commissions and fees
$
518,718
$
427,402
$
91,316
21.4
%
Year Ended December
31,
Period over Period
(in thousands, except percentages)
2023
% of total
2022
% of total
Change
Wholesale Brokerage
$
1,319,056
65.1
%
$
1,129,241
66.0
%
$
189,815
16.8
%
Binding Authority
275,961
13.6
231,048
13.5
44,913
19.4
Underwriting Management
431,579
21.3
351,572
20.5
80,007
22.8
Total Net commissions and fees
$
2,026,596
$
1,711,861
$
314,735
18.4
%
Liquidity and Financial Condition
As of December 31, 2023, the Company had Cash and cash
equivalents of $838.8 million and outstanding debt principal of
$2.0 billion.
Full Year 2024 Outlook*
The Company is initiating its full year 2024 outlook for both
Organic Revenue Growth Rate and Adjusted EBITDAC Margin as
follows:
- Organic Revenue Growth Rate guidance for full year 2024 to be
between 12.0% - 13.5%
- Adjusted EBITDAC Margin guidance for full year 2024 to be
between 31.0% - 31.5%
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 (benefit),
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 consisted 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 5, Restructuring” of
the annual 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 represented costs associated with
the 2020 restructuring plan. Amortization and expense consisted of
charges related to discontinued prepaid incentive programs. For the
three months and year ended December 31, 2023, Other non-operating
(income) loss included a $10.4 million charge related to the change
in the TRA liability caused by a change in our blended state tax
rates. For the three months and year ended December 31, 2022, Other
non-operating (income) loss included income of $1.7 million and a
$5.6 million charge, respectively, 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, vested Class C Incentive Units, and the
effect of unvested equity awards were exchanged into shares of
Class A common stock. The most directly comparable GAAP financial
metric is Diluted earnings (loss) per share.
The reconciliations of the above non-GAAP measures to each of
their most directly comparable GAAP financial measure are set forth
in the reconciliation tables accompanying this release.
With respect to the Organic revenue growth rate and Adjusted
EBITDAC margin outlook presented in the “Full Year 2024 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 December
31,
Year Ended December
31,
(in thousands, except percentages and per
share data)
2023
2022
2023
2022
REVENUE
Net commissions and fees
$
518,718
$
427,402
$
2,026,596
$
1,711,861
Fiduciary investment income
14,145
7,613
50,953
13,332
Total revenue
$
532,863
$
435,015
$
2,077,549
$
1,725,193
EXPENSES
Compensation and benefits
331,735
270,542
1,321,029
1,128,981
General and administrative
73,586
57,120
276,181
196,971
Amortization
27,674
25,038
106,799
103,601
Depreciation
2,468
1,787
9,038
5,690
Change in contingent consideration
1,063
1,279
5,421
442
Total operating expenses
$
436,526
$
355,766
$
1,718,468
$
1,435,685
OPERATING INCOME
$
96,337
$
79,249
$
359,081
$
289,508
Interest expense, net
29,667
29,367
119,507
104,829
Loss (income) from equity method
investment in related party
(2,849
)
—
(8,731
)
414
Other non-operating (income) loss
10,343
(1,759
)
10,380
5,073
INCOME BEFORE INCOME TAXES
$
59,176
$
51,641
$
237,925
$
179,192
Income tax expense
673
5,859
43,445
15,935
NET INCOME
$
58,503
$
45,782
$
194,480
$
163,257
GAAP financial measures
Revenue
$
532,863
$
435,015
$
2,077,549
$
1,725,193
Compensation and benefits
331,735
270,542
1,321,029
1,128,981
General and administrative
73,586
57,120
