Skip to main content

Ryan Specialty Reports Fourth Quarter 2022 Results

- Total Revenue grew 14.9% year-over-year to $435.0 million -

- Organic Revenue Growth Rate of 10.3% year-over-year -

- Net Income of $45.8 million, or $0.14 per diluted share -

- Adjusted EBITDAC grew 5.8% year-over-year to $127.3 million -

- Adjusted Net Income declined 4.1% year over year to $73.8 million, or $0.27 per diluted share -

- Initiates 2023 outlook for Organic Revenue Growth Rate and Adjusted EBITDAC Margin -

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, 2022.

Fourth Quarter 2022 Highlights

  • Revenue grew 14.9% year-over-year to $435.0 million, compared to $378.5 million in the prior-year period
  • Organic Revenue Growth Rate* was 10.3% for the quarter, compared to 15.4% in the prior-year period
  • Net Income grew 54.6% year-over-year to $45.8 million, compared to $29.6 million in the prior-year period. Diluted Earnings per Share was $0.14
  • Adjusted EBITDAC* increased 5.8% to $127.3 million, compared to $120.3 million in the prior-year period
  • Adjusted EBITDAC Margin* of 29.3%, compared to 31.8% in the prior-year period
  • Adjusted Net Income* decreased 4.1% to $73.8 million, compared to $77.0 million in the prior-year period
  • Adjusted Diluted Earnings per Share* decreased 6.9% to $0.27, compared to $0.29 in the prior-year period

Full Year 2022 Highlights

  • Total Revenue grew 20.4% year-over-year to $1.7 billion, compared to $1.4 billion in the prior year
  • Organic Revenue Growth Rate* was 16.4%, compared to 22.4% for the prior year
  • Net Income grew 188.3% year over year to $163.3 million, compared to $56.6 million in the prior year.
  • Adjusted EBITDAC* increased 12.4% to $517.4 million, compared to $460.2 million in the prior year
  • Adjusted EBITDAC Margin* of 30.0%, compared to 32.1% for the prior year
  • Adjusted Net Income* increased 7.5% to $312.0 million, compared to $290.1 million in the prior year
  • Adjusted Diluted Earnings per Share* increased 6.5% to $1.15, compared to $1.08 for the prior year

“The Ryan Specialty team ended 2022 on a strong note, as another quarter of double-digit organic growth enabled us to generate 16% organic revenue growth for the full year, an outstanding accomplishment considering the progressively challenging macro environment throughout the year,” said Patrick G. Ryan, Founder, Chairman and Chief Executive Officer of Ryan Specialty. “This performance is continued validation of our differentiated business model and the strong execution from our world-class teammates throughout the year on behalf of our clients. As we look ahead to 2023, we see clear opportunities to invest in our business and optimize our operations to create additional efficiencies and enhance our platform in order to capitalize on growth opportunities while accelerating margins in the mid to long term. We remain well positioned with our strong balance sheet and E&S focus to continue expanding our market share, generating profitable growth and delivering long-term value for our investors.”

Summary of Fourth Quarter 2022 Results

 

 

Three Months Ended December 31,

 

 

Change

 

(in thousands, except percentages and per share data)

 

2022

 

 

2021

 

 

$

 

 

%

 

GAAP financial measures

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

435,015

 

 

$

378,535

 

 

$

56,480

 

 

 

14.9

%

Compensation and benefits

 

 

270,542

 

 

 

253,793

 

 

 

16,749

 

 

 

6.6

 

General and administrative

 

 

57,120

 

 

 

41,971

 

 

 

15,149

 

 

 

36.1

 

Total operating expenses

 

 

355,766

 

 

 

323,286

 

 

 

32,480

 

 

 

10.0

 

Operating income

 

 

79,249

 

 

 

55,249

 

 

 

24,000

 

 

 

43.4

 

Net income

 

 

45,782

 

 

 

29,616

 

 

 

16,166

 

 

 

54.6

 

Net income attributable to Ryan Specialty Holdings, Inc.

 

 

17,895

 

 

 

10,051

 

 

 

7,844

 

 

 

78.0

 

Total revenue growth rate (1)

 

 

14.9

%

 

 

15.8

%

 

 

 

 

 

 

Compensation and benefits expense ratio (2)

 

 

62.2

%

 

 

67.0

%

 

 

 

 

 

 

General and administrative expense ratio (3)

 

 

13.1

%

 

 

11.1

%

 

 

 

 

 

 

Net income margin

 

 

10.5

%

 

 

7.8

%

 

 

 

 

 

 

Earnings (loss) per share (4)

 

$

0.16

 

 

$

0.10

 

 

 

 

 

 

 

Diluted earnings (loss) per share (4)

 

$

0.14

 

 

$

0.09

 

 

 

 

 

 

 

Non-GAAP financial measures*

 

 

 

 

 

 

 

 

 

 

 

 

Organic revenue growth rate

 

 

10.3

%

 

 

15.4

%

 

 

 

 

 

 

Adjusted compensation and benefits expense

 

$

252,571

 

 

$

221,111

 

 

$

31,460

 

 

 

14

%

Adjusted compensation and benefits expense ratio

 

 

58.1

%

 

 

58.4

%

 

 

 

 

 

 

Adjusted general and administrative expense

 

$

55,182

 

 

$

37,107

 

 

$

18,075

 

 

 

48.7

%

Adjusted general and administrative expense ratio

 

 

12.7

%

 

 

9.8

%

 

 

 

 

 

 

Adjusted EBITDAC

 

$

127,262

 

 

$

120,317

 

 

$

6,945

 

 

 

5.8

%

Adjusted EBITDAC margin

 

 

29.3

%

 

 

31.8

%

 

 

 

 

 

 

Adjusted net income

 

$

73,833

 

 

$

76,983

 

 

$

(3,150

)

 

 

(4.1

)%

Adjusted net income margin

 

 

17.0

%

 

 

20.3

%

 

 

 

 

 

 

Adjusted diluted earnings per share

 

$

0.27

 

 

$

0.29

 

 

 

 

 

 

 

* 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)

 

Total revenue growth rate is defined as 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%. December 31, 2021 revenue of $378.5 million less December 31, 2020 revenue of $326.9 million is a $51.6 million period-over-period change. The change, $51.6 million, divided by the December 31, 2020 revenue of $326.9 million is a total revenue change of 15.8%

(2)

 

Compensation and benefits expense ratio is defined as Compensation and benefits divided by Total revenue.

(3)

 

General and administrative expense ratio is defined as General and administrative expense divided by Total revenue.

(4)

 

See “Note 13, Earnings (Loss) Per Share” of the annual consolidated financial statements.

Fourth Quarter 2022 Review*

Total revenue for the fourth quarter of 2022 was $435.0 million, an increase of 14.9% compared to $378.5 million in the prior-year period. This increase was primarily due to continued solid Organic revenue growth of 10.3%, driven by new client wins and expanded relationships with existing clients, coupled with continued expansion of the E&S market, revenue from acquisitions completed in the fourth quarter of 2021 and increased Fiduciary investment income.

