NEW YORK, June 20, 2024 /PRNewswire/ -- Ryan Specialty Holdings Inc. (NYSE:RYAN) will replace Apartment Income REIT Corp. (NYSE:AIRC) in the S&P MidCap 400 effective prior to the opening of trading on Friday, June 28. Blackstone Inc. (NYSE: BX) is acquiring Apartment Income REIT in a deal expected to be completed soon, pending final closing conditions. Following is a summary of the changes that will take place prior to the open of trading on the effective date: Effective Date Index Name Action Company Name ...

Ryan Specialty Holdings, Inc. (NYSE:RYAN) Q1 2024 Earnings Conference Call May 2, 2024 5:00 PM ET Company Participants Pat Ryan - Founder, Chairman & Chief Executive Officer Tim Turner - President Jeremiah Bickham - Chief Financial Officer Miles Wuller - Chief Executive Officer, RSG Underwriting Managers Conference Call Participants Elyse Greenspan - Wells Fargo Mike Zaremski - BMO Capital Markets Rob Cox - Goldman Sachs Meyer Shields - KBW Alison Jacobowitz - UBS. Operator Good afternoon and thank you for ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF For the quarterly period ended March 31, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-40645 RYAN SPECIALTY HOLDINGS, INC. (Exact name of registrant as specified in its charter) Delaware 86-2526344 (State or Other Jurisdiction of ...

RYAN SPECIALTY REPORTS FIRST QUARTER 2024 RESULTS - Total Revenue grew 20.6% year-over-year to $552.0 million - First Quarter 2024 Highlights "We had a great start to 2024, driven by another quarter of double-digit organic growth and further enhancement of our margin profile," said Patrick G. Ryan, Founder, Chairman and Chief Executive Officer of Ryan Specialty. "Our exceptional performance was highlighted by 13.7% organic revenue growth, a 120-basis point expansion of our Adjusted EBITDAC margin, and 34.6% ...

Financial Performance and Growth - Net income increased by $106.6 million, from $56.6 million in 2021 to $163.3 million in 2022[392] - Net income for 2023 was $194.48 million, with a net income margin of 9.4%[407] - Adjusted EBITDAC for 2023 was $624.74 million, with an adjusted EBITDAC margin of 30.1%[407] - Adjusted net income for 2023 was $375.58 million, with an adjusted net income margin of 18.1%[410] - Net income for 2023 increased to $194.48 million, up 19.1% from $163.26 million in 2022[500] - Net income for 2022 was $194.48 million, compared to $61.05 million in 2021, representing a significant increase[506] - Total revenue growth rate (GAAP) for 2023 was 20.4%, with organic revenue growth rate (Non-GAAP) at 15.0%[396] - Revenue from the Top 100 retail broker trading firms grew faster than the company's organic revenue growth rate of 15.0% in 2023[336] - Total cash flows from operating activities in 2023 were $477.20 million, a 42.2% increase from $335.51 million in 2022[500] - Cash flows used in investing activities for 2023 were $476.23 million, primarily due to business combinations of $446.68 million[500] - Cash flows from financing activities in 2023 were negative $12.61 million, compared to positive $314.76 million in 2022[500] - Ending cash balance for 2023 was $1.76 billion, slightly down from $1.77 billion in 2022[500] - Total assets increased to $7,247.2 million as of December 31, 2023, compared to $6,383.7 million in 2022, driven by growth in goodwill, customer relationships, and other intangible assets[497] - Goodwill increased to $1,646.5 million as of December 31, 2023, from $1,315.0 million in 2022, reflecting acquisitions and adjustments[497] - Customer relationships grew to $572.4 million as of December 31, 2023, up from $457.1 million in 2022, indicating expansion in customer base and related intangible assets[497] - Total liabilities increased to $6,267.6 million as of December 31, 2023, from $5,565.9 million in 2022, primarily due to higher fiduciary liabilities and long-term debt[497] - Stockholders' equity rose to $979.6 million as of December 31, 2023, compared to $817.8 million in 2022, driven by retained earnings and additional paid-in capital[497] - Retained earnings increased to $114.4 million as of December 31, 2023, from $54.0 million in 2022, reflecting improved profitability[497] - Non-controlling interests grew to $419.9 million as of December 31, 2023, from $339.4 million in 2022, indicating increased equity participation from minority stakeholders[497] - Total stockholders' equity increased to $979.64 million in 2022 from $817.81 million in 2021[506] Cost Management and Restructuring - The ACCELERATE 2025 program is expected to generate annual savings of approximately $50.0 million by 2025, with cumulative one-time charges of $90.0 million through 2024[326] - The company incurred restructuring expenses of $48.37 million in 2023, including $25.99 million for operations and technology optimization[581] - Restructuring and related expense for 2023 was $49.28 million, up from $5.72 million in 2022[407] - Acquisition-related expense for 2023 was $23.27 million, a significant increase from $4.6 million in 2022[407] - Non-cash equity-based compensation in 2023 was $69.74 million, down 10.0% from $77.48 million in 2022[500] - Depreciation expense increased to $9.04 million in 2023, up 58.8% from $5.69 million in 2022[500] - Amortization expense for 2023 was $106.80 million, a 3.1% increase from $103.60 million in 2022[500] - Operating lease costs for 2023 totaled $36.9 million, up from $32.8 million in 2022, reflecting increased leasing activity[590] - The present value of operating lease liabilities as of December 31, 2023, was $175.8 million, with total undiscounted future lease payments of $220.5 million[590] Revenue and Income Sources - The company's revenue is derived from net commissions and fees, which are calculated as a percentage of total insurance policy premiums, with additional contingent or volume-based commissions[345] - Fiduciary investment income is generated from interest earned on insurance premiums and surplus lines taxes held in fiduciary accounts[348] - Net commissions and policy fees revenue is recognized when an insurance policy is bound and issued, net of estimated policy cancellations[519] - Binding Authority revenue includes insurance commissions, supplemental commissions, and contingent commissions from carriers[524] - Approximately 3% of the company's revenues for the year ended December 31, 2023, were generated from activities in the United Kingdom, Europe, Canada, and Singapore[460] - Approximately 3% of the company's revenues for 2023 and 2022 were generated outside the United States, exposing it to foreign exchange rate fluctuations[200] Tax and Regulatory Matters - Income tax expense increased by $11.0 million, from $4.9 million in 2021 to $15.9 million in 2022, due to higher pre-tax book income[391] - Income tax expense for 2023 was $43.4 million, with an effective tax rate of 18.2%, compared to $15.9 million and 8.9% in 2022[670] - The company recorded a non-cash deferred income tax expense of $18.4 million due to Common Control Reorganizations (CCRs) in 2023[676] - The company recognizes a liability on the Consolidated Balance Sheets based on the undiscounted estimated future payments under the Tax Receivable Agreement (TRA)[428] - The company recognized $358.9 million and $295.3 million of liabilities relating to obligations under the Tax Receivable Agreement (TRA) as of December 31, 2023, and 2022, respectively, based on the assumption of sufficient future taxable income[454] - The company accounts for income taxes under the asset and liability method, recognizing deferred tax assets and liabilities for future tax consequences[555] - The company accounts for uncertain tax positions using a two-step approach, recognizing tax benefits when more likely than not to be sustainable upon examination[557] - The company has $2.9 million in foreign tax credit carryforwards that will begin to expire in 2031, with a full valuation