276,181
196,971
Net income
58,503
45,782
194,480
163,257
Compensation and benefits expense
ratio
62.3
%
62.2
%
63.6
%
65.4
%
General and administrative expense
ratio
13.8
%
13.1
%
13.3
%
11.4
%
Net income margin
11.0
%
10.5
%
9.4
%
9.5
%
Earnings per share
$
0.19
$
0.16
$
0.53
$
0.57
Diluted earnings per share
$
0.18
$
0.14
$
0.52
$
0.52
Non-GAAP Financial Measures
(Unaudited)
Three Months Ended December
31,
Year Ended December
31,
(in thousands, except percentages and per
share data)
2023
2022
2023
2022
Non-GAAP financial measures*
Organic revenue growth rate
16.0
%
10.3
%
15.0
%
16.4
%
Adjusted compensation and benefits
expense
$
310,416
$
252,571
$
1,222,342
$
1,021,823
Adjusted compensation and benefits expense
ratio
58.3
%
58.1
%
58.8
%
59.2
%
Adjusted general and administrative
expense
$
63,862
$
55,182
$
230,467
$
185,956
Adjusted general and administrative
expense ratio
12.0
%
12.7
%
11.1
%
10.8
%
Adjusted EBITDAC
$
158,585
$
127,262
$
624,740
$
517,414
Adjusted EBITDAC margin
29.8
%
29.3
%
30.1
%
30.0
%
Adjusted net income
$
95,672
$
73,833
$
375,582
$
311,991
Adjusted net income margin
18.0
%
17.0
%
18.1
%
18.1
%
Adjusted diluted earnings per share
$
0.35
$
0.27
$
1.38
$
1.15
Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share
data)
December 31, 2023
December 31, 2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
838,790
$
992,723
Commissions and fees receivable – net
294,195
231,423
Fiduciary cash and receivables
3,131,660
2,611,647
Prepaid incentives – net
8,718
8,584
Other current assets
62,229
49,690
Total current assets
$
4,335,592
$
3,894,067
NON-CURRENT ASSETS
Goodwill
1,646,482
1,314,984
Customer relationships
572,416
457,131
Other intangible assets
38,254
29,313
Prepaid incentives – net
15,103
20,792
Equity method investment in related
party
46,099
38,514
Property and equipment – net
42,427
31,271
Lease right-of-use assets
127,708
143,870
Deferred tax assets
383,816
396,814
Other non-current assets
39,312
56,987
Total non-current assets
$
2,911,617
$
2,489,676
TOTAL ASSETS
$
7,247,209
$
6,383,743
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
liabilities
$
136,340
$
119,022
Accrued compensation
419,560
350,369
Operating lease liabilities
21,369
22,744
Short-term debt and current portion of
long-term debt
35,375
30,587
Fiduciary liabilities
3,131,660
2,611,647
Total current liabilities
$
3,744,304
$
3,134,369
NON-CURRENT LIABILITIES
Accrued compensation
24,917
10,048
Operating lease liabilities
154,457
151,944
Long-term debt
1,943,837
1,951,900
Tax Receivable Agreement liabilities
358,898
295,347
Other non-current liabilities
41,152
22,323
Total non-current liabilities
$
2,523,261
$
2,431,562
TOTAL LIABILITIES
$
6,267,565
$
5,565,931
STOCKHOLDERS' EQUITY
Class A common stock ($0.001 par value;
1,000,000,000 shares authorized, 118,593,062 and 112,437,825 shares
issued and outstanding at December 31, 2023 and 2022,
respectively)
119
112
Class B common stock ($0.001 par value;
1,000,000,000 shares authorized, 141,621,188 and 147,214,275 shares
issued and outstanding at December 31, 2023 and 2022,
respectively)
142
147
Class X common stock ($0.001 par value;
10,000,000 shares authorized, 640,784 shares issued and 0
outstanding at December 31, 2023 and 2022)
—
—
Preferred stock ($0.001 par value;
500,000,000 shares authorized, 0 shares issued and outstanding at
December 31, 2023 and 2022)
—
—
Additional paid-in capital
441,997
418,123
Retained earnings
114,420
53,988
Accumulated other comprehensive income
3,076
6,035
Total stockholders' equity attributable
to Ryan Specialty Holdings, Inc.