Total operating expenses for the fourth quarter of 2022 were $355.8 million, a 10.0% increase compared to the prior-year period. This was primarily due to an increase in Compensation and benefits expense, which is heavily correlated to revenue growth, offset by a decline in Acquisition related long-term incentives 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 to accommodate revenue growth, including continued normalization of business travel and client entertainment.

Net income for the fourth quarter of 2022 increased 54.6% to $45.8 million, compared to $29.6 million in the prior-year period. The increase was mainly due to strong year-over-year revenue growth, lower IPO related charges, and partially offset by higher Interest expense, net. Diluted earnings per share for the fourth quarter of 2022 was $0.14, compared to $0.09 in the prior-year period.

Adjusted EBITDAC of $127.3 million grew 5.8% from $120.3 million in the prior-year period. Adjusted EBITDAC margin for the quarter was 29.3%, compared to 31.8% 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 fourth quarter of 2022 decreased 4.1% to $73.8 million, compared to $77.0 million in the prior-year period. Adjusted net income margin was 17.0%, compared to 20.3% in the prior-year period. Adjusted diluted earnings per share for the fourth quarter of 2022 decreased 6.9% to $0.27, compared to $0.29 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 2022 Revenue 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)

 

2022

 

 

% of

total

 

 

2021

 

 

% of

total

 

 

Change

 

Wholesale Brokerage

 

$

287,968

 

 

 

67.4

%

 

$

255,750

 

 

 

67.6

%

 

$

32,218

 

 

 

12.6

%

Binding Authority

 

 

52,697

 

 

 

12.3

 

 

 

48,186

 

 

 

12.7

 

 

 

4,511

 

 

 

9.4

 

Underwriting Management

 

 

86,737

 

 

 

20.3

 

 

 

74,443

 

 

 

19.7

 

 

 

12,294

 

 

 

16.5

 

Total Net commissions and fees

 

$

427,402

 

 

 

 

 

$

378,379

 

 

 

 

 

$

49,023

 

 

 

13.0

%

Liquidity and Financial Condition

As of December 31, 2022, the Company had Cash and cash equivalents of $992.7 million and outstanding debt principal of $2.0 billion.

ACCELERATE 2025

Today we are announcing ACCELERATE 2025, a two-year restructuring program, effective in the first quarter, that will enable continued growth, drive innovation, and deliver sustainable productivity improvements over the long term. The program will result in approximately $65 million of cumulative one-time charges through 2024 and we expect the program to generate annual savings of approximately $35 million in 2025.

Full Year 2023 Outlook*

The Company is initiating its full year 2023 outlook for both Organic Revenue Growth Rate and Adjusted EBITDAC Margin as follows:

  • Organic Revenue Growth Rate guidance for full year 2023 to be between 10.0% – 13.0%
  • Adjusted EBITDAC Margin guidance for full year 2023 to be between 29.0% – 30.0%

* For a definition of Organic revenue growth rate and Adjusted EBITDAC margin as well as an explanation of the Company’s inability to provide reconciliations of these forward-looking non-GAAP measures, 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 or its plans and objectives for future operations, growth initiatives, or strategies and the statements under the caption “Full Year 2023 Outlook” and “Accelerate 2025" 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 cyclicality of, and the economic conditions in, the markets in which the Company operates; conditions that result in reduced insurer capacity; 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; 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; the potential that the Company’s underwriting models contain errors or are otherwise ineffective; any damage to the Company’s reputation; decreases in current market share as a result of disintermediation within the insurance industry; impairment of goodwill; 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; the impact on the Company’s operations and financial condition from the effects of the current COVID-19 pandemic; the impact of breaches in security that cause significant system or network disruptions; 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; and the impact of being unable to refinance the Company’s indebtedness.

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. The most directly comparable GAAP financial metric 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 of the exchange of 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, into shares of Class A common stock and the effect of unvested equity awards. The most directly comparable GAAP financial metric is Diluted earnings (loss) per share.

The reconciliation of the above non-GAAP measures to 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 December 31,

 

 

Year Ended

December 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

Net commissions and fees

 

$

427,402

 

 

$

378,379

 

 

$

1,711,861

 

 

$

1,432,179

 

Fiduciary investment income

 

 

7,613

 

 

 

156

 

 

 

13,332

 

 

 

592

 

Total revenue

 

$

435,015

 

 

$

378,535

 

 

$

1,725,193

 

 

$

1,432,771

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

270,542

 

 

 

253,793

 

 

 

1,128,981

 

 

 

991,618

 

General and administrative

 

 

57,120

 

 

 

41,971

 

 

 

196,971

 

 

 

138,955

 

Amortization

 

 

25,038

 

 

 

25,782

 

 

 

103,601

 

 

 

107,877

 

Depreciation

 

 

1,787

 

 

 

1,205

 

 

 

5,690

 

 

 

4,806

 

Change in contingent consideration

 

 

1,279

 

 

 

535

 

 

 

442

 

 

 

2,891

 

Total operating expenses

 

$

355,766

 

 

$

323,286

 

 

$

1,435,685

 

 

$

1,246,147

 

OPERATING INCOME

 

$

79,249

 

 

$

55,249

 

 

$

289,508

 

 

$

186,624

 

Interest expense, net

 

 

29,367

 

 

 

19,130

 

 

 

104,829

 

 

 

79,354

 

Loss from equity method investment in related party

 

 

 

 

 

1,369

 

 

 

414

 

 

 

759

 

Other non-operating (income) loss

 

 

(1,759

)

 

 

(600

)

 

 

5,073

 

 

 

44,947

 

INCOME BEFORE INCOME TAXES

 

$

51,641

 

 

$

35,350

 

 

$

179,192

 

 

$

61,564

 

Income tax expense

 

 

5,859

 

 

 

5,734

 

 

 

15,935

 

 

 

4,932

 

NET INCOME

 

$

45,782

 

 

$

29,616

 

 

$

163,257

 

 

$

56,632

 

GAAP financial measures

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

435,015

 

 

$

378,535

 

 

$

1,725,193

 

 

$

1,432,771

 

Compensation and benefits

 

 

270,542

 

 

 

253,793

 

 

 

1,128,981

 

 

 

991,618

 

General and administrative

 

 

57,120

 

 

 

41,971

 

 

 

196,971

 

 

 

138,955

 

Net income

 

 

45,782

 

 

 

29,616

 

 

 

163,257

 

 

 

56,632

 

Compensation and benefits expense ratio

 

 

62.2

%

 

 

67.0

%

 

 

65.4

%

 

 

69.2

%

General and administrative expense ratio

 

 

13.1

%

 

 

11.1

%

 

 

11.4

%

 

 

9.7

%

Net income margin

 

 

10.5

%

 

 

7.8

%

 

 

9.5

%

 

 

4.0

%

Earnings per share

 

$

0.16

 

 

$

0.10

 

 

$

0.57

 

 

$

(0.07

)

Diluted earnings per share

 

$

0.14

 

 

$

0.09

 

 

$

0.52

 

 

$

(0.07

)

Non-GAAP Financial Measures (Unaudited)

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

(in thousands, except percentages and per share data)

2022

 

 

2021

 

 

2022

 

 

2021

 

Non-GAAP financial measures*

 

 

 

 

 

 

 

 

 

 