allowance recorded against this deferred tax asset[672] - Changes in tax laws or regulations could materially increase corporate taxes and adversely affect the company's financial condition or results of operations[226] - The OECD/G-20 Inclusive Framework on BEPS may lead to a global minimum tax and changes in profit allocation rules, potentially increasing the company's effective tax rate and cash tax liabilities[228] - Unanticipated changes in effective tax rates or adverse outcomes from tax audits could adversely affect the company's operating results and financial condition[265] Legal and Regulatory Risks - The company is subject to various legal and regulatory oversight, including data privacy laws, cybersecurity regulations, and compliance with HIPAA, which could increase costs and limit growth[202][206][208] - The company faces potential liability from E&O claims and other legal proceedings, which could adversely affect its financial position and reputation[218] - The company holds client funds and surplus lines taxes, exposing it to complex fiduciary regulations and potential fines or penalties for mismanagement[220] - The company relies on common law trademark protection for key brand names like "Ryan Specialty" and "RT Specialty," which could be challenged or infringed upon, potentially harming its brand value[223] - Compliance with public company regulations has increased legal and financial compliance costs and may divert management's attention from revenue-generating activities[273] - The company's forum selection provisions in its certificate of incorporation may discourage lawsuits against it or its directors and officers[279] - The company's certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation, potentially limiting stockholders' ability to obtain a favorable judicial forum for disputes[279] Debt and Financing - The company had $1,596.4 million of outstanding principal on Term Loan borrowings as of December 31, 2023, with interest subject to a 0.75% floor and exposure to Adjusted Term SOFR interest rate changes[463] - The company's indebtedness is largely floating rate, and elevated or increasing interest rates could lead to higher interest expenses[233] - Inability to make scheduled payments on indebtedness could result in default, foreclosure, or bankruptcy[235] - The company may need to raise additional funds, and failure to do so could harm its competitive position and results of operations[242] - The Tax Receivable Agreement may require accelerated payments in certain circumstances, potentially exceeding actual tax benefits realized[257] - Cash flows used by financing activities in 2023 were $12.6 million, a decrease of $327.4 million compared to 2022[433] - Total projected future cash outflows for long-term incentive compensation agreements are $7.27 million, with $6.73 million expected in 2026[438] Market and Economic Risks - The E&S market saw $80 billion in insured catastrophe losses in 2023, driven by 21 severe convective storm events above $1 billion in losses, totaling $58 billion[341] - The company faces risks from potential decreases in insurance premiums or commission rates, which could lead to revenue reductions or expenses[163] - The company's inability to achieve the intended results of the ACCELERATE 2025 program could impact its business, financial condition, and results of operations[182] - The company's operating results and stock price may be impacted by changing economic conditions, including inflationary pressures and interest rate volatility[287] - The company's stock price may be influenced by investors' perception, events beyond its control (e.g., weather, war, health crises), and any default on its indebtedness[287] - The company's quarterly operating results and stock price may fluctuate due to market conditions, new product introductions, regulatory developments, and other factors[285] - Sales of a large number of Class A common stock shares in the public market could reduce the trading price of the stock[281] - The company has filed registration statements to register shares of Class A common stock and other equity securities issued under incentive plans, which may be freely sold in the public market[281] Corporate Governance and Stock Structure - The Director Nomination Agreement with the Ryan Parties grants them significant influence over board nominations, potentially resulting in disproportionate representation[270] - The company's dual-class common stock structure and other governance provisions could discourage proxy contests and affect stockholder influence over corporate actions[276] - The company may issue preferred stock in the future, which could delay or prevent a change in control and adversely affect the market price and rights of Class A common stock holders[283] - The company's preferred stock could be issued with voting, liquidation, dividend, and other rights superior to Class A common stock[283] - The company's operating results may be affected by the departure or addition of key personnel[285] Acquisitions and Investments - The company signed a definitive agreement to acquire Castel Underwriting Agencies Limited, with the transaction expected to close in the first half of 2024[331] - Internally developed software in development increased to $18.1 million in 2023, up from $11.2 million in 2022, indicating ongoing R&D investments[587] - The fair value of the interest rate cap as of December 31, 2023, was $29.7 million, down from $45.9 million in 2022, reflecting changes in market conditions[643] Compensation and Equity - Unvested Restricted Stock Units (RSUs) at the end of 2023 totaled 3,359,778, with a weighted average grant date fair value of $23.07[617] - Incentive RSUs granted in 2023 totaled 921,288, with a weighted average grant date fair value of $41.37[617] - Outstanding Incentive Options at the end of 2023 totaled 165,684, with a weighted average exercise price of $34.39[620] Receivables and Liabilities - The company's receivables are shown net of an allowance for credit losses, estimated based on historical write-offs and current economic conditions[529] - Receivables increased to $294.2 million as of December 31, 2023, up from $231.4 million in 2022, reflecting growth in commissions and fees receivable[584] - The company records liabilities for loss contingencies when probable and reasonably estimable, with significant management judgment required[552] - The company has an ownership interest in three entities holding segregated account protected cell captives, with only the activity of the regulated Core Companies recorded in consolidated financial statements[551] - Loss on Tax Receivable Agreement in 2023 was $11.17 million, more than double the $5.55 million in 2022[500] - Deferred income tax expense from common control reorganizations in 2023 was $18.36 million, a new expense item not present in 2022[500]

Ryan Specialty Holdings, Inc. (NYSE:RYAN) Q4 2023 Earnings Conference Call February 27, 2024 5:00 PM ET Company Participants Pat Ryan – Founder, Chairman and Chief Executive Officer Tim Turner – President Jeremiah Bickham – Chief Financial Officer Miles Wuller – Chief Executive Officer, RSG Underwriting Managers Conference Call Participants Elyse Greenspan – Wells Fargo Mike Zaremski – BMO Capital Markets Meyer Shields – KBW Rob Cox – Goldman Sachs Bill Carcache – Wolfe Research Mike Ward – Citi Ryan Tunis ...

RYAN SPECIALTY REPORTS FOURTH QUARTER 2023 RESULTS; INITIATES QUARTERLY DIVIDEND - Total Revenue grew 22.5% year-over-year to $532.9 million - - Adjusted EBITDAC grew 24.6% year-over-year to $158.6 million - - Adjusted Net Income increased 29.6% year over year to $95.7 million, or $0.35 per diluted share - FEBRUARY 27, 2024 | CHICAGO, IL — Ryan Specialty Holdings, Inc. (NYSE: RYAN) ("Ryan Specialty" or the "Company"), a leading international specialty insurance firm, today announced results for the fourth q ...

