Company Overview - Ryan Specialty Group (RSG) was founded in 2010 and has grown to $1 billion in revenue by 2020[12] - RSG is the 2nd largest U S P&C wholesale broker and the largest U S P&C MGU[12] - The company experienced 20% organic revenue growth in 2020[12] - Total revenue growth in 2020 was 33%[12] Market Position and Strategy - 71% of RSG's premiums are placed in the E&S market[20] - The E&S market has a Compound Annual Growth Rate (CAGR) of 6 4% compared to the admitted market's 4 0% over the past decade[23] - RSG's revenue growth with the top 100 retail brokerage firms exceeded RSG's organic revenue growth of 20% in 2020[31] - Approximately $59 million of revenue was acquired in 2019, and $240 million in 2020 through strategic acquisitions[31] Financial Performance - Adjusted EBITDAC increased from $191 million in 2019 to $294 million in 2020[40] - The Adjusted EBITDAC Margin increased from 25% in 2019 to 29% in 2020[40] - The company's revenue increased from $765 million in 2019 to $1 018 billion in 2020[40]

Summary of Ryan Specialty Group (RYAN) FY Conference Call - June 03, 2025 Company Overview - **Company**: Ryan Specialty Group (RYAN) - **Industry**: Insurance, specifically specialty insurance services and distribution Key Points and Arguments 1. **Growth Performance**: Ryan Specialty has achieved six consecutive years of over 20% top-line growth and fourteen years of double-digit organic growth, positioning itself to capitalize on secular growth trends in the insurance industry [5][11] 2. **Market Dynamics**: The insurance industry is experiencing significant changes, driven by factors such as climate change, social inflation, and the consolidation of retail brokers [3][5] 3. **M&A Strategy**: The company has deployed over $2.4 billion in capital for mergers and acquisitions (M&A), with a robust pipeline for future deals, focusing on cultural, strategic, and accretive fits [6][7][8] 4. **Talent Acquisition**: Ryan Specialty emphasizes its strong talent pool, with a 98% retention rate among brokers, and is committed to recruiting and training top talent [9][10] 5. **Ecosystem of Excellence**: The company has developed a unique ecosystem that combines talent, relationships, and innovation, allowing it to stay ahead of market needs and outperform competitors [14][19] 6. **Delegated Authority Growth**: There is a significant trend towards increased utilization of delegated authority in the insurance market, with 70% of carriers anticipating an increase in the next twelve months [27][29] 7. **Market Positioning**: Ryan Specialty is positioned as a leader in the delegated authority space, with a focus on specialty solutions across retail, wholesale, and carrier environments [22][24][30] 8. **Resiliency of E&S Market**: The company highlights the durability of the excess and surplus (E&S) market, which is driven by the compulsory nature of many of its products [33] 9. **Future Guidance**: For 2025, Ryan Specialty expects organic growth of 11% to 13%, despite anticipating challenges in Q2 due to pressures in the property market [34][36] 10. **Capital Allocation**: M&A remains a top priority, with a focus on maximizing shareholder value through strategic capital allocation [36][37] Additional Important Insights - **Weather Impact**: The company is actively addressing the challenges posed by climate change and weather volatility through specialized brokerage and underwriting practices [41][42] - **High Net Worth Segment**: Ryan Specialty has successfully developed a new business vertical focused on high net worth homes, which is rapidly growing into a multibillion-dollar segment [46] - **Long-term Margin Goals**: The company aims to achieve a 35% margin target by 2027 through sustainable growth and margin expansion [39][38] This summary encapsulates the key insights and strategic directions discussed during the conference call, highlighting Ryan Specialty Group's robust growth trajectory, innovative practices, and proactive market positioning.

Insurance Advisory Partners LLC and Howden Capital Markets & Advisory acted as financial advisors to Oaktree and Velocity; JP Morgan Securities LLC served as financial advisor to Ryan Specialty. Debevoise & Plimpton LLP served as legal counsel to Velocity and Oaktree; Sidley Austin LLP served as legal counsel to Ryan Specialty; and Willkie Farr & Gallagher LLP served as legal counsel to FM. In partnership with Oaktree, Velocity has achieved significant milestones since 2022. Oaktree acquired VRU from Markel ...