 

Organic revenue growth rate

 

10.3

%

 

 

15.4

%

 

 

16.4

%

 

 

22.4

%

Adjusted compensation and benefits expense

$

252,571

 

 

$

221,111

 

 

$

1,021,823

 

 

$

846,563

 

Adjusted compensation and benefits expense ratio

 

58.1

%

 

 

58.4

%

 

 

59.2

%

 

 

59.1

%

Adjusted general and administrative expense

$

55,182

 

 

$

37,107

 

 

$

185,956

 

 

$

125,977

 

Adjusted general and administrative expense ratio

 

12.7

%

 

 

9.8

%

 

 

10.8

%

 

 

8.8

%

Adjusted EBITDAC

$

127,262

 

 

$

120,317

 

 

$

517,414

 

 

$

460,231

 

Adjusted EBITDAC margin

 

29.3

%

 

 

31.8

%

 

 

30.0

%

 

 

32.1

%

Adjusted net income

$

73,833

 

 

$

76,983

 

 

$

311,991

 

 

$

290,117

 

Adjusted net income margin

 

17.0

%

 

 

20.3

%

 

 

18.1

%

 

 

20.2

%

Adjusted diluted earnings per share

$

0.27

 

 

$

0.29

 

 

$

1.15

 

 

$

1.08

 

Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share data)

 

December 31, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

992,723

 

 

$

386,962

 

Commissions and fees receivable – net

 

 

231,423

 

 

 

210,252

 

Fiduciary cash and receivables

 

 

2,611,647

 

 

 

2,390,185

 

Prepaid incentives – net

 

 

8,584

 

 

 

7,726

 

Other current assets

 

 

49,690

 

 

 

15,882

 

Total current assets

 

$

3,894,067

 

 

$

3,011,007

 

NON-CURRENT ASSETS

 

 

 

 

 

 

Goodwill

 

 

1,314,984

 

 

 

1,309,267

 

Other intangible assets

 

 

486,444

 

 

 

573,930

 

Prepaid incentives – net

 

 

20,792

 

 

 

25,382

 

Equity method investment in related party

 

 

38,514

 

 

 

45,417

 

Property and equipment – net

 

 

31,271

 

 

 

15,290

 

Lease right-of-use assets

 

 

143,870

 

 

 

84,874

 

Deferred tax assets

 

 

396,814

 

 

 

382,753

 

Other non-current assets

 

 

56,987

 

 

 

10,788

 

Total non-current assets

 

$

2,489,676

 

 

$

2,447,701

 

TOTAL ASSETS

 

$

6,383,743

 

 

$

5,458,708

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

119,022

 

 

 

99,403

 

Accrued compensation

 

 

350,369

 

 

 

386,301

 

Operating lease liabilities

 

 

22,744

 

 

 

18,783

 

Short-term debt and current portion of long-term debt

 

 

30,587

 

 

 

23,469

 

Fiduciary liabilities

 

 

2,611,647

 

 

 

2,390,185

 

Total current liabilities

 

$

3,134,369

 

 

$

2,918,141

 

NON-CURRENT LIABILITIES

 

 

 

 

 

 

Accrued compensation

 

 

10,048

 

 

 

4,371

 

Operating lease liabilities

 

 

151,944

 

 

 

74,386

 

Long-term debt

 

 

1,951,900

 

 

 

1,566,627

 

Deferred tax liabilities

 

 

562

 

 

 

631

 

Tax Receivable Agreement liabilities

 

 

295,347

 

 

 

272,100

 

Other non-current liabilities

 

 

21,761

 

 

 

27,675

 

Total non-current liabilities

 

$

2,431,562

 

 

$

1,945,790

 

TOTAL LIABILITIES

 

$

5,565,931

 

 

$

4,863,931

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Class A common stock ($0.001 par value; 1,000,000,000 shares authorized, 112,437,825 and 109,894,548 shares issued and outstanding at December 31, 2022 and 2021, respectively)

 

 

112

 

 

 

110

 

Class B common stock ($0.001 par value; 1,000,000,000 shares authorized, 147,214,275 and 149,162,107 shares issued and outstanding at December 31, 2022 and 2021, respectively)

 

 

147

 

 

 

149

 

Class X common stock ($0.001 par value; 10,000,000 shares authorized, 640,784 shares issued and 0 outstanding at December 31, 2022 and 2021)

 

 

 

 

 

 

Preferred stock ($0.001 par value; 500,000,000 shares authorized, 0 shares issued and outstanding at December 31, 2022 and 2021)

 

 

 

 

 

 

Additional paid-in capital

 

 

418,123

 

 

 

348,865

 

Retained earnings (accumulated deficit)

 

 

53,988

 

 

 

(7,064

)

Accumulated other comprehensive income

 

 

6,035

 

 

 

1,714

 

Total stockholders' equity attributable to Ryan Specialty Holdings, Inc.

 

$

478,405

 

 

$

343,774

 

Non-controlling interests

 

 

339,407

 

 

 

251,003

 

Total stockholders' equity

 

$

817,812

 

 

$

594,777

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

6,383,743

 

 

$

5,458,708

 

Consolidated Statements of Cash Flows (Unaudited)

 

 

Year Ended December 31,

 

(in thousands)

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

163,257

 

 

$

56,632

 

Adjustments to reconcile net income to cash flows provided by operating activities:

 

 

 

 

 

 

Loss (gain) from equity method investment in related party

 

 

414

 

 

 

759

 

Amortization

 

 

103,601

 

 

 

107,877

 

Depreciation

 

 

5,690

 

 

 

4,806

 

Prepaid and deferred compensation expense

 

 

28,831

 

 

 

46,470

 

Non-cash equity-based compensation

 

 

77,480

 

 

 

67,534

 

Amortization of deferred debt issuance costs

 

 

12,054

 

 

 

11,372

 

Amortization of interest rate cap premium

 

 

4,636

 

 

 

 

Deferred income tax expense (benefit)

 

 

8,986

 

 

 

(1,154

)

Loss on extinguishment of existing debt

 

 

 

 

 

8,634

 

Loss on Tax Receivable Agreement

 

 

5,553

 

 

 

 

Change (net of acquisitions) in:

 

 

 

 

 

 

Commissions and fees receivable – net

 

 

(20,370

)

 

 

(29,657

)

Accrued interest liability

 

 

7,776

 

 

 

760

 

Other current assets and accrued liabilities

 

 

(63,659

)

 

 

78,728

 

Other non-current assets and accrued liabilities

 

 

1,265

 

 

 

(79,268

)

Total cash flows provided by operating activities

 

$

335,514

 

 

$

273,493

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Business combinations - net of cash acquired and cash held in a fiduciary capacity

 

 

 

 

 

(108,883

)

Asset acquisitions

 

 

(7,714

)

 

 

(343,158

)

Prepaid incentives issued – net of repayments

 

 

337

 

 

 

3,885

 

Equity method investment in related party

 

 

 

 

 

 

Capital expenditures

 

 

(15,043

)

 

 

(9,781

)

Total cash flows used for investing activities

 

$

(22,420

)

 

$

(457,937

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Contributions of members' and mezzanine equity

 

 

 

 

 

 