Financial Data and Key Metrics - Total revenue grew by 21.8% YoY to $502 million, with organic revenue growth of 14.7% [7][27] - Adjusted EBITDAC increased by 25.8% YoY to $147 million, with an adjusted EBITDAC margin improvement of 90 basis points to 29.3% [36] - Net income for Q3 2023 was $16 million, impacted by a one-time non-cash deferred tax expense of $0.04 per diluted share due to the Socius acquisition [28] - The company raised its full-year 2023 organic revenue growth guidance to 13.5%-14.5% and adjusted EBITDAC margin guidance to 29.5%-30.0% [37] Business Line Performance - Wholesale brokerage specialty saw strong growth, driven by property and casualty lines, with significant contributions from the Socius acquisition [21][23] - Underwriting Management specialty performed well, with growth driven by rate increases, new initiatives like excess casualty, and profit commissions [24] - Binding authority specialty continued its strong performance, with opportunities for panel consolidation and long-term growth [31] Market Trends and Dynamics - The E&S market remained robust, with increased flow of business due to complex weather, legal environments, and reduced risk appetite in the admitted market [19][20] - Property pricing and submission flow were key drivers of growth, with strong rate momentum in property lines, though public company D&O and Cyber saw exceptions [25] - Casualty lines, particularly transportation and habitational, experienced higher flow into the E&S market due to social inflation and reserving issues [22][54] Strategic Direction and Industry Competition - The company continues to execute its M&A strategy, focusing on high-quality specialty distributors and expanding its total addressable market in specialty insurance [9][10] - Recent acquisitions, including AccuRisk, have strengthened the company's employee benefits platform, with a focus on medical stop loss and integrated health solutions [11][12] - The company remains disciplined in its M&A approach, targeting firms with higher growth and long-term margin potential [13][14] Management Commentary on Operating Environment and Outlook - Management highlighted the uncertain macroeconomic and geopolitical environment but expects favorable specialty insurance market dynamics to persist [17] - The company is well-positioned to capitalize on E&S market tailwinds through its flexible business model and specific growth lines [18] - The ACCELERATE 2025 program is expected to generate $50 million in annual savings by 2025, with cumulative special charges of $90 million through 2024 [15][29] Other Important Information - The company made targeted investments in talent during the quarter to enhance capabilities in current and developing lines of business [14] - The Socius acquisition was restructured for tax efficiency, resulting in a one-time non-cash deferred tax expense but no expected cash impact [28] Q&A Session Summary Question: Organic growth guidance and Q4 expectations [39] - Q4 is seasonally strong, with potential upside in property business, though the guidance reflects measured assumptions [40] Question: Incremental savings from the ACCELERATE 2025 program [41] - The full $50 million in savings will be realized in 2025, with more savings flowing through in 2024 [41] Question: M&A pipeline and valuation trends [42][43] - Larger deals are defined as those over $400 million, with valuations remaining consistent for high-quality companies [42][43] Question: Expansion of total addressable market (TAM) [46][47] - The company aims to expand TAM significantly and is prepared to deploy all available capital, including potential debt, for strategic acquisitions [46][47] Question: Drivers of growth in binding authority and Underwriting Management [50][51] - Growth is driven by rate opportunities, new product launches, and profit commissions from prior soft market cycles [50][51] Question: Sustainability of property flow into the E&S market [56][61] - The company expects continued strong demand for E&S products due to global warming impacts and structural housing shortages [61][62] Question: Impact of larger brokers entering the wholesale space [63][64] - The company believes its independence and specialized expertise differentiate it from potential new entrants [63][64] Question: Talent retention and productivity [66][67] - The company's culture and platform enable high talent retention and productivity increases for new hires [66][67] Question: Transactional business trends [68] - Global M&A volumes remain under pressure, but the company is offsetting this through geographic and product expansion [68] Question: Assumptions for supplemental and contingent commissions in guidance [71][72] - Supplemental and contingent commissions are not included in organic growth calculations but are factored into margin guidance [71][72] Question: Casualty market trends and social inflation [73][74] - The company sees steady increases in high-hazard casualty business, driven by transportation, habitational, and consumer product liability [73][74] Question: Margin expectations for Q4 [77] - Lower margins in Q4 are expected due to hiring and continued investments in the business [77] Question: Integration of benefits businesses [79][80] - The three benefits businesses complement each other, with AccuRisk adding capabilities in group captives and integrated health plans [79][80] Question: Business mix changes YoY [92] - Public D&O remains a headwind, but its impact has lessened compared to the previous year [92][97]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) Details the Form 10-Q filing, registrant information, and common shares outstanding [Registrant Details](index=1&type=section&id=Registrant%20Details) Provides registrant's name, jurisdiction, address, and securities registered, including filing status and shares outstanding - Registrant: **RYAN SPECIALTY HOLDINGS, INC.**, incorporated in Delaware, with principal executive offices in Chicago, IL[2](index=2&type=chunk) - Class A Common Stock (RYAN) is registered on The New York Stock Exchange (NYSE)[3](index=3&type=chunk) - The registrant is a **Large accelerated filer** and had **260.3 million shares** of common stock outstanding on October 31, 2023 (**118.3 million Class A**, **142.0 million Class B**)[4](index=4&type=chunk)[5](index=5&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) Discusses forward-looking statements, highlighting inherent risks and uncertainties that could impact future results [Nature of Forward-Looking Statements and Risks](index=4&type=section&id=Nature%20of%20Forward-Looking%20Statements%20and%20Risks) Defines forward-looking statements and enumerates various substantial risks and uncertainties that could materially alter actual outcomes - Forward-looking statements are subject to substantial risks and uncertainties, including those related to management, security, client relationships, market conditions, and regulatory environment[9](index=9&type=chunk)[10](index=10&type=chunk)[12](index=12&type=chunk) [Commonly Used Defined Terms](index=6&type=section&id=Commonly%20Used%20Defined%20Terms) Defines key terminology used in the Form 10-Q for consistent understanding of company and industry-specific terms [Key Terminology](index=6&type=section&id=Key%20Terminology) Provides definitions for key company and industry-specific terms to ensure clarity and consistent understanding throughout the report - Defines key terms such as "Company," "Adjusted Term SOFR," "Admitted," "E&S," "LLC," "IPO," "MGA," "MGU," "TRA," "Wholesale Brokerage," and "Underwriting Management" to facilitate understanding of the report[16](index=16&type=chunk)[17](index=17&type=chunk) [PART I. FINANCIAL INFORMATION](index=8&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=8&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements including income, comprehensive income, balance sheet, cash flow, and equity, with explanatory notes [Consolidated Statements of Income (Loss) (Unaudited)](index=8&type=section&id=Consolidated%20Statements%20of%20Income%20(Loss)%20(Unaudited)) | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenue | $501,938 | $411,996 | $1,544,686 | $1,290,178 | | Operating income | $69,817 | $61,344 | $262,744 | $210,259 | | Income before income taxes | $40,530 | $32,690 | $178,749 | $127,551 | | Net income | $15,703 | $29,279 | $135,977 | $117,475 | | Net income (loss) attributable to Ryan Specialty Holdings, Inc. | $(5,047) | $11,745 | $38,191 | $43,157 | | Basic EPS | $(0.04) | $0.11 | $0.34 | $0.40 | | Diluted EPS | $(0.04) | $0.09 | $0.34 | $0.37 | [Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=9&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20(Unaudited)) | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | $15,703 | $29,279 | $135,977 | $117,475 | | Net income (loss) attributable to Ryan Specialty Holdings, Inc. | $(5,047) | $11,745 | $38,191 | $43,157 | | Total other comprehensive income (loss), net of tax | $(289) | $5,626 | $2,201 | $2,653 | | Comprehensive income (loss) attributable to Ryan Specialty Holdings, Inc. | $(5,336) | $17,371 | $40,392 | $45,810 | [Consolidated Balance Sheets (Unaudited)](index=10&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)) | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Total current assets | $3,586,424 | $3,894,067 | | Total non-current assets | $2,839,438 | $2,489,676 | | TOTAL ASSETS | $6,425,862 | $6,383,743 | | Total current liabilities | $2,981,837 | $3,134,369 | | Total non-current liabilities | $2,502,784 | $2,431,562 | | TOTAL LIABILITIES | $5,484,621 | $5,565,931 | | Total stockholders' equity attributable to Ryan Specialty Holdings, Inc. | $542,978 | $478,405 | | Non-controlling interests | $398,263 | $339,407 | | Total stockholders' equity | $941,241 | $817,812 | [Consolidated Statements of Cash Flows (Unaudited)](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) | Metric (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :----------------------------- | :----------------------------- | | Cash flows from operating activities | $250,335 | $150,984 | | Cash flows used for investing activities | $(381,934) | $(11,689) | | Cash flows (used for) provided by financing activities | $(31,958) | $260,335 | | Net change in cash, cash equivalents, and cash held in a fiduciary capacity | $(164,385) | $398,356 | | Cash, cash equivalents, and cash held in a fiduciary capacity—Ending balance | $1,603,000 | $1,538,017 | [Consolidated Statements of Stockholders' Equity (Unaudited)](index=12&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)) - Total stockholders' equity increased from **$817.8 million** at January 1, 2023, to **$941.2 million** at September 30, 2023, driven by net income, equity-based compensation, and LLC equity exchanges, partially offset by tax distributions and other comprehensive losses[31](index=31&type=chunk) - Non-controlling interests increased from **$339.4 million** at January 1, 2023, to **$398.3 million** at September 30, 2023, reflecting their share of net income and equity-based compensation, partially offset by tax distributions and exchanges[31](index=31&type=chunk) [Notes to the Consolidated Financial Statements (Unaudited)](index=14&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements%20(Unaudited)) Offers detailed explanations and disclosures for the unaudited financial statements, covering operations, accounting policies, and specific financial items [Note 1. Basis of Presentation](index=14&type=section&id=Note%201.%20Basis%20of%20Presentation) - Ryan Specialty Holdings, Inc. is a service provider of specialty products and solutions for insurance brokers, agents, and carriers, operating through one segment and not taking on underwriting risk (except for an equity method investment)[34](index=34&type=chunk) - The Company consolidates the financial results of New LLC and LLC, holding **45.4% ownership** of outstanding LLC Common Units as of September 30, 2023, and is the **primary beneficiary** of the LLC, a variable interest entity[36](index=36&type=chunk)[40](index=40&type=chunk) [Note 2. Revenue from Contracts with Customers](index=15&type=section&id=Note%202.%20Revenue%20from%20Contracts%20with%20Customers) | Specialty (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Wholesale Brokerage | $308,872 | $267,222 | $976,338 | $841,273 | | Binding Authority | $69,245 | $55,607 | $208,547 | $178,351 | | Underwriting Management | $109,228 | $84,722 | $322,993 | $264,835 | | Total Net commissions and fees | $487,345 | $407,551 | $1,507,878 | $1,284,459 | - Contract assets, primarily from volume-based commissions, decreased from **$13.0 million** at December 31, 2022, to **$7.9 million** at September 30, 2023. Contract liabilities (deferred revenue) increased from **$1.4 million** to **$7.4 million** over the same period[45](index=45&type=chunk) [Note 3. Mergers and Acquisitions](index=15&type=section&id=Note%203.%20Mergers%20and%20Acquisitions) - In 2023, the Company completed acquisitions of Griffin Underwriting Services (**$115.5 million cash**), ACE Benefit Partners, Inc. and Point6 Healthcare, LLC (aggregate **$46.8 million cash** + **$2.3 million contingent consideration**), and Socius Insurance Services (**$253.5 million cash** + **$5.8 million contingent consideration** + **$2.7 million Class A common stock**)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) Acquired Assets/Liabilities (in thousands) | Acquired Assets/Liabilities (in thousands) | Total (Nine Months Ended Sep 30, 2023) | | :--------------------------------------- | :------------------------------------- | | Total assets acquired | $566,327 | | Total liabilities assumed | $139,649 | | Net assets acquired | $426,678 | - The aggregate maximum contingent consideration related to acquisitions was **$92.0 million** as of September 30, 2023[53](index=53&type=chunk) [Note 4. Restructuring](index=16&type=section&id=Note%204.%20Restructuring) - The ACCELERATE 2025 program, initiated in February 2023, is expected to incur total restructuring costs of approximately **$90.0 million** through December 31, 2024, and generate annual savings of approximately **$50.0 million** in 2025[54](index=54&type=chunk) Restructuring Expense (in thousands) | Restructuring Expense (in thousands) | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2023 | | :--------------------------------- | :------------------------------ | :----------------------------- | | Operations and technology optimization | $10,824 | $18,529 | | Compensation and benefits | $5,109 | $6,709 | | Asset impairment and other termination costs | $544 | $11,057 | | Total | $16,477 | $36,295 | [Note 5. Receivables and Other Current Assets](index=17&type=section&id=Note%205.%20Receivables%20and%20Other%20Current%20Assets) Receivables (in thousands) | Receivables (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------------- | :----------- | :----------- | | Commissions and fees receivable – net | $238,827 | $231,423 | Allowance for Expected Credit Losses (in thousands) | Allowance for Expected Credit Losses (in thousands) | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2023 | | :------------------------------------------------ | :------------------------------ | :----------------------------- | | Beginning of period | $2,089 | $1,980 | | Write-offs | $(441) | $(1,342) | | Increase in provision | $869 | $1,879 | | End of period | $2,517 | $2,517 | [Note 6. Leases](index=18&type=section&id=Note%206.%20Leases) Lease Costs (in thousands) | Lease Costs (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating lease costs | $8,687 | $7,734 | $26,339 | $23,344 | | Lease costs – net | $8,728 | $7,773 | $26,535 | $23,487 | - Weighted average remaining operating lease term is **8.3 years** as of September 30, 2023, with a weighted average discount rate of **5.1%**[61](index=61&type=chunk) [Note 7. Debt](index=19&type=section&id=Note%207.%20Debt) Debt (in thousands) | Debt (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------ | :----------- | :----------- | | Term debt | $1,566,232 | $1,571,818 | | Senior secured notes | $396,096 | $399,791 | | Total debt | $1,981,061 | $1,982,487 | | Long-term debt | $1,945,495 | $1,951,900 | - The Term Loan had **$1,600.5 million** principal outstanding as of September 30, 2023, with an interest rate of **3.00% plus Adjusted Term SOFR** (subject to a **75 basis point floor**)[63](index=63&type=chunk)[260](index=260&type=chunk) - The Revolving Credit Facility has a borrowing capacity of **$600.0 million**, with **no amounts drawn** as of September 30, 2023[64](index=64&type=chunk) [Note 8. Stockholders' Equity](index=20&type=section&id=Note%208.