Revenue Sources - For the three months ended March 31, 2025, approximately 6% of revenues were generated from international operations in the UK, Europe, Canada, India, and Singapore[268]. Debt and Interest Rates - As of March 31, 2025, the company had $1,695.8 million of outstanding principal on its Term Loan borrowings, which bears interest on a floating rate, subject to a 0.0% floor[272]. - The company entered into an interest rate cap agreement for an upfront cost of $25.5 million, with a notional amount of $1,000.0 million and a strike rate of 2.75%[273]. - A hypothetical 100 basis point increase in short-term interest rates would impact net income by $6,161 thousand, while a decrease would have the same magnitude in the opposite direction[274]. - The fair value of the Term Loan approximates the carrying amount as of March 31, 2025, based on available information[272]. Cash Management - Approximately 1,108.3 million in cash and cash equivalents held in fiduciary capacity would be affected by a 100 basis point change in interest rates, impacting fiduciary investment income by $11,083 thousand[274]. - The majority of cash and cash equivalents are held in demand deposit accounts and short-term investments, primarily consisting of AAA-rated money market funds and treasury bills[276]. Market Risks - The company is exposed to foreign currency risk, but the exposure from potential changes in exchange rates is considered immaterial[269]. - The company is subject to various market risks, including interest rate and foreign currency exchange rate fluctuations[266]. - The company has implemented an investment policy to minimize counterparty credit risk, focusing on the preservation of principal and liquidity[276].

Core Viewpoint - Ryan Specialty Group reported quarterly earnings of $0.39 per share, matching the Zacks Consensus Estimate, and showing an increase from $0.35 per share a year ago [1] - The company posted revenues of $690.17 million for the quarter, exceeding the Zacks Consensus Estimate by 1.16%, and up from $552.05 million year-over-year [2] Earnings Performance - The earnings surprise for the previous quarter was -4.26%, with actual earnings of $0.45 per share compared to an expected $0.47 [1] - Over the last four quarters, the company has surpassed consensus EPS estimates only once [1] Revenue Performance - Ryan Specialty has topped consensus revenue estimates two times over the last four quarters [2] - The current consensus EPS estimate for the upcoming quarter is $0.68 on revenues of $850.22 million, and for the current fiscal year, it is $2.09 on revenues of $3.08 billion [7] Stock Performance - Ryan Specialty shares have increased by approximately 2.1% since the beginning of the year, contrasting with a -5.3% decline in the S&P 500 [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [6] Industry Outlook - The Insurance - Brokerage industry is currently ranked in the bottom 14% of over 250 Zacks industries, which may negatively impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that the outlook for the industry can materially affect stock performance [5][8]

Financial Data and Key Metrics Changes - Total revenue grew by 25% to $690 million, driven by organic revenue growth of 12.9% and contributions from M&A adding 13 percentage points [23][4][3] - Adjusted EBITDAC increased by 27.5% to $200 million, with the adjusted EBITDAC margin expanding by 60 basis points to 29.1% [24][4] - Adjusted earnings per share rose by 11.4% to $0.39, while there was a GAAP net loss of $4 million due to a nonrecurring deferred tax expense [24][25] Business Line Data and Key Metrics Changes - The casualty specialty experienced strong growth with high renewal retention and new business, particularly in habitational risks, transportation, construction, and healthcare [14][16] - The property specialty showed modest growth despite a challenging environment, with continued pricing declines but high renewal retention [12][13] - The delegated authority specialty had a strong start in 2025, driven by top-tier talent and expanding product offerings [17] Market Data and Key Metrics Changes - The E&S market is expected to grow in importance, with risks moving into this market due to its ability to offer solutions for complex risks [9][10] - The company noted a robust flow of business into the specialty channels, particularly in casualty, indicating strong market demand [31][9] Company Strategy and Development Direction - The company aims to continue delivering innovative solutions, executing its M&A strategy, and increasing profitability while investing in its platform [7][5] - The focus on M&A has significantly expanded the total addressable market and enhanced capabilities to serve clients [5][19] - The company is committed to balancing investments in talent and technology with margin expansion [21][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased uncertainty around global trade and economic