$
559,754
$
478,405
Non-controlling interests
419,890
339,407
Total stockholders' equity
$
979,644
$
817,812
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
7,247,209
$
6,383,743
Consolidated Statements of Cash Flows
(Unaudited)
Year Ended December
31,
(in thousands)
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income
$
194,480
$
163,257
Adjustments to reconcile net income to
cash flows provided by operating activities:
Loss (income) from equity method
investment in related party
(8,731
)
414
Amortization
106,799
103,601
Depreciation
9,038
5,690
Prepaid and deferred compensation
expense
12,192
28,831
Non-cash equity-based compensation
69,743
77,480
Amortization of deferred debt issuance
costs
12,172
12,054
Amortization of interest rate cap
premium
6,955
4,636
Deferred income tax expense (benefit)
7,134
8,986
Deferred income tax expense from common
control reorganizations
18,356
—
Loss on extinguishment of existing
debt
—
—
Loss on Tax Receivable Agreement
11,170
5,553
Changes in operating assets and
liabilities, net of acquisitions:
Commissions and fees receivable – net
(44,185
)
(20,370
)
Accrued interest liability
934
7,776
Other current assets and accrued
liabilities
40,360
(63,659
)
Other non-current assets and accrued
liabilities
40,786
1,265
Total cash flows provided by operating
activities
$
477,203
$
335,514
CASH FLOWS FROM INVESTING
ACTIVITIES
Business combinations - net of cash
acquired and cash held in a fiduciary capacity
(446,682
)
—
Asset acquisitions
—
(7,714
)
Repayments of prepaid incentives
228
337
Capital expenditures
(29,776
)
(15,043
)
Total cash flows used in investing
activities
$
(476,230
)
$
(22,420
)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from senior secured notes
—
394,000
Payment of interest rate cap premium,
net
—
(23,326
)
Repayment of term debt
(16,500
)
(16,500
)
Debt issuance costs paid
—
(2,369
)
Finance lease and other costs paid
—
(36
)
Payment of contingent consideration
(4,477
)
(6,241
)
Purchase of remaining interest in Ryan
Re
—
—
Repurchase of preferred equity
—
—
Tax distributions to LLC unitholders
(71,674
)
(39,883
)
Equity repurchases from pre-IPO
unitholders
—
—
Repurchase of Class A common stock in the
IPO
—
—
Repurchase of pre-IPO LLC Units and
payment of Alternative TRA Payments
—
—
Issuance of Class A common stock in the
IPO, net of offering costs paid
—
—
Repayment of unsecured promissory
notes
—
—
Receipt of taxes related to net share
settlement of equity awards
7,811
7,168
Taxes paid related to net share settlement
of equity awards
(8,785
)
(7,168
)
Payment of Tax Receivable Agreement
liabilities
(16,206
)
(8,309
)
Net change in fiduciary liabilities
97,221
17,420
Total cash flows provided by (used in)
financing activities
$
(12,610
)
$
314,756
Effect of changes in foreign exchange
rates on cash, cash equivalents, and cash and cash equivalents held
in a fiduciary capacity
584
(126
)
NET CHANGE IN CASH, CASH EQUIVALENTS,
AND CASH AND CASH EQUIVALENTS HELD IN A FIDUCIARY CAPACITY
$
(11,053
)
$
627,724
CASH, CASH EQUIVALENTS, AND CASH AND
CASH EQUIVALENTS HELD IN A FIDUCIARY CAPACITY— Beginning
balance
1,767,385
1,139,661
CASH, CASH EQUIVALENTS, AND CASH AND
CASH EQUIVALENTS HELD IN A FIDUCIARY CAPACITY—Ending
balance
$
1,756,332
$
1,767,385
Reconciliation of cash, cash
equivalents, and cash and cash equivalents held in a fiduciary
capacity
Cash and cash equivalents
$
838,790
$
992,723
Cash and cash equivalents held in a