%20Stockholders'%20Equity) - As of September 30, 2023, the Company owned **45.4%** of the economic interests in the LLC, with non-controlling interest holders owning **54.6%**[73](index=73&type=chunk) - **Class A common stock** has **one vote per share**, while **Class B common stock** initially has **10 votes per share** but no dividend or liquidation rights. **Class X and Preferred stock** had **no shares outstanding**[69](index=69&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) [Note 9. Equity-Based Compensation](index=21&type=section&id=Note%209.%20Equity-Based%20Compensation) - The Company grants various equity-based awards under the Omnibus Plan, including Restricted Stock, Restricted Common Units, RSUs, Stock Options, and Class C Incentive Units, with diverse vesting schedules (e.g., pro rata over 5 years, 10% in years 3-9 and 30% in year 10, or one-third in years 3, 4, and 5)[75](index=75&type=chunk)[79](index=79&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) Equity-Based Compensation Expense (in thousands) | Equity-Based Compensation Expense (in thousands) | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------------------- | :------------------------------ | :----------------------------- | :----------------------------- | | Total equity-based compensation expense | $17,608 | $54,136 | $61,100 | - Total unrecognized equity-based compensation expense was **$167.4 million** as of September 30, 2023, with weighted-average remaining expense periods ranging from **0.5 to 5.6 years** across different award types[99](index=99&type=chunk) [Note 10. Earnings (Loss) Per Share](index=25&type=section&id=Note%2010.%20Earnings%20(Loss)%20Per%20Share) EPS (Class A Common Stock) | EPS (Class A Common Stock) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Basic | $(0.04) | $0.11 | $0.34 | $0.40 | | Diluted | $(0.04) | $0.09 | $0.34 | $0.37 | - For the three months ended September 30, 2023, **141.7 million** non-controlling interest LLC Common Units and **98.7 thousand** vested Class C Incentive Units were excluded from diluted EPS calculation as their effect would have been antidilutive[102](index=102&type=chunk) [Note 11. Derivatives](index=26&type=section&id=Note%2011.%20Derivatives) - The Company uses an interest rate cap agreement (**notional amount $1,000.0 million**, **2.75% strike**, terminates **December 31, 2025**) to manage Term Loan interest rate exposure[104](index=104&type=chunk) Interest Rate Cap (in thousands) | Interest Rate Cap (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------- | :----------- | :----------- | | Fair value | $46,845 | $45,860 | | Accumulated other comprehensive income | $27,700 | $22,200 | - For the nine months ended September 30, 2023, **$16.4 million** related to payments received from the interest rate cap was reclassified into earnings as an offset to interest expense[106](index=106&type=chunk) [Note 12. Variable Interest Entities](index=26&type=section&id=Note%2012.%20Variable%20Interest%20Entities) - The Company consolidates the LLC as a Variable Interest Entity (VIE) under ASC 810, with its financial position, performance, and cash flows effectively representing those of the LLC[107](index=107&type=chunk) - Cash and cash equivalents, Tax Receivable Agreement liabilities, and Deferred tax assets are primarily attributable solely to Ryan Specialty Holdings, Inc., not the LLC[107](index=107&type=chunk) [Note 13. Fair Value Measurements](index=26&type=section&id=Note%2013.%20Fair%20Value%20Measurements) - The fair value of the interest rate cap is classified as **Level 2**, while contingent consideration obligations are classified as **Level 3**, requiring unobservable inputs and Monte Carlo simulations for valuation[112](index=112&type=chunk)[113](index=113&type=chunk) Fair Value (in thousands) | Fair Value (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------------ | :----------- | :----------- | | Interest rate cap (Level 2) | $46,845 | $45,860 | | Contingent consideration (Level 3) | $36,018 | $29,251 | [Note 14. Commitments and Contingencies](index=28&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) - The Company faces ordinary course E&O exposure, with insurance coverage up to **$100.0 million** in excess of a **$5.0 million per claim retention** (increased from $2.5 million as of June 1, 2023)[118](index=118&type=chunk)[119](index=119&type=chunk) - Loss contingencies for outstanding E&O matters were **$5.9 million** as of September 30, 2023, down from **$26.1 million** at December 31, 2022[119](index=119&type=chunk) - A specific unusual circumstance involving mis-underwritten policies resulted in an estimated loss contingency of **$0.2 million** and a probable recovery of **$22.6 million** from E&O insurance carriers as of September 30, 2023[120](index=120&type=chunk) [Note 15. Related Parties](index=28&type=section&id=Note%2015.%20Related%20Parties) - The Company holds a **47% interest** in Ryan Investment Holdings, LLC (RIH), which in turn has a **50% non-controlling interest** in Geneva Re Partners, LLC (GRP), a Bermuda-regulated reinsurance company[123](index=123&type=chunk) - Ryan Re, a subsidiary, provides underwriting and administrative services to Geneva Re, earning a service fee of 115% of administrative costs. Revenue from Geneva Re was **$1.1 million** for the nine months ended September 30, 2023[127](index=127&type=chunk) - The Company charters executive jets from Executive Jet Management (EJM), with Mr. Ryan indirectly owning aircraft leased to EJM. The Company receives a discount when chartering Mr. Ryan's aircraft[129](index=129&type=chunk) [Note 16. Income Taxes](index=29&type=section&id=Note%2016.%20Income%20Taxes) - The Company is subject to federal, state, and local income taxes on its allocable share of LLC's net taxable income, while the LLC is taxed as a partnership[130](index=130&type=chunk) - The effective tax rate for the three and nine months ended September 30, 2023, was **61.26%** and **23.92%** respectively, significantly impacted by a **$20.7 million** non-cash deferred income tax expense from a Common Control Reorganization (CCR) related to the Socius acquisition[131](index=131&type=chunk)[133](index=133&type=chunk) TRA Liabilities (in thousands) | TRA Liabilities (in thousands) | Dec 31, 2022 | Sep 30, 2023 | | :----------------------------- | :----------- | :----------- | | Balance | $295,347 | $359,074 | [Note 17. Supplemental Cash Flow Information](index=31&type=section&id=Note%2017.%20Supplemental%20Cash%20Flow%20Information) Cash Paid For (in thousands) | Cash Paid For (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------- | :----------------------------- | :----------------------------- | | Interest | $116,620 | $62,796 | | Income taxes | $9,812 | $8,089 | Non-Cash Investing and Financing Activities (in thousands) | Non-Cash Investing and Financing Activities (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :------------------------------------------------------- | :----------------------------- | :----------------------------- | | Tax Receivable Agreement liabilities | $63,249 | $23,089 | [Note 18. Subsequent Events](index=31&type=section&id=Note%2018.