health, but expressed confidence in navigating challenges due to a diversified business model [6][7] - The company expects to maintain strong organic growth and profitability despite potential headwinds in the property market [7][24] Other Important Information - The acquisition of USQ Risk is expected to add approximately $11 million in annualized revenue and enhance capabilities in alternative risk offerings [19][24] - The company plans to continue monitoring macroeconomic conditions closely for any potential impacts on business [27] Q&A Session Summary Question: Can you discuss the sustainability of upper single-digit inorganic revenue growth? - Management indicated a robust M&A pipeline with strong double-digit flow in specialty channels, remaining optimistic about future opportunities [31] Question: How might the USQ Risk acquisition scale up in revenue? - Management emphasized the strategic nature of the acquisition and the potential for significant organic growth through new talent and capabilities [34][36] Question: What are the technology investments contributing to growth? - Management highlighted efforts to streamline workflows and experiment with AI solutions to enhance operational efficiency [42] Question: What are the expectations for property growth in Q2? - Management acknowledged Q2 as a challenging comp but expects modest growth in property despite rate deceleration [46][73] Question: How is the M&A pipeline looking? - Management confirmed a robust pipeline with opportunities across small, medium, and large deals, maintaining a focus on strategic fit [75][78] Question: What is the outlook for construction and economic pressures? - Management reported strong construction results with no noticeable changes in the market, indicating continued strength in this area [59] Question: How is the company taking share in the submission flow? - Management noted a double-digit increase in submission flow and opportunities for growth through brokerage consolidation [62]

Financial Data and Key Metrics Changes - Total revenue grew by 25% to $690 million, driven by organic revenue growth of 12.9% and contributions from M&A adding 13 percentage points [22][4] - Adjusted EBITDAC increased by 27.5% to $200 million, with an adjusted EBITDAC margin expanding by 60 basis points to 29.1% [22][4] - Adjusted earnings per share rose by 11.4% to $0.39, while a GAAP net loss of $4 million was reported due to a nonrecurring tax expense [22][23] Business Line Data and Key Metrics Changes - The casualty specialty experienced strong growth with high renewal retention and new business, particularly in habitational risks, transportation, construction, and healthcare [14][15] - The property specialty showed modest growth despite pricing declines, with expectations for continued competitive rates in the near term [12][13] - The delegated authority specialties, including binding and underwriting management, reported strong organic growth, particularly in casualty and transactional liability, with significant contributions from recent acquisitions [16][17] Market Data and Key Metrics Changes - The E&S market is expected to grow in importance, with risks moving into this market due to its ability to offer solutions for complex risks [9][10] - The company noted a robust flow of business into the specialty channels, particularly in casualty, with property also showing surprising strength [30][31] Company Strategy and Development Direction - The company aims to continue delivering innovative solutions, executing its M&A strategy, and increasing profitability while investing in its platform [7][5] - The focus remains on expanding the total addressable market through acquisitions and enhancing capabilities to serve clients [5][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased uncertainty around global trade and economic health, but expressed confidence in navigating challenges due to a diversified business model [6][7] - The company expects to maintain strong organic growth and profitability, driven by its strategic positioning in the specialty insurance market [7][19] Other Important Information - The acquisition of USQ Risk is expected to add approximately $11 million in annualized revenue and enhance the company's capabilities in alternative risk offerings [18] - The company plans to continue monitoring macroeconomic conditions closely for potential impacts on its business [26] Q&A Session Summary Question: Can you discuss the sustainability of upper single-digit inorganic revenue growth? - Management indicated a robust M&A pipeline with strong double-digit business flow, particularly in specialty channels, and expressed optimism for future opportunities [30][31] Question: How might the USQ Risk acquisition scale up in revenue? - Management emphasized the strategic nature of the acquisition and the potential for significant organic growth through new talent and capabilities [32][34] Question: What