Allocation of contribution to Redeemable Preferred Units embedded derivative

 

 

 

 

 

 

Proceeds from senior secured notes

 

 

394,000

 

 

 

 

Payment of interest rate cap premium

 

 

(25,500

)

 

 

 

Interest rate cap receipts

 

 

2,174

 

 

 

 

Repayment of term debt

 

 

(16,500

)

 

 

(16,500

)

Borrowing of term debt

 

 

 

 

 

 

Debt issuance costs paid

 

 

(2,369

)

 

 

(2,431

)

Finance lease and other costs paid

 

 

(36

)

 

 

(129

)

Payment of contingent consideration

 

 

(6,241

)

 

 

(4,495

)

Purchase of remaining interest in Ryan Re

 

 

 

 

 

(48,368

)

Repurchase of preferred equity

 

 

 

 

 

(78,256

)

Tax distributions to LLC unitholders

 

 

(39,883

)

 

 

(47,096

)

Equity repurchases from pre-IPO unitholders

 

 

 

 

 

(3,880

)

Repurchase of Class A common stock in the IPO

 

 

 

 

 

(183,616

)

Repurchase of pre-IPO LLC Units and payment of Alternative TRA Payments

 

 

 

 

 

(780,352

)

Issuance of Class A common stock in the IPO, net of offering costs paid

 

 

 

 

 

1,448,097

 

Repayment of unsecured promissory notes

 

 

 

 

 

(1,108

)

Repayment of subordinated notes

 

 

 

 

 

 

Borrowings on revolving credit facilities

 

 

 

 

 

 

Repayments on revolving credit facilities

 

 

 

 

 

 

Receipt of taxes related to net share settlement of equity awards

 

 

7,168

 

 

 

 

Taxes paid related to net share settlement of equity awards

 

 

(7,168

)

 

 

 

Payment of Tax Receivable Agreement liabilities

 

 

(8,309

)

 

 

 

Net change in fiduciary liabilities

 

 

17,420

 

 

 

147,418

 

Total cash flows provided by financing activities

 

$

314,756

 

 

$

429,284

 

Effect of changes in foreign exchange rates on cash, cash equivalents, and cash held in a fiduciary capacity

 

 

(126

)

 

 

(883

)

NET CHANGE IN CASH, CASH EQUIVALENTS, AND CASH HELD IN A FIDUCIARY CAPACITY

 

$

627,724

 

 

$

243,957

 

CASH, CASH EQUIVALENTS, AND CASH HELD IN A FIDUCIARY CAPACITY—Beginning balance

 

 

1,139,661

 

 

 

895,704

 

CASH, CASH EQUIVALENTS, AND CASH HELD IN A FIDUCIARY CAPACITY—Ending balance

 

$

1,767,385

 

 

$

1,139,661

 

Reconciliation of cash, cash equivalents, and cash held in a fiduciary capacity

 

 

 

 

 

 

Cash and cash equivalents

 

 

992,723

 

 

 

386,962

 

Cash held in a fiduciary capacity

 

 

774,662

 

 

 

752,699

 

Total cash, cash equivalents, and cash held in a fiduciary capacity

 

$

1,767,385

 

 

$

1,139,661

 

Net Commissions and Fees

 

 

Three Months Ended December 31,

 

 

Period over Period

 

(in thousands, except percentages)

 

2022

 

 

% of

total

 

 

2021

 

 

% of

total

 

 

Change

 

Wholesale Brokerage

 

$

287,968

 

 

 

67.4

%

 

$

255,750

 

 

 

67.6

%

 

$

32,218

 

 

 

12.6

%

Binding Authority

 

 

52,697

 

 

 

12.3

 

 

 

48,186

 

 

 

12.7

 

 

 

4,511

 

 

 

9.4

 

Underwriting Management

 

 

86,737

 

 

 

20.3

 

 

 

74,443

 

 

 

19.7

 

 

 

12,294

 

 

 

16.5

 

Total Net commissions and fees

 

$

427,402

 

 

 

 

 

$

378,379

 

 

 

 

 

$

49,023

 

 

 

13.0

%

 

 

Year Ended December 31,

 

 

Period over Period

 

(in thousands, except percentages)

 

2022

 

 

% of

total

 

 

2021

 

 

% of

total

 

 

Change

 

Wholesale Brokerage

 

$

1,129,241

 

 

 

66.0

%

 

$

931,979

 

 

 

65.1

%

 

$

197,262

 

 

 

21.2

%

Binding Authority

 

 

231,048

 

 

 

13.5

 

 

 

209,622

 

 

 

14.6

 

 

 

21,426

 

 

 

10.2

 

Underwriting Management

 

 

351,572

 

 

 

20.5

 

 

 

290,578

 

 

 

20.3

 

 

 

60,994

 

 

 

21.0

 

Total Net commissions and fees

 

$

1,711,861

 

 

 

 

 

$

1,432,179

 

 

 

 

 

$

279,682

 

 

 

19.5

%

Reconciliation of Organic Revenue Growth Rate to Total Revenue Growth Rate

 

 

Three Months Ended

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

Total Revenue Growth Rate (GAAP) (1)

 

 

14.9

%

 

 

15.8

%

Less: Mergers and Acquisitions (2)

 

 

(2.2

)

 

 

(0.6

)

Change in Other (3)

 

 

(2.4

)

 

 

0.2

 

Organic Revenue Growth Rate (Non-GAAP)

 

 

10.3

%

 

 

15.4

%

(1)

 

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%. December 31, 2021 revenue of $378.5 million less December 31, 2020 revenue of $326.9 million is a $51.6 million period-over-period change. The change, $51.6 million, divided by the December 31, 2020 revenue of $326.9 million is a total revenue change of 15.8%.

(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 December 31, 2022 and 2021 was $8.5 million and $1.9 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 December 31, 2022 and 2021 was $8.9 million and $0.6 million, respectively.

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

Total Revenue Growth Rate (GAAP) (1)

 

 

20.4

%

 

 

40.7

%

Less: Mergers and Acquisitions (2)

 

 

(2.8

)

 

 

(18.3

)

Change in Other (3)

 

 

(1.2

)

 

 

0.0

 

Organic Revenue Growth Rate (Non-GAAP)

 

 

16.4

%

 

 

22.4

%

(1)

 

December 31, 2022 revenue of $1,725.2 million less December 31, 2021 revenue of $1,432.8 million is a $292.4 million year-over-year 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%. December 31, 2021 revenue of $1,432.8 million less December 31, 2020 revenue of $1,018.3 million is a $414,497 year-over-year change. The change, $414,497, divided by the December 31, 2020 revenue of $1,018.3 million is a total revenue change of 40.7%. See “Comparison of the Year Ended December 31, 2022 and 2021” for further details.

(2)

 

The mergers and acquisitions adjustment excludes net commission and fees revenue generated during the first 12 months following an acquisition. The total adjustment for the years ended December 31, 2022 and 2021 was $40.0 million and $186.4 million, respectively.

(3)

 

The other adjustments exclude the year-over-year change in contingent commissions, fiduciary investment income, and foreign exchange rates. The total adjustment for the years ended December 31, 2022 and 2021 was $16.0 million and $0.6 million, respectively.