%20Subsequent%20Events) - On October 29, 2023, the Company entered into a definitive agreement to acquire **AccuRisk Holdings, LLC**, a medical stop loss MGU, with the acquisition expected to close in **Q4 2023**[142](index=142&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's analysis of financial performance, condition, liquidity, and cash flows, including business overview, key drivers, and accounting policies [Overview](index=32&type=section&id=Overview) - Ryan Specialty is a service provider of specialty products and solutions for insurance brokers, agents, and carriers, offering distribution, underwriting, product development, administration, and risk management services[146](index=146&type=chunk) - A significant majority of premiums are placed in the Excess & Surplus (E&S) market, including Lloyd's of London, which offers greater flexibility in terms, conditions, and rates compared to the Admitted market[147](index=147&type=chunk) [Significant Events and Transactions](index=32&type=section&id=Significant%20Events%20and%20Transactions) Highlights corporate structure, the ACCELERATE 2025 program's progress and financial impact, and recent acquisition activities [Corporate Structure](index=32&type=section&id=Corporate%20Structure) - Ryan Specialty Holdings, Inc. is a holding company that operates and controls the business of the LLC through New LLC, consolidating its financial results. The LLC is taxed as a partnership, passing taxable income/loss to its members[149](index=149&type=chunk) [ACCELERATE 2025 Program](index=32&type=section&id=ACCELERATE%202025%20Program) - The ACCELERATE 2025 program, initiated in Q1 2023, aims for continued growth, innovation, and sustainable productivity improvements, with expected cumulative one-time charges of approximately **$90.0 million** through 2024 and annual savings of **$50.0 million** in 2025[150](index=150&type=chunk)[152](index=152&type=chunk) - For the nine months ended September 30, 2023, the Company incurred **$36.3 million** in restructuring costs, with **$22.9 million** in general and administrative expenses and the remainder workforce-related[153](index=153&type=chunk) [Acquisitions](index=33&type=section&id=Acquisitions_MD%26A) - In July 2023, the Company acquired ACE Benefit Partners, Inc., Point6 Healthcare, LLC, and Socius Insurance Services[154](index=154&type=chunk)[155](index=155&type=chunk) - Post-period, on October 29, 2023, the Company entered into an agreement to acquire **AccuRisk Holdings, LLC**, expected to close in **Q4 2023**[155](index=155&type=chunk) [Key Factors Affecting Our Performance](index=33&type=section&id=Key%20Factors%20Affecting%20Our%20Performance) - Key performance drivers include pursuing strategic acquisitions, deepening relationships with retail broker trading partners, building the National Binding Authority Specialty, investing in operations and growth, generating commissions regardless of E&S market state, managing macroeconomic conditions, and leveraging E&S market growth[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) - The E&S market growth is driven by complex, high-hazard risks, but growth may not be linear due to shifts between E&S and non-E&S markets, as seen with public company D&O policies[164](index=164&type=chunk)[165](index=165&type=chunk) [Components of Results of Operations](index=34&type=section&id=Components%20of%20Results%20of%20Operations) Details the company's revenue streams and expense categories, providing context for understanding operational performance [Revenue](index=34&type=section&id=Revenue_Components) - Net commissions and fees are the primary revenue source, derived from Wholesale Brokerage, Binding Authority, and Underwriting Management Specialties, including supplemental and contingent commissions based on underwriting results or volume[167](index=167&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk) - Fiduciary investment income is interest earned on insurance premiums and surplus lines taxes held in a fiduciary capacity[172](index=172&type=chunk) [Expenses](index=35&type=section&id=Expenses_Components) - Compensation and benefits is the largest expense, comprising salaries, incentives, benefits, and equity-based compensation, influenced by competitive markets for human capital[173](index=173&type=chunk) - General and administrative expenses include travel, office, professional fees, and other operational costs, generally scaling with employee count and business size[174](index=174&type=chunk) - Amortization primarily relates to intangible assets from acquisitions (customer relationships, trade names, software). Interest expense, net, includes debt interest, interest rate cap amortization, contingent consideration imputed interest, and deferred debt issuance costs, offset by interest income[175](index=175&type=chunk)[176](index=176&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Compares financial results for the three and nine months ended September 30, 2023 and 2022, detailing revenue, expenses, and net income changes [Comparison of the Three Months Ended September 30, 2023 and 2022](index=38&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20September%2030%2C%202023%20and%202022) Details financial performance for the three months ended September 30, 2023, versus 2022, focusing on revenue and expense changes [Revenue](index=38&type=section&id=Revenue_3M) | Revenue (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--------------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Net commissions and fees | $487,345 | $407,551 | $79,794 | 19.6% | | Fiduciary investment income | $14,593 | $4,445 | $10,148 | NM | | Total revenue | $501,938 | $411,996 | $89,942 | 21.8% | - Organic revenue growth contributed **$60.6 million (14.9%)** to the increase in Net commissions and fees, driven by a growing E&S market, new business wins, and strong property portfolio performance. Acquisitions contributed **$17.8 million (4.4%)**[190](index=190&type=chunk) [Expenses](index=39&type=section&id=Expenses_3M) | Expense (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--------------------- | :------------------------------ | :------------------------------ | :--------- | :--------- | | Compensation and benefits | $329,212 | $274,108 | $55,104 | 20.1% | | General and administrative | $69,288 | $48,991 | $20,297 | 41.4% | | Amortization | $29,572 | $25,667 | $3,905 | 15.2% | | Interest expense, net | $31,491 | $28,864 | $2,627 | 9.1% | | Income tax expense | $24,827 | $3,411 | $21,416 | NM | | Net income | $15,703 | $29,279 | $(13,576) | (46.4)% | - Compensation and benefits increased due to **496 additional employees** and ACCELERATE 2025 restructuring expenses, partially offset by decreases in acquisition-related and IPO-related long-term incentive compensation[193](index=193&type=chunk) - General and administrative expenses rose due to acquisition-related expenses, ACCELERATE 2025 restructuring, professional services, and increased travel and entertainment[195](index=195&type=chunk) - Income tax expense significantly increased by **$21.4 million**, primarily due to a **$20.7 million** non-cash deferred income tax expense from the Common Control Reorganization (CCR) following the Socius acquisition[201](index=201&type=chunk) [Comparison of the Nine Months Ended September 30, 2023 and 2022](index=40&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20September%2030%2C%202023%20and%202022) Details financial performance for the nine months ended September 30, 2023, versus 2022, focusing on revenue and expense changes [Revenue](index=40&type=section&id=Revenue_9M) | Revenue (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net commissions and fees | $1,507,878 | $1,284,459 | $223,419 | 17.4% | | Fiduciary investment income | $36,808 | $5,719 | $31,089 | NM | | Total revenue | $1,544,686 | $1,290,178 | $254,508 | 19.7% | - Organic revenue growth accounted for **$189.6 million (14.8%)** of the increase in Net commissions and fees, driven by E&S market growth, new business, and property portfolio strength. Acquisitions contributed **$29.9 million (2.3%)**[203](index=203&type=chunk)[210](index=210&type=chunk) [Expenses](index=41&type=section&id=Expenses_9M) | Expense (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Compensation and benefits | $989,294 | $858,439 | $130,855 | 15.2% | | General and administrative | $202,595 | $139,851 | $62,744 | 44.9% | | Amortization | $79,125 | $78,563 | $562 | 0.7% | | Interest expense, net | $89,840 | $75,462 | $14,378 | 19.1% | | Income tax expense | $42,772 | $10,076 | $32,696 | NM | | Net income | $135,977 | $117,475 | $18,502 | 15.7% | - Compensation and benefits increased by **$130.9 million**, driven by **496 additional employees** and **$12.7 million** in ACCELERATE 2025 restructuring expenses, partially offset by lower acquisition-related and IPO-related long-term incentive compensation[211](index=211&type=chunk) - General and administrative expenses increased by **$62.7 million**, primarily due to **$18.8 million** in ACCELERATE 2025 restructuring expenses, increased travel and entertainment, professional services, and acquisition-related expenses[213](index=213&type=chunk) - Income tax expense increased by **$32.7 million**, largely due to a **$20.7 million** non-cash deferred income tax expense from the Common Control Reorganization (CCR) in Q3 