technology investments are being made to enhance growth and efficiency? - The company is focused on streamlining workflows and experimenting with AI solutions to improve operational efficiency and reduce cycle times [40][41] Question: What are the expectations for property growth in the upcoming quarters? - Management expects modest growth in property despite headwinds, with Q2 being a challenging comp due to previous strong performance [45][70] Question: How is the M&A pipeline looking currently? - The company has a robust pipeline of small, medium, and large deals, with a willingness to temporarily exceed leverage comfort for the right opportunities [73][76] Question: What is the outlook for construction and economic pressures? - Management reported strong construction results with no noticeable changes in the market, indicating continued strength in infrastructure and residential construction [59] Question: How is the company taking share in the submission flow? - Management noted a double-digit increase in submission flow and highlighted opportunities in the consolidation of brokerage intermediaries [61][62]

Financial Data and Key Metrics Changes - Total revenue grew by 25% to $690 million, driven by organic revenue growth of 12.9% and contributions from M&A adding 13 percentage points [3][23] - Adjusted EBITDAC increased by 27.5% to $200 million, with an adjusted EBITDAC margin expanding by 60 basis points to 29.1% [4][23] - Adjusted earnings per share rose by 11.4% to $0.39, while there was a GAAP net loss of $4 million due to a nonrecurring deferred tax expense [23][24] Business Line Data and Key Metrics Changes - The casualty specialty experienced strong growth with high renewal retention and new business, particularly in habitational risks, transportation, construction, and healthcare [14] - The property specialty showed modest growth despite a challenging environment, with continued pricing declines but high renewal retention [12][13] - The delegated authority specialties, including binding authority and underwriting management, had strong organic growth, particularly in casualty and transactional liability [15][16] Market Data and Key Metrics Changes - The E&S market is expected to grow in importance, with risks moving into this market due to its ability to handle complex and uncertain loss environments [9][10] - The company noted a robust flow of business into the specialty channels, particularly in casualty, indicating strong market demand [31] Company Strategy and Development Direction - The company aims to continue delivering innovative solutions, executing its M&A strategy, and increasing profitability while investing in its platform [6][20] - The focus on M&A has significantly expanded the total addressable market and enhanced capabilities to serve clients [5][19] - The company is committed to balancing investments in talent and technology with margin expansion to ensure sustainable growth [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current uncertain economic environment, citing a diversified business model and specialized expertise [6][24] - The company anticipates continued organic growth and profitability, despite challenges in the property market [27][73] Other Important Information - The acquisition of USQ Risk is expected to add approximately $11 million in annualized revenue and enhance the company's capabilities in alternative risk offerings [19] - The company maintains a robust M&A pipeline, focusing on strategic and accretive opportunities [20][76] Q&A Session Summary Question: Can you discuss the sustainability of upper single-digit inorganic revenue growth? - Management indicated a strong double-digit flow of business into the channel, with a robust M&A pipeline, suggesting optimism for future growth [31] Question: What is the potential for scaling the USQ Risk acquisition? - Management emphasized the strategic nature of the acquisition and the potential for significant organic growth through new talent and capabilities [34][37] Question: Can you provide insights on technology investments and their impact on growth? - The company is streamlining workflows and experimenting with AI solutions to enhance operational efficiency and client service [44] Question: How do you expect property growth to trend in the upcoming quarters? - Management acknowledged the challenges in property but expressed confidence in maintaining modest growth through strong new business and retention [72][73] Question: What is the current state of the M&A pipeline? - The company has a robust pipeline of small, medium, and large deals, with a willingness to temporarily exceed leverage comfort for the right opportunities [76][78]