Reconciliation of Adjusted Compensation and Benefits Expense to Compensation and Benefits Expense

 

 

Three Months Ended

 

 

 

December 31,

 

(in thousands, except percentages)

 

2022

 

 

2021

 

Total Revenue

 

$

435,015

 

 

$

378,535

 

Compensation and Benefits Expense

 

$

270,542

 

 

$

253,793

 

Acquisition related long-term incentive compensation

 

 

88

 

 

 

(9,568

)

Restructuring and related expense

 

 

 

 

 

(688

)

Amortization and expense related to discontinued prepaid incentives

 

 

(1,663

)

 

 

(1,768

)

Equity-based compensation

 

 

(5,380

)

 

 

(2,380

)

IPO related expenses

 

 

(11,016

)

 

 

(18,278

)

Adjusted Compensation and Benefits Expense (1)

 

$

252,571

 

 

$

221,111

 

Compensation and Benefits Expense Ratio

 

 

62.2

%

 

 

67.0

%

Adjusted Compensation and Benefits Expense Ratio

 

 

58.1

%

 

 

58.4

%

(1)

 

Adjustments made to Compensation and benefits expense are described in the footnotes of the reconciliation of Adjusted EBITDAC to Net income in “Reconciliation of Adjusted EBITDAC to Net Income.”

 

 

Year Ended December 31,

 

(in thousands, except percentages)

 

2022

 

 

2021

 

Total Revenue

 

$

1,725,193

 

 

$

1,432,771

 

Compensation and Benefits Expense

 

$

1,128,981

 

 

$

991,618

 

Acquisition-related expense

 

 

(122

)

 

 

 

Acquisition related long-term incentive compensation

 

 

(22,093

)

 

 

(38,405

)

Restructuring and related expense

 

 

(724

)

 

 

(9,934

)

Amortization and expense related to discontinued prepaid

incentives

 

 

(6,738

)

 

 

(7,209

)

Equity-based compensation

 

 

(23,390

)

 

 

(13,639

)

IPO related expenses

 

 

(54,091

)

 

 

(75,868

)

Adjusted Compensation and Benefits Expense (1)

 

$

1,021,823

 

 

$

846,563

 

Compensation and Benefits Expense Ratio

 

 

65.4

%

 

 

69.2

%

Adjusted Compensation and Benefits Expense Ratio

 

 

59.2

%

 

 

59.1

%

(1)

 

Adjustments made to Compensation and benefits expense are described in the footnotes of the reconciliation of Adjusted EBITDAC to Net income in “Reconciliation of Adjusted EBITDAC to Net Income.”

Reconciliation of Adjusted General and Administrative Expense to General and Administrative Expense

 

 

Three Months Ended

 

 

 

December 31,

 

(in thousands, except percentages)

 

2022

 

 

2021

 

Total Revenue

 

$

435,015

 

 

$

378,535

 

General and Administrative Expense

 

$

57,120

 

 

$

41,971

 

Acquisition-related expense

 

 

(1,710

)

 

 

(2,147

)

Restructuring and related expense

 

 

 

 

 

(441

)

Other non-recurring expense

 

 

 

 

 

3

 

IPO related expenses

 

 

(228

)

 

 

(2,279

)

Adjusted General and Administrative Expense (1)

 

$

55,182

 

 

$

37,107

 

General and Administrative Expense Ratio

 

 

13.1

%

 

 

11.1

%

Adjusted General and Administrative Expense Ratio

 

 

12.7

%

 

 

9.8

%

(1)

 

Adjustments made to General and administrative expense are described in the footnotes of the reconciliation of Adjusted EBITDAC to Net income in “Reconciliation of Adjusted EBITDAC to Net Income.”

 

 

Year Ended December 31,

 

(in thousands, except percentages)

 

2022

 

 

2021

 

Total Revenue

 

$

1,725,193

 

 

$

1,432,771

 

General and Administrative Expense

 

$

196,971

 

 

$

138,955

 

Acquisition-related expense

 

 

(4,477

)

 

 

(4,275

)

Restructuring and related expense

 

 

(4,993

)

 

 

(4,727

)

Other non-recurring expense

 

 

 

 

 

(351

)

IPO related expenses

 

 

(1,545

)

 

 

(3,625

)

Adjusted General and Administrative Expense (1)

 

$

185,956

 

 

$

125,977

 

General and Administrative Expense Ratio

 

 

11.4

%

 

 

9.7

%

Adjusted General and Administrative Expense Ratio

 

 

10.8

%

 

 

8.8

%

(1)

 

Adjustments made to General and administrative expense are described in the footnotes of the reconciliation of Adjusted EBITDAC to Net income in “Reconciliation of Adjusted EBITDAC to Net Income.”

Reconciliation of Adjusted EBITDAC to Net Income

 

 

Three Months Ended

 

 

 

December 31,

 

(in thousands, except percentages)

 

2022

 

 

2021

 

Total Revenue

 

$

435,015

 

 

$

378,535

 

Net Income

 

$

45,782

 

 

$

29,616

 

Interest expense, net

 

 

29,367

 

 

 

19,130

 

Income tax expense

 

 

5,859

 

 

 

5,734

 

Depreciation

 

 

1,787

 

 

 

1,205

 

Amortization

 

 

25,038

 

 

 

25,782

 

Change in contingent consideration

 

 

1,279

 

 

 

535

 

EBITDAC

 

$

109,112

 

 

$

82,002

 

Acquisition-related expense (1)

 

 

1,710

 

 

 

2,147

 

Acquisition related long-term incentive compensation (2)

 

 

(88

)

 

 

9,568

 

Restructuring and related expense (3)

 

 

 

 

 

1,129

 

Amortization and expense related to discontinued prepaid incentives (4)

 

 

1,663

 

 

 

1,768

 

Other non-operating loss (income) (5)

 

 

(1,759

)

 

 

(600

)

Equity-based compensation (6)

 

 

5,380

 

 

 

2,380

 

Other non-recurring expense

 

 

 

 

 

(3

)

IPO related expenses (7)

 

 

11,244

 

 

 

20,557

 

(Income) / loss from equity method investments in related party

 

 

 

 

 

1,369

 

Adjusted EBITDAC

 

$

127,262

 

 

$

120,317

 

Net Income Margin (8)

 

 

10.5

%

 

 

7.8

%

Adjusted EBITDAC Margin

 

 

29.3

%

 

 

31.8

%

(1)

 

Acquisition-related expense includes diligence, transaction-related, and integration costs. General and administrative expenses contributed to $1.7 million and $2.1 million of the acquisition-related expense for the three months ended December 31, 2022 and 2021, respectively.

(2)

 

Acquisition related long-term incentive compensation arises from long-term incentive plans associated with acquisitions.

(3)

 

Restructuring and related expense consists of de minimis Compensation and benefits for the three months ended December 31, 2022 and $0.7 million for the three months ended December 31, 2021, and General and administrative costs including occupancy and professional services fees of $0.4 million for the three months ended December 31, 2021, related to the restructuring plan. The Compensation and benefits expense includes severance as well as employment costs related to services rendered between the notification and termination dates. See “Note 5, Restructuring” of the audited consolidated financial statements for further details. The remaining costs that preceded the restructuring plan were associated with organizational design, other severance, and non-recurring lease costs.