fiduciary capacity
917,542
774,662
Total cash, cash equivalents, and cash
and cash equivalents held in a fiduciary capacity
$
1,756,332
$
1,767,385
Reconciliation of Organic Revenue
Growth Rate to Total Revenue Growth Rate
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Total Revenue Growth Rate (GAAP)
(1)
22.5
%
14.9
%
20.4
%
20.4
%
Less: Mergers and Acquisitions (2)
(4.3
)
(2.2
)
(2.8
)
(2.8
)
Change in Other (3)
(2.2
)
(2.4
)
(2.6
)
(1.2
)
Organic Revenue Growth Rate (Non-
GAAP)
16.0
%
10.3
%
15.0
%
16.4
%
- For the three months ended December 31, 2023, December 31, 2023
revenue of $532.9 million less December 31, 2022 revenue of $435.0
million is a $97.8 million period-over-period change. The change,
$97.8 million, divided by the December 31, 2022 revenue of $435.0
million, is a total revenue change of 22.5%. For the three months
ended December 31, 2022, December 31, 2022 revenue of $435.0
million less December 31, 2021 revenue of $378.5 million is a $56.5
million period-over-period change. The change, $56.5 million,
divided by the December 31, 2021 revenue of $378.5 million, is a
total revenue change of 14.9%. For the year ended December 31,
2023, December 31, 2023 revenue of $2,077.5 million less December
31, 2022 revenue of $1,725.2 million is a $352.4 million
period-over-period change. The change, $352.4 million, divided by
December 31, 2022 revenue of $1,725.2 million, is a total revenue
change of 20.4%. For the year ended December 31, 2022, December 31,
2022 revenue of $1,725.2 million less December 31, 2021 revenue of
$1,432.8 million is a $292.4 million period-over-period change. The
change, $292.4 million, divided by the December 31, 2021 revenue of
$1,432.8 million, is a total revenue change of 20.4%.
- 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
December 31, 2023 and 2022 was $18.6 million and $8.5 million,
respectively. The total adjustment for the year ended December 31,
2023 and 2022 was $48.2 million and $40.0 million,
respectively.
- 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
December 31, 2023 and 2022 was $9.6 million and $8.9 million,
respectively. The total adjustment for the year ended December 31,
2023 and 2022 was $44.6 million and $16.0 million,
respectively.
Reconciliation of Adjusted Compensation
and Benefits Expense to Compensation and Benefits Expense
Three Months Ended
Year Ended
December 31,
December 31,
(in thousands, except percentages)
2023
2022
2023
2022
Total Revenue
$
532,863
$
435,015
$
2,077,549
$
1,725,193
Compensation and Benefits
Expense
$
331,735
$
270,542
$
1,321,029
$
1,128,981
Acquisition-related expense
(856
)
—
(4,186
)
(122
)
Acquisition related long-term incentive
compensation (1)
6,036
88
4,334
(22,093
)
Restructuring and related expense
(9,244
)
—
(22,651
)
(724
)
Amortization and expense related to
discontinued prepaid incentives
(1,648
)
(1,663
)
(6,441
)
(6,738
)
Equity-based compensation
(7,940
)
(5,380
)
(31,047
)
(23,390
)
IPO related expenses
(7,667
)
(11,016
)
(38,696
)
(54,091
)
Adjusted Compensation and Benefits
Expense (2)
$
310,416
$
252,571
$
1,222,342
$
1,021,823
Compensation and Benefits Expense
Ratio
62.3
%
62.2
%
63.6
%
65.4
%
Adjusted Compensation and Benefits
Expense Ratio
58.3
%
58.1
%
58.8
%
59.2
%
- In the fourth quarter of 2023, Acquisition related long-term
incentive compensation includes a $6.8 million expense reversal
related to the claw back of an All Risks LTIP payment from a
terminated employee.