2023[219](index=219&type=chunk) [Non-GAAP Financial Measures and Key Performance Indicators](index=43&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Key%20Performance%20Indicators) Defines and reconciles non-GAAP financial measures and key performance indicators used for assessing company performance [Organic Revenue Growth Rate](index=43&type=section&id=Organic%20Revenue%20Growth%20Rate) - Organic revenue growth rate adjusts total revenue growth for recent acquisitions, contingent commissions, fiduciary investment income, and foreign exchange impacts[222](index=222&type=chunk) Metric (in percentages) | Metric (in percentages) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenue growth rate (GAAP) | 21.8% | 16.8% | 19.7% | 22.4% | | Organic revenue growth rate (Non-GAAP) | 14.7% | 13.7% | 14.7% | 18.7% | [Adjusted Compensation and Benefits Expense and Adjusted Compensation and Benefits Expense Ratio](index=44&type=section&id=Adjusted%20Compensation%20and%20Benefits%20Expense%20and%20Adjusted%20Compensation%20and%20Benefits%20Expense%20Ratio) - Adjusted compensation and benefits expense excludes equity-based compensation, acquisition and restructuring related compensation, and other non-recurring items[227](index=227&type=chunk) Metric (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Compensation and benefits expense | $329,212 | $274,108 | $989,294 | $858,439 | | Adjusted compensation and benefits expense | $296,400 | $247,095 | $911,925 | $769,253 | | Compensation and benefits expense ratio | 65.6% | 66.5% | 64.0% | 66.5% | | Adjusted compensation and benefits expense ratio | 59.1% | 60.0% | 59.0% | 59.6% | [Adjusted General and Administrative Expense and Adjusted General and Administrative Expense Ratio](index=45&type=section&id=Adjusted%20General%20and%20Administrative%20Expense%20and%20Adjusted%20General%20and%20Administrative%20Expense%20Ratio) - Adjusted general and administrative expense excludes acquisition and restructuring related G&A expenses, and other non-recurring items[230](index=230&type=chunk) Metric (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | General and administrative expense | $69,288 | $48,991 | $202,595 | $139,851 | | Adjusted general and administrative expense | $58,559 | $48,084 | $166,606 | $130,774 | | General and administrative expense ratio | 13.8% | 11.9% | 13.1% | 10.8% | | Adjusted general and administrative expense ratio | 11.7% | 11.7% | 10.8% | 10.1% | [Adjusted EBITDAC and Adjusted EBITDAC Margin](index=45&type=section&id=Adjusted%20EBITDAC%20and%20Adjusted%20EBITDAC%20Margin) - Adjusted EBITDAC is Net income before interest, taxes, depreciation, amortization, and change in contingent consideration, further adjusted for equity-based compensation, acquisition/restructuring expenses, and other non-recurring items[232](index=232&type=chunk)[234](index=234&type=chunk) Metric (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | $15,703 | $29,279 | $135,977 | $117,475 | | Adjusted EBITDAC | $146,979 | $116,817 | $466,155 | $390,151 | | Net income margin | 3.1% | 7.1% | 8.8% | 9.1% | | Adjusted EBITDAC margin | 29.3% | 28.4% | 30.2% | 30.2% | [Adjusted Net Income and Adjusted Net Income Margin](index=46&type=section&id=Adjusted%20Net%20Income%20and%20Adjusted%20Net%20Income%20Margin) - Adjusted net income is tax-effected earnings before amortization, equity-based compensation, acquisition/restructuring expenses, IPO costs, and other non-recurring items, calculated as if the Company owned 100% of the LLC[237](index=237&type=chunk)[239](index=239&type=chunk) Metric (in thousands) | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | $15,703 | $29,279 | $135,977 | $117,475 | | Adjusted net income | $86,632 | $66,560 | $282,144 | $237,774 | | Net income margin | 3.1% | 7.1% | 8.8% | 9.1% | | Adjusted net income margin | 17.3% | 16.2% | 18.3% | 18.4% | [Adjusted Diluted Earnings Per Share](index=47&type=section&id=Adjusted%20Diluted%20Earnings%20Per%20Share) - Adjusted diluted EPS is calculated by dividing Adjusted net income by diluted shares outstanding, assuming 100% exchange of LLC Common Units for Class A common stock and adjusting for unvested equity awards[242](index=242&type=chunk) Metric | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Diluted EPS (GAAP) | $(0.04) | $0.09 | $0.34 | $0.37 | | Adjusted diluted EPS (Non-GAAP) | $0.32 | $0.25 | $1.04 | $0.88 | [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) Analyzes the company's cash flow generation, liquidity sources and uses, and contractual obligations to meet financial commitments [Cash Flows From Operating Activities](index=50&type=section&id=Cash%20Flows%20From%20Operating%20Activities) - Cash flows from operating activities increased by **$99.4 million** to **$250.3 million** for the nine months ended September 30, 2023, compared to the same period in 2022, driven by increased net income and changes in other current/non-current assets and accrued liabilities[264](index=264&type=chunk) [Cash Flows From Investing Activities](index=51&type=section&id=Cash%20Flows%20From%20Investing%20Activities) - Cash flows used for investing activities significantly increased by **$370.2 million** to **$381.9 million** for the nine months ended September 30, 2023, primarily due to **$366.1 million** for business combinations (Griffin, Socius, ACE, Point6 acquisitions)[267](index=267&type=chunk) [Cash Flows From Financing Activities](index=51&type=section&id=Cash%20Flows%20From%20Financing%20Activities) - Cash flows used for financing activities were **$32.0 million** for the nine months ended September 30, 2023, a decrease of **$292.3 million** compared to cash flows provided in the prior year, mainly due to tax distributions, debt repayment, and contingent consideration payments, contrasting with the prior year's bond issuance[268](index=268&type=chunk) [Contractual Obligations and Commitments](index=51&type=section&id=Contractual%20Obligations%20and%20Commitments) Long-term Incentive Compensation Agreements (in thousands) | Long-term Incentive Compensation Agreements (in thousands) | Sep 30, 2023 | | :------------------------------------------------------- | :----------- | | Total liability | $1,785 | | Projected future expense | $5,144 | | Total projected future cash outflows | $6,928 | Contingent Consideration (in thousands) | Contingent Consideration (in thousands) | Sep 30, 2023 | | :------------------------------------ | :----------- | | Total liability | $36,018 | | Projected future expense | $5,432 | | Total projected future cash outflows | $41,450 | [Critical Accounting Policies and Estimates](index=52&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Critical accounting policies and estimates include revenue recognition, business combinations, goodwill and intangibles, income taxes, and tax receivable agreement liabilities, which involve significant judgment and assumptions[276](index=276&type=chunk) [Recent Accounting Pronouncements](index=52&type=section&id=Recent%20Accounting%20Pronouncements) - No material changes to significant accounting policies from the Annual Report on Form 10-K for the year ended December 31, 2022, were disclosed[43](index=43&type=chunk)[279](index=279&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) Discusses the company's exposure to market risks, specifically foreign currency and interest rate fluctuations from operations [Foreign Currency Risk](index=52&type=section&id=Foreign%20Currency%20Risk) - Approximately 2% of revenues for the nine months ended September 30, 2023, were generated from activities in the United Kingdom, Europe, and Canada, with immaterial exposure to foreign currency risk[282](index=282&type=chunk) [Interest Rate Risk](index=52&type=section&id=Interest%20Rate%20Risk) - Fiduciary investment income is sensitive to changes in short-term interest rates[284](index=284&type=chunk) - The Company's Term Loan (**$1,600.5 million** outstanding principal as of September 30, 2023) bears floating interest (**Adjusted Term SOFR + 3.00%**, subject to a **0.75% floor**), and an interest rate cap is in place to manage this exposure[284](index=284&type=chunk)[285](index=285&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Evaluates the effectiveness of the company's disclosure controls and internal control over financial reporting as