(4)

 

Amortization and expense related to discontinued prepaid incentive programs – see “Note 15, Employee Benefit Plans, Prepaid and Long-Term Incentives” of the audited consolidated financial statements for further detail.

(5)

 

For the three months ended December 31, 2022 and 2021, Other non-operating loss (income) includes a $(1.7) million and $(0.6) million, change in the TRA liability, respectively, caused by an update in our blended state tax rates.

(6)

 

Equity-based compensation reflects non-cash equity-based expense.

(7)

 

IPO related expenses include $0.2 million and $2.3 million of General and administrative expense associated with the preparations for Sarbanes-Oxley compliance, tax, and accounting advisory services on IPO-related structure changes for the three months ended December 31, 2022 and 2021, respectively, and compensation-related expense of $11.0 million and $18.3 million for the three months ended December 31, 2022 and 2021, respectively, primarily related to the revaluation of existing equity awards at the IPO as well as expense for new awards issued at the IPO.

(8)

 

Net income margin is Net income as a percentage of Total revenue.

 

 

Year Ended December 31,

 

(in thousands, except percentages)

 

2022

 

 

2021

 

Total Revenue

 

$

1,725,193

 

 

$

1,432,771

 

Net Income

 

$

163,257

 

 

$

56,632

 

Interest expense, net

 

 

104,829

 

 

 

79,354

 

Income tax expense

 

 

15,935

 

 

 

4,932

 

Depreciation

 

 

5,690

 

 

 

4,806

 

Amortization

 

 

103,601

 

 

 

107,877

 

Change in contingent consideration

 

 

442

 

 

 

2,891

 

EBITDAC

 

$

393,754

 

 

$

256,492

 

Acquisition-related expense (1)

 

 

4,599

 

 

 

4,275

 

Acquisition related long-term incentive compensation (2)

 

 

22,093

 

 

 

38,405

 

Restructuring and related expense (3)

 

 

5,717

 

 

 

14,661

 

Amortization and expense related to discontinued prepaid incentives (4)

 

 

6,738

 

 

 

7,209

 

Other non-operating loss (income) (5)

 

 

5,073

 

 

 

44,947

 

Equity-based compensation (6)

 

 

23,390

 

 

 

13,639

 

Other non-recurring expense (7)

 

 

 

 

 

351

 

IPO related expenses (8)

 

 

55,636

 

 

 

79,493

 

(Income) / loss from equity method investments in related party

 

 

414

 

 

 

759

 

Adjusted EBITDAC (9)

 

$

517,414

 

 

$

460,231

 

Net Income Margin (10)

 

 

9.5

%

 

 

4.0

%

Adjusted EBITDAC Margin

 

 

30.0

%

 

 

32.1

%

(1)

 

Acquisition-related expense includes diligence, transaction-related, and integration costs. Compensation and benefits expenses were $0.1 million for the year ended December 31, 2022, while General and administrative expenses contributed to $4.5 million and $4.3 million of the acquisition-related expense for the years ended December 31, 2022 and 2021, respectively.

(2)

 

Acquisition related long-term incentive compensation arises from long-term incentive plans associated with acquisitions.

(3)

 

Restructuring and related expense consists of compensation and benefits of $0.7 million and $9.9 million for the years ended December 31, 2022 and 2021, respectively, and General and administrative costs including occupancy and professional services fees of $5.0 million and $4.7 million for the years ended December 31, 2022 and 2021, respectively, related to the restructuring plan. The compensation and benefits expense includes severance as well as employment costs related to services rendered between the notification and termination dates. See “Note 5, Restructuring” of the audited consolidated financial statements for further details. The remaining costs that preceded the restructuring plan were associated with organizational design, other severance, and non-recurring lease costs.

(4)

 

Amortization and expense related to discontinued prepaid incentive programs – see “Note 15, Employee Benefit Plans, Prepaid and Long-Term Incentives” of the audited consolidated financial statements for further details.

(5)

 

For the year ended December 31, 2022, Other non-operating loss includes a $5.6 million charge related to the change in the TRA liability caused by a change in our blended state tax rates. For the year ended December 31, 2021, Other non-operating loss includes the change in fair value of the embedded derivatives on the preferred equity. This change in fair value of $36.9 million was due to the occurrence of our IPO. The loss in 2021 also includes expense of $8.6 million associated with the extinguishment of a portion of our deferred debt issuance costs on the term debt.

(6)

 

Equity-based compensation reflects non-cash equity-based expense.

(7)

 

Other non-recurring expense includes one-time impacts that do not reflect the core performance of the business, including General and administrative expenses of $0.4 million for the year ended December 31, 2021, and de minimis Compensation and benefits expense for the years ended December 31, 2022 and 2021, respectively. Other non-recurring items include one-time professional services costs associated with term debt repricing, and one-time non-income tax charges and tax and accounting consultancy costs associated with potential structure changes.

(8)

 

IPO related expenses includes $1.5 million and $3.6 million for the years ended December 31, 2022 and 2021, respectively, of General and administrative expense associated with the preparations for Sarbanes-Oxley compliance, tax and accounting advisory services on IPO-related structure changes, and Compensation-related expense of $54.1 million and $75.9 million for the years ended December 31, 2022 and 2021, respectively, related primarily to the revaluation of existing equity awards at the IPO as well as expense for new awards issued at the IPO.

(9)

 

Consolidated Adjusted EBITDAC does not reflect a deduction for the Adjusted EBITDAC associated with the non-controlling interest in Ryan Re for the period of time prior to March 31, 2021 when the Company did not own 100% of Ryan Re.

(10)

 

Net income margin is Net income as a percentage of Total revenue.

Reconciliation of Adjusted Net Income to Net Income

 

 

Three Months Ended

 

 

 

December 31,

 

(in thousands, except percentages)

 

2022

 

 

2021

 

Total Revenue

 

$

435,015

 

 

$

378,535

 

Net Income

 

$

45,782

 

 

$

29,616

 

Income tax expense

 

 

5,859

 

 

 

5,734

 

Amortization

 

 

25,038

 

 

 

25,782

 

Amortization of deferred debt issuance costs (1)

 

 

3,037

 

 

 

2,826

 

Change in contingent consideration

 

 

1,279

 

 

 

535

 

Acquisition-related expense (2)

 

 

1,710

 

 

 

2,147

 

Acquisition related long-term incentive compensation (3)

 

 

(88

)

 

 

9,568

 

Restructuring and related expense (4)

 

 

 

 

 

1,129

 

Amortization and expense related to discontinued prepaid incentives (5)

 

 

1,663

 

 

 

1,768

 

Other non-operating loss (income) (6)

 

 

(1,759

)

 

 

(600

)

Equity-based compensation (7)

 

 

5,380

 

 

 

2,380

 

Other non-recurring expense

 

 

 

 

 

(3

)

IPO related expenses (8)

 

 

11,244

 

 

 

20,557

 

(Income) / loss from equity method investments in related party

 

 

 

 

 

1,369

 

Adjusted Income before Income Taxes

 

$

99,145

 

 

$

102,808

 

Adjusted tax expense (9)

 

 

(25,312

)

 

 

(25,825

)

Adjusted Net Income

 

$

73,833

 

 

$

76,983

 

Net Income Margin (10)

 

 

10.5

%

 

 

7.8

%

Adjusted Net Income Margin

 

 

17.0

%

 

 

20.3

%

(1)

 

Interest expense, net includes amortization of deferred debt issuance costs.