- 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
Year Ended
December 31,
December 31,
(in thousands, except percentages)
2023
2022
2023
2022
Total Revenue
$
532,863
$
435,015
$
2,077,549
$
1,725,193
General and Administrative
Expense
$
73,586
$
57,120
$
276,181
$
196,971
Acquisition-related expense
(6,891
)
(1,710
)
(19,088
)
(4,477
)
Restructuring and related expense
(2,833
)
—
(26,626
)
(4,993
)
IPO related expenses
—
(228
)
—
(1,545
)
Adjusted General and Administrative
Expense (1)
$
63,862
$
55,182
$
230,467
$
185,956
General and Administrative Expense
Ratio
13.8
%
13.1
%
13.3
%
11.4
%
Adjusted General and Administrative
Expense Ratio
12.0
%
12.7
%
11.1
%
10.8
%
- 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
Year Ended
December 31,
December 31,
(in thousands, except percentages)
2023
2022
2023
2022
Total Revenue
$
532,863
$
435,015
$
2,077,549
$
1,725,193
Net Income
$
58,503
$
45,782
$
194,480
$
163,257
Interest expense, net
29,667
29,367
119,507
104,829
Income tax expense
673
5,859
43,445
15,935
Depreciation
2,468
1,787
9,038
5,690
Amortization
27,674
25,038
106,799
103,601
Change in contingent consideration
1,063
1,279
5,421
442
EBITDAC
$
120,048
$
109,112
$
478,690
$
393,754
Acquisition-related expense
7,747
1,710
23,274
4,599
Acquisition related long-term incentive
compensation (1)
(6,036
)
(88
)
(4,334
)
22,093
Restructuring and related expense
12,077
—
49,277
5,717
Amortization and expense related to
discontinued prepaid incentives
1,648
1,663
6,441
6,738
Other non-operating loss (income)
10,343
(1,759
)
10,380
5,073
Equity-based compensation
7,940
5,380
31,047
23,390
IPO related expenses
7,667
11,244
38,696
55,636
(Income) / loss from equity method
investments in related party
(2,849
)
—
(8,731
)
414
Adjusted EBITDAC (2)
$
158,585
$
127,262
$
624,740
$
517,414
Net Income Margin
11.0
%
10.5
%
9.4
%
9.5
%
Adjusted EBITDAC Margin
29.8
%
29.3
%
30.1
%
30.0
%
- In the fourth quarter of 2023, Acquisition related long-term
incentive compensation includes a $6.8 million expense reversal
related to the claw back of an All Risks LTIP payment from a
terminated employee.
- 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
Year Ended
December 31,
December 31,
(in thousands, except percentages)
2023
2022
2023
2022
Total Revenue
$
532,863
$
435,015
$
2,077,549
$
1,725,193
Net Income
$
58,503
$
45,782
$
194,480
$
163,257
Income tax expense
673
5,859
43,445
15,935
Amortization
27,674
25,038
106,799
103,601
Amortization of deferred debt issuance
costs (1)
3,047
3,037
12,172
12,054
Change in contingent consideration
1,063
1,279
5,421
442
Acquisition-related expense
7,747
1,710
23,274
4,599
Acquisition related long-term incentive
compensation
(6,036
)
(88
)
(4,334
)
22,093
Restructuring and related expense
12,077
—
49,277
5,717
Amortization and expense related to
discontinued prepaid incentives
1,648
1,663
6,441
6,738
Other non-operating loss (income)
10,343
(1,759
)
10,380
5,073
Equity-based compensation
7,940
5,380
31,047
23,390
IPO related expenses
7,667
11,244
38,696
55,636
(Income) / loss from equity method
investments in related party
(2,849
)
—
(8,731
)
414
Adjusted Income before Income Taxes
(2)
$
129,497
$
99,145
$
508,367
$
418,949
Adjusted tax expense (3)
(33,825
)
(25,312
)
(132,785
)
(106,958
)
Adjusted Net Income
$
95,672
$
73,833
$
375,582
$
311,991
Net Income Margin
11.0
%
10.5
%
9.4
%
9.5
%
Adjusted Net Income Margin
18.0
%
17.0
%
18.1
%
18.1
%
- Interest expense, net includes amortization of deferred debt
issuance costs.