of September 30, 2023 [Evaluation of Disclosure Controls and Procedures](index=53&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - As of September 30, 2023, the Company's disclosure controls and procedures were deemed effective at the reasonable assurance level, designed to ensure timely and accurate reporting of information[288](index=288&type=chunk) [Changes in Internal Control](index=53&type=section&id=Changes%20in%20Internal%20Control) - There have been no material changes in internal control over financial reporting during the quarter ended September 30, 2023[290](index=290&type=chunk) [Inherent Limitations of Internal Control Over Financial Reporting](index=53&type=section&id=Inherent%20Limitations%20of%20Internal%20Control%20Over%20Financial%20Reporting) - Management acknowledges that no control system can provide absolute assurance against all errors and fraud, only reasonable assurance, due to inherent limitations[291](index=291&type=chunk) [PART II. OTHER INFORMATION](index=53&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) Confirms no current legal proceedings are expected to have a material adverse effect on the company's business - The Company is not currently a party to any litigation that, if determined adversely, would individually or collectively have a material adverse effect on its business, operating results, cash flows, or financial condition[293](index=293&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) Confirms no material changes to previously disclosed risk factors from prior SEC filings - There have been no material changes to the risk factors previously disclosed in the annual report on Form 10-K for December 31, 2022, and the Form 10-Q for March 31, 2023[294](index=294&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports on the issuance of unregistered Class A common stock in connection with a recent acquisition - In connection with the Socius Insurance Services acquisition, the Company issued **60,021 shares** of Class A common stock on July 3, 2023, at **$37.85 per share**, relying on a Regulation D exemption from registration[297](index=297&type=chunk) [Item 3. Defaults Upon Senior Securities](index=54&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Confirms no defaults occurred on senior securities during the reporting period - No defaults upon senior securities were reported[298](index=298&type=chunk) [Item 4. Mine Safety Disclosures](index=54&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) States that mine safety disclosures are not applicable to the company's operations - Not applicable[299](index=299&type=chunk) [Item 5. Other Information](index=54&type=section&id=Item%205.%20Other%20Information) Updates on the ACCELERATE 2025 restructuring program's costs and savings, and confirms no changes in insider trading arrangements - The board approved an update to the ACCELERATE 2025 restructuring program on October 30, 2023, expecting approximately **$90 million** in cumulative pre-tax charges by end of 2024 and **$50 million** in annual cost savings in 2025[300](index=300&type=chunk)[301](index=301&type=chunk) - Approximately **95%** of the cumulative pre-tax charges for the ACCELERATE 2025 program are expected to result in future cash expenditures[301](index=301&type=chunk) - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended September 30, 2023[303](index=303&type=chunk) [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including corporate governance, debt, and equity agreements - The report includes a list of exhibits, such as the Amended and Restated Certificate of Incorporation, Bylaws, Registration Rights Agreement, Indenture, Tax Receivable Agreement, LLC Operating Agreements, Indemnification Agreements, Director Nomination Agreement, Omnibus Incentive Plan, and various equity award agreements[305](index=305&type=chunk)[306](index=306&type=chunk) [SIGNATURES](index=57&type=section&id=SIGNATURES) [Report Signatures](index=57&type=section&id=Report%20Signatures) Contains official signatures certifying the submission of the Quarterly Report on Form 10-Q by the authorized financial officer - The report was signed on November 2, 2023, by Jeremiah R. Bickham, Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)[311](index=311&type=chunk)

Financial Data and Key Metrics - Total revenue grew 19.1% YoY to $585 million, driven by 16.1% organic growth [5][32] - Adjusted EBITDAC increased 16.9% YoY to $194 million, with a margin decline of 60 bps to 33.2% [25] - Net income for Q2 2023 was $84 million, or $0.26 per diluted share, while adjusted net income was $124 million, or $0.45 per diluted share [25] - The company expects GAAP interest expense of $31 million in Q3 and $29 million in Q4 [22] Business Line Performance - Property and casualty lines showed strong growth, particularly in transportation, driven by social inflation and carrier rate increases [21][24] - The Binding Authority specialty saw solid growth in traditional binding and personal lines despite capacity constraints [29] - Public company D&O, transactional liability, and construction-related lines faced headwinds, with modest growth expected in H2 [30] - The Wholesale Brokerage specialty performed well, with property and casualty lines benefiting from market conditions and higher reinsurance costs [45][46][47] - The Underwriting Management specialty delivered strong results, particularly in property, casualty, and reinsurance [48] Market Performance - The E&S (Excess and Surplus) market remained robust, with increased flow due to conservative appetites, rate increases, and tighter limit management [13][24][27] - California, a significant E&S market, showed double-digit growth in recent months, driven by personal lines and property [84][85] - The cyber market experienced rate deceleration, particularly in public D&O and excess layers, but remains a growth opportunity [42][86][112] Strategic Direction and Industry Competition - The company completed three strategic acquisitions in July, adding $40 million in annual revenue and expanding capabilities in professional lines, cyber, and benefits [7][8][17] - The ACCELERATE 2025 program is on track to deliver $35 million in annual savings by 2025, with $17 million in charges incurred in Q2 [12][51] - The company continues to invest in talent and innovation, particularly in areas like cat property and transportation, to capture market share and drive long-term growth [11][13][15] - The benefits market is a key focus, with acquisitions in medical stop-loss insurance and plans to expand into integrated health solutions [16][17][72] Management Commentary on Operating Environment and Outlook - Management expects favorable specialty insurance market dynamics to persist, with 2023 projected to be another strong year [14] - The company raised its full-year organic revenue growth guidance to 13.0%-14.5%, up from 10.5%-13.0%, while maintaining adjusted EBITDAC margin guidance of 29.0%-30.0% [52][55] - The E&S market is expected to remain a significant driver of growth, with flow into the non-admitted market outpacing rate increases [49] Other Key Information - The company paid for three acquisitions at the beginning of Q3, reducing operating funds relative to the Q2 balance sheet [22] - Fiduciary investment income partially offset margin pressures from hiring and T&E normalization [25][33] - The company remains disciplined in M&A, focusing on cultural fit, strategic alignment, and accretion [10] Q&A Session Summary Question: Updated organic growth guidance and property concentration - Q2 is the highest property concentration quarter, with Q4 being the next highest but not expected to match Q2 growth [36] - The company expects H2 growth to mirror H1, with strong contributions from casualty lines [55] Question: M&A pipeline and margin impact - The M&A pipeline remains robust, with discussions ongoing in the benefits market [57] - Acquisitions are expected to have a neutral margin impact, with no significant changes to seasonality or EBITDAC [59][74] Question: Cyber market dynamics - Cyber remains a growth opportunity despite rate deceleration, with the company well-positioned in binding authorities and MGUs [86][112][117] Question: California market and property E&S capabilities - The company is well-positioned in California