(2)

 

Acquisition-related expense includes diligence, transaction-related, and integration costs. General and administrative expenses contributed to $1.7 million and $2.1 million of the acquisition-related expense for the three months ended December 31, 2022 and 2021, respectively.

(3)

 

Acquisition related long-term incentive compensation arises from long-term incentive plans associated with acquisitions.

(4)

 

Restructuring and related expense consists of de minimis Compensation and benefits for the three months ended December 31, 2022 and $0.7 million for the three months ended December 31, 2021, and General and administrative costs including occupancy and professional services fees of $0.4 million for the three months ended December 31, 2021, related to the Restructuring Plan. The Compensation and benefits expense includes severance as well as employment costs related to services rendered between the notification and termination dates. See “Note 5, Restructuring” of the audited consolidated financial statements for further detail. The remaining costs that preceded the Restructuring Plan were associated with organizational design, other severance, and non-recurring lease costs.

(5)

 

Amortization and expense related to discontinued prepaid incentive programs – see “Note 15, Employee Benefit Plans, Prepaid and Long-Term Incentives” of the audited consolidated financial statements for further detail.

(6)

 

For the three months ended December 31, 2022 and 2021, Other non-operating loss (income) includes a $(1.7) million and $(0.6) million, change in the TRA liability, respectively, caused by an update in our blended state tax rates.

(7)

 

Equity-based compensation reflects non-cash equity-based expense.

(8)

 

IPO related expenses include $0.2 million and $2.3 million of General and administrative expense associated with the preparations for Sarbanes-Oxley compliance, tax, and accounting advisory services on IPO-related structure changes for the three months ended December 31, 2022 and 2021, respectively, and compensation-related expense of $11.0 million and $18.3 million for the three months ended December 31, 2022 and 2021, respectively, primarily related to the revaluation of existing equity awards at the IPO as well as expense for new awards issued at the IPO.

(9)

 

The Company is 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 the LLC. For the three 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 adjusted income before income taxes as if the Company owned 100% of the LLC. For the three months ended December 31, 2021 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 4.12% on 100% of adjusted income before income taxes as if the Company owned 100% of the LLC.

(10)

 

Net income margin is Net income as a percentage of Total revenue.

 

 

Year Ended December 31,

 

(in thousands, except percentages)

 

2022

 

 

2021

 

Total Revenue

 

$

1,725,193

 

 

$

1,432,771

 

Net Income

 

$

163,257

 

 

$

56,632

 

Income tax expense

 

 

15,935

 

 

 

4,932

 

Amortization

 

 

103,601

 

 

 

107,877

 

Amortization of deferred debt issuance costs (1)

 

 

12,054

 

 

 

11,372

 

Change in contingent consideration

 

 

442

 

 

 

2,891

 

Acquisition-related expense (2)

 

 

4,599

 

 

 

4,275

 

Acquisition related long-term incentive compensation (3)

 

 

22,093

 

 

 

38,405

 

Restructuring and related expense (4)

 

 

5,717

 

 

 

14,661

 

Amortization and expense related to discontinued prepaid incentives (5)

 

 

6,738

 

 

 

7,209

 

Other non-operating loss (income) (6)

 

 

5,073

 

 

 

44,947

 

Equity-based compensation (7)

 

 

23,390

 

 

 

13,639

 

Other non-recurring expense (8)

 

 

 

 

 

351

 

IPO related expenses (9)

 

 

55,636

 

 

 

79,493

 

(Income) / loss from equity method investments in related party

 

 

414

 

 

 

759

 

Adjusted Income before Income Taxes

 

$

418,949

 

 

$

387,443

 

Adjusted tax expense (10)

 

 

(106,958

)

 

 

(97,326

)

Adjusted Net Income (11)

 

$

311,991

 

 

$

290,117

 

Net Income Margin (12)

 

 

9.5

%

 

 

4.0

%

Adjusted Net Income Margin

 

 

18.1

%

 

 

20.2

%

(1)

 

Interest expense, net includes amortization of deferred debt issuance costs.

(2)

 

Acquisition-related expense includes diligence, transaction-related, and integration costs. Compensation and benefits expenses were $0.1 million for the year ended December 31, 2022, while General and administrative expenses contributed to $4.5 million and $4.3 million of the acquisition-related expense for the years ended December 31, 2022 and 2021, respectively.

(3)

 

Acquisition related long-term incentive compensation arises from long-term incentive plans associated with acquisitions.

(4)

 

Restructuring and related expense consists of compensation and benefits of $0.7 million and $9.9 million for the years ended December 31, 2022 and 2021, respectively, and General and administrative costs including occupancy and professional services fees of $5.0 million and $4.7 million for the years ended December 31, 2022 and 2021, respectively, related to the Restructuring Plan. The compensation and benefits expense includes severance as well as employment costs related to services rendered between the notification and termination dates. See “Note 5, Restructuring” of the audited consolidated financial statements for further detail. The remaining costs that preceded the Restructuring Plan were associated with organizational design, other severance, and non-recurring lease costs.

(5)

 

Amortization and expense related to discontinued prepaid incentive programs – see “Note 15, Employee Benefit Plans, Prepaid and Long-Term Incentives” of the audited consolidated financial statements for further detail.

(6)

 

For the year ended December 31, 2022, Other non-operating loss includes a $5.6 million charge related to the change in the TRA liability caused by a change in our blended state tax rates. For the year ended December 31, 2021, Other non-operating loss includes the change in fair value of the embedded derivatives on the Redeemable Preferred Units. This change in fair value of $36.9 million was due to the occurrence of a Realization Event in the third quarter of 2021, which is defined as a Qualified Public Offering or a Sale Transaction in the Onex Purchase Agreement. The loss in 2021 also includes expense of $8.6 million associated with the extinguishment of a portion of our deferred debt issuance costs on the term debt.

(7)

 

Equity-based compensation reflects non-cash equity-based expense.

(8)

 

Other non-recurring expense includes one-time impacts that do not reflect the core performance of the business, including General and administrative expenses of $0.4 million for the year ended December 31, 2021, and de minimis Compensation and benefits expense for the years ended December 31, 2022 and 2021. Other non-recurring items include one-time professional services costs associated with term debt repricing, and one-time non-income tax charges and tax and accounting consultancy costs associated with potential structure changes.

(9)

 

IPO related expenses includes $1.5 million and $3.6 million for the years ended December 31, 2022 and 2021, respectively, of General and administrative expense associated with the preparations for Sarbanes-Oxley compliance, tax and accounting advisory services on IPO-related structure changes, and Compensation-related expense of $54.1 million and $75.9 million for the years ended December 31, 2022 and 2021, respectively, related primarily to the revaluation of existing equity awards at the IPO as well as expense for new awards issued at the IPO.