- Adjustments made to Net income are described in definition of
Adjusted EBITDAC in “Non-GAAP Financial Measures and Key
Performance Indicators.”
- 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 twelve months ended December 31, 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
5.12% on 100% of our adjusted income before income taxes as if the
Company owned 100% of the LLC. For the three and twelve months
ended December 31, 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 4.53% 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
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Earnings per share of Class A common
stock – diluted
$
0.18
$
0.14
$
0.52
$
0.52
Less: Net income attributed to dilutive
shares and substantively vested RSUs (1)
—
(0.08
)
(0.03
)
(0.29
)
Plus: Impact of all LLC Common Units
exchanged for Class A shares (2)
0.04
0.10
0.24
0.38
Plus: Adjustments to Adjusted net income
(3)
0.14
0.10
0.67
0.56
Plus: Dilutive impact of unvested equity
awards (4)
(0.01
)
(0.00
)
(0.02
)
(0.02
)
Adjusted diluted earnings per
share
$
0.35
$
0.27
$
1.38
$
1.15
(Share count in '000s)
Weighted-average shares of Class A common
stock outstanding – diluted
128,295
267,771
125,745
265,750
Plus: Impact of all LLC Common Units
exchanged for Class A shares (2)
140,632
—
142,384
—
Plus: Dilutive impact of unvested equity
awards (4)
3,534
2,871
4,137
4,731
Adjusted diluted earnings per share
diluted share count
272,461
270,642
272,266
270,481
- 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 December 31, 2023 and 2022, this removes $0.4 million
and $20.8 million of Net income, respectively, on 128.3 million and
267.8 million Weighted-average shares of Class A common stock
outstanding - diluted, respectively. For the twelve months ended
December 31, 2023 and 2022, this removes $4.2 million and $76.3
million of Net income, respectively, on 128.3 million and 267.8
million Weighted-average shares of Class A common stock outstanding
- diluted, respectively. See “Note 12, Earnings (Loss) Per Share”
of the annual consolidated financial statements.
- 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) and vested Class C
Incentive Units were exchanged for shares of Class A common stock.
For the three months ended December 31, 2023 and 2022, this
includes $35.7 million and $27.9 million of Net income,
respectively, on 268.9 million and 267.8 million Weighted-average
shares of Class A common stock outstanding - diluted, respectively.
For the twelve months ended December 31, 2023 and 2022, this
includes $133.4 million and $102.2 million of Net income,
respectively, on 268.1 million and 265.8 million Weighted-average
shares of Class A common stock outstanding - diluted, respectively.
For the three months ended December 31, 2022, 144.0 million
weighted average outstanding LLC Common Units were considered
dilutive and included in the 267.8 million Weighted-average shares
of Class A common stock outstanding - diluted within Diluted EPS.
For the twelve months ended December 31, 2022, 144.0 million
weighted average outstanding LLC Common Units were considered
dilutive and included in the 265.8 million Weighted-average shares
of Class A common stock outstanding - diluted within Diluted EPS.
See “Note 12, Earnings (Loss) Per Share” of the annual consolidated
financial statements.
- 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” on
268.9 million and 267.8 million Weighted-average shares of Class A
common stock outstanding - diluted for the three months ended
December 31, 2023 and 2022, respectively, and on 268.1 million and
265.8 million shares of Weighted-average shares of Class A common
stock outstanding - diluted for the twelve months ended December
31, 2023 and 2022, respectively.
- 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 12, Earnings (Loss) Per Share”
of the annual consolidated financial statements. For the three
months ended December 31, 2023 and 2022, 3.5 million and 2.9
million shares were added to the calculation, respectively, and for
the year ended December 31, 2023 and 2022, 4.1 million and 4.7
million shares were added to the calculation, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240226090127/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)
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Ryan Specialty (NYSE:RYAN)
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From Aug 2023 to Aug 2024