Revenue Performance - Total revenue for Q1 2025 increased by 25.0% year-over-year to $690.2 million, compared to $552.0 million in the prior-year period[1] - Total revenue for the three months ended March 31, 2025, was $690,166,000, a 25% increase from $552,046,000 in the same period of 2024[56] - For the twelve months ended March 31, 2025, total revenue reached $2,653,830,000, with a net income of $184,847,000[63] Organic Revenue Growth - Organic revenue growth rate was 12.9% for the quarter, down from 13.7% in the prior-year period[4] - Organic revenue growth rate for the three months ended March 31, 2025, was 12.9%, compared to 13.7% in the same period of 2024[45] - Full year 2025 outlook for organic revenue growth rate is between 11.0% – 13.0%[22] Income and Earnings - Net income decreased to a loss of $(4.4) million, compared to a profit of $40.7 million in the prior-year period[9] - Net income (loss) for the three months ended March 31, 2025, was $(4,389,000), compared to a net income of $40,677,000 in 2024, resulting in a net income margin of (0.6)%[58] - Adjusted net income increased by 13.0% to $107.8 million, with an adjusted net income margin of 15.6%[11] - Adjusted net income for the three months ended March 31, 2025, was $107,839,000, representing a margin of 15.6%[58] Earnings Per Share - Adjusted diluted earnings per share rose by 11.4% to $0.39, compared to $0.35 in the prior-year period[11] - Adjusted diluted earnings per share for the three months ended March 31, 2025, was $0.39, compared to $0.35 in the same period of 2024[45] Operating Expenses - Total operating expenses increased by 23.1% to $589.9 million, primarily due to higher compensation and benefits expenses[7] - Compensation and benefits expense ratio for the three months ended March 31, 2025, was 62.3%, down from 67.7% in the same period of 2024[44] - General and administrative expense ratio for the three months ended March 31, 2025, was 15.4%, up from 13.7% in the same period of 2024[44] EBITDAC Performance - Adjusted EBITDAC grew by 27.5% to $200.5 million, with an adjusted EBITDAC margin of 29.1%[10] - Adjusted EBITDAC for the three months ended March 31, 2025, was $200,501,000, up from $157,222,000 in 2024, with an adjusted EBITDAC margin of 29.1%[57] - Full year 2025 adjusted EBITDAC margin guidance is between 32.5% – 33.5%[22] Cash Flow and Assets - The company incurred cash flows used in operating activities of $142,825 thousand in Q1 2025, compared to $116,539 thousand in Q1 2024[47] - Cash and cash equivalents decreased from $540,203 thousand as of December 31, 2024, to $203,549 thousand as of March 31, 2025, a decline of approximately 62.3%[46] - Total current assets decreased from $4,788,858 thousand as of December 31, 2024, to $4,609,110 thousand as of March 31, 2025, a decline of approximately 3.8%[46] Liabilities and Equity - Total liabilities increased from $8,551,633 thousand as of December 31, 2024, to $8,832,726 thousand as of March 31, 2025, representing a rise of approximately 3.3%[46] - Total stockholders' equity attributable to Ryan Specialty Holdings, Inc. decreased from $627,662 thousand as of December 31, 2024, to $542,518 thousand as of March 31, 2025, a decline of approximately 13.6%[46] Interest Expense - Interest expense for the three months ended March 31, 2025, was $54.508 million, compared to $29.400 million in the same period of 2024[44] - Interest expense, net for the three months ended March 31, 2025, was $54,508,000, compared to $29,400,000 in 2024[56] Acquisition-Related Expenses - The company incurred acquisition-related expenses of $17,302,000 for the three months ended March 31, 2025, compared to $8,437,000 in 2024[58] Dividend Declaration - The company declared a regular quarterly dividend of $0.12 per share, payable on May 27, 2025[16]

Financial Performance and Risks - Approximately 5% and 3% of the company's revenues for the years ended December 31, 2024, and 2023, respectively, were generated outside of the United States, exposing the company to currency risk from exchange rate fluctuations [218]. - The company is subject to various risks including changes in tax laws, decreased commission revenues due to proposed tort reform legislation, and potential adverse effects from outstanding debt [22]. - The company is experiencing increased scrutiny regarding compensation practices in the insurance brokerage industry, which may affect future revenue streams [252]. - The company’s ability to generate sufficient cash flow to service all indebtedness is subject to various economic and competitive factors beyond its control [273]. - The company may incur additional indebtedness in the future, which could exacerbate risks associated with its substantial indebtedness [272]. - The company is subject to ongoing and periodic tax audits, and unfavorable outcomes could result in higher tax costs, penalties, and interest [261]. - Changes in tax legislation, including those arising from the OECD's BEPS project, could materially impact the company's effective tax rate and cash tax liabilities [262]. - The company may face operational risks and increased financing costs if credit ratings are downgraded, affecting access to financing sources [276]. Cybersecurity and Compliance - The company has experienced cybersecurity incidents, including fraudulent activities and security breaches, but these have not had a material impact on its business strategy or financial condition to date [224]. - The company must comply with the Health Insurance Portability and Accountability Act (HIPAA) due to its entry into employee benefits insurance products, increasing regulatory complexity [247]. - The company is monitoring the evolving landscape of artificial intelligence regulations, which could impose additional compliance requirements [249]. - The company faces significant regulatory exposure due to evolving data protection laws, including potential fines for noncompliance with the EU GDPR [242]. - The California Consumer Privacy Act (CCPA) requires increased transparency and data subject rights, affecting how the company manages personal information [244]. - The U.K. Data Protection Act allows for fines up to £17.5 million or 4% of worldwide turnover, whichever is higher, impacting the company's operations [243]. - The company faces risks related to corporate responsibility and stakeholder interest practices, which could impose additional costs or expose it to new risks [219]. Corporate Governance and Ownership - The Ryan Parties control 82% of the Class B common stock, allowing them to influence significant corporate transactions [288]. - As of December 31, 2024, the Ryan Parties control approximately 76% of the voting power of the outstanding capital stock, significantly influencing corporate decisions [309]. - The dual-class common stock structure allows Class B common stock holders to control the outcome of matters requiring stockholder approval, potentially affecting the market price of Class A common stock [314]. - The concentration of ownership by the Ryan Parties may deprive Class A common stockholders of opportunities to receive a premium for their shares in a sale of the company [309]. - Provisions in the corporate governance documents could make it more difficult for stockholders to replace current management or initiate actions opposed by the Board [316]. - The Director Nomination Agreement allows the Ryan Parties to designate nominees for the Board based on their ownership percentage, potentially leading to disproportionate representation [310]. - The company has opted out of Section 203 of the DGCL, which could discourage third-party acquisitions and affect stockholder actions [315]. Financial Obligations and Tax Agreements - As of December 31, 2024, the company had a total outstanding indebtedness of $3,300 million, including $400 million related to 4.375% Senior Secured Notes and $1,200 million related to 5.875% Senior Secured Notes [267]. - The company has commitments available to be borrowed under the Revolving Credit Facility of $1,399.7 million, which would be secured on a first-priority basis if borrowed [267]. - The company expects to use cash flow from operations to meet current and future financial obligations, which may limit cash flow availability for working capital and capital expenditures [268]. - The company may need to incur debt to finance payments under the Tax Receivable Agreement if cash resources are insufficient [295]. - The Tax Receivable Agreement requires the Company to make cash payments equal to 85% of the tax benefits realized, which may be substantial [291]. - The LLC is obligated to make tax distributions quarterly to LLC Unitholders based on net taxable income, which may exceed the overall effective tax rate applicable to corporate taxpayers [302]. - As of December 31, 2024, the Company has recorded Tax Receivable Agreement liabilities of $436.3 million associated with payments to current and certain former LLC Unitholders [291]. Market and Stock Performance - The company's quarterly operating results are expected to fluctuate significantly due to various factors, including market conditions and competition [325]. - Fluctuations in quarterly financial results may limit investors' ability to sell shares of Class A common stock, potentially affecting market price and liquidity [325]. - Key factors influencing stock price volatility include economic conditions, regulatory developments, and changes in investor perception [326]. - The company has declared its first cash dividend on February 27, 2024, and has paid dividends quarterly since then, but future dividends are not guaranteed [323]. - The company may issue preferred stock in the future, which could adversely affect holders of Class A common stock and depress its market price [324]. - Future sales of a substantial number of Class A common stock could adversely affect its market price, with significant pre-IPO equity holders not subject to sales restrictions [322]. - The company faces risks from potential securities class action litigation due to stock price volatility, which could incur substantial costs and divert management's attention [325].