(10)

 

The Company is 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 the LLC. For the year 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 adjusted income before income taxes as if the Company owned 100% of the LLC. For the year ended December 31, 2021 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 4.12% on 100% of adjusted income before income taxes as if the Company owned 100% of the LLC.

(11)

 

Consolidated Adjusted net income does not reflect a deduction for the Adjusted net income associated with the non-controlling interest in Ryan Re for the period of time prior to March 31, 2021 when the Company did not own 100% of Ryan Re or the non-controlling interest attributed to the retained ownership of the LLC.

(12)

 

Net income (loss) margin is Net income (loss) as a percentage of Total revenue.

Reconciliation of Adjusted Diluted Earnings per Share to Diluted Earnings per Share

 

 

Three Months Ended December 31, 2022

 

 

 

 

 

 

Adjustments

 

 

 

 

(in thousands, except per share data)

 

U.S. GAAP

 

 

Less: Net

income

attributed to

dilutive awards

and substantively

vested shares (1)

 

 

Plus: Net

income

attributed to

non-controlling interests (2)

 

 

Plus:

Adjustments

to Adjusted net income

(3)

 

 

Plus:

Dilutive

impact of

unvested equity awards

(4)

 

 

Adjusted

diluted

earnings per share

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Class A common shareholders- diluted

 

$

38,722

 

 

$

(20,827

)

 

$

27,887

 

 

$

28,051

 

 

$

 

 

$

73,833

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares of Class A common stock outstanding- diluted

 

 

267,771

 

 

 

 

 

 

 

 

 

 

 

 

2,871

 

 

 

270,642

 

Net income per share of Class A

common stock- diluted

 

$

0.14

 

 

$

(0.08

)

 

$

0.10

 

 

$

0.10

 

 

$

(0.00

)

 

$

0.27

 

(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.

(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. 143,960 weighted average outstanding LLC Common Units were considered dilutive for the three months ended December 31, 2022 and included in the 267,771 Weighted-average shares outstanding within Diluted earnings (loss) per share.

(3)

 

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”.

(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 earnings per share calculation.

 

 

Three Months Ended December 31, 2021

 

 

 

 

 

 

Adjustments

 

 

 

 

(in thousands, except per share data)

 

U.S. GAAP

 

 

Less: Net

income

attributed to

dilutive awards

and substantively vested shares (1)

 

 

Plus:

Impact of all

LLC Common

Units exchanged

for Class A shares (2)

 

 

Plus:

Adjustments

to Adjusted net income

(3)

 

 

Plus:

Dilutive

impact of

unvested equity awards

(4)

 

 

Adjusted

diluted

earnings per share

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Class A common shareholders- diluted

 

$

10,534

 

 

$

(483

)

 

$

19,565

 

 

$

47,367

 

 

$

 

 

$

76,983

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares of Class A common stock outstanding- diluted

 

 

113,531

 

 

 

 

 

 

143,153

 

 

 

 

 

 

11,852

 

 

 

268,536

 

Net income (loss) per share of Class A common stock- diluted

 

$

0.09

 

 

$

 

 

$

0.02

 

 

$

0.19

 

 

$

(0.01

)

 

$

0.29

 

(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.

(2)

 

For comparability purposes, this calculation incorporates the net income (loss) and weighted average shares of Class A common stock 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 and the non-controlling interest in Ryan Re for the period of time prior to March 31, 2021 when the Company did not own 100% of the business.

(3)

 

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”.

(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 loss per share calculation.

 

 

Year Ended December 31, 2022

 

 

 

 

 

 

Adjustments

 

 

 

 

(in thousands, except per share data)

 

U.S. GAAP

 

 

Less: Net

income

attributed to


dilutive awards

and substantively

vested shares (1)

 

 

Plus: Net

income

attributed to

non-controlling

interests (2)

 

 

Plus:

Adjustments to

Adjusted

net income

(3)

 

 

Plus:

Dilutive

impact of

unvested

equity awards

(4)

 

 

Adjusted

diluted

earnings

per share

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Class A common shareholders- diluted

 

$

137,370

 

 

$

(76,318

)

 

$

102,205

 

 

$

148,734

 

 

$

 

 

$

311,991

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares of Class A common stock outstanding- diluted

 

 

265,750

 

 

 

 

 

 

 

 

 

 

 

 

4,731

 

 

 

270,481

 

Net income per share of Class A common stock- diluted

 

$

0.52

 

 

$

(0.29

)

 

$

0.38

 

 

$

0.56

 

 

$

(0.02

)

 

$

1.15

 

(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. See “Note 13, Earnings (Loss) Per Share” of the audited consolidated financial statements in the Annual Report.

(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. 143,992 weighted average outstanding LLC Common Units were considered dilutive for the year ended December 31, 2022 and included in the 265,750 Weighted-average shares outstanding within Diluted earnings (loss) per share. See “Note 13, Earnings (Loss) Per Share” of the audited consolidated financial statements.

(3)

 

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”.

(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 earnings per share calculation disclosed in “Note 13, Earnings (Loss) Per Share” of the audited consolidated financial statements.

 

 

Year Ended December 31, 2021

 

 

 

 

 

 

Adjustments

 

 

 

 

(in thousands, except per share data)

 

U.S. GAAP

 

 

Plus: Net

income (loss)

attributable to

the LLC

before the Organizational

Transactions

 

 

Plus:

Impact of

all LLC

Common Units

exchanged for

Class A shares (1)

 

 

Plus:

Adjustments

to Adjusted

net income

(2)

 

 

Plus:

Dilutive

impact of

unvested

equity awards

(3)

 

 

Adjusted

diluted

earnings per

share

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Class A common shareholders- diluted

 

$

(7,064

)

 

$

72,937

 

 

$

(9,241

)

 

$

233,485

 

 

$

 

 

$

290,117

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares of Class A common stock outstanding- diluted

 

 

105,730

 

 

 

 

 

 

142,968

 

 

 

 

 

 

19,313

 

 

 

268,011

 

Net income (loss) per share of Class A common stock- diluted

 

$

(0.07

)

 

$

0.69

 

 

$

(0.40

)

 

$

0.94

 

 

$

(0.08

)

 

$

1.08

 

(1)

 

For comparability purposes, this calculation incorporates the net income (loss) and weighted average shares of Class A common stock 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 and the non-controlling interest in Ryan Re for the period of time prior to March 31, 2021 when the Company did not own 100% of the business.

(2)

 

Adjustments to Adjusted net income are described in the footnotes of the reconciliation of Adjusted net income to Net Income in “Adjusted Net Income and Adjusted Net Income Margin”.

(3)

 

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 Loss Per Share calculation disclosed in “Note 13, Earnings (Loss) Per Share” of the audited consolidated financial statements.

 

Contacts

Investor Relations

Noah Angeletti

SVP, Head of Investor Relations & Treasurer

Ryan Specialty

IR@ryanspecialty.com

Phone: (312) 784-6152

Media Relations

Alice Phillips Topping

SVP, Chief Marketing & Communications Officer

Ryan Specialty

Alice.Topping@ryansg.com

Phone: (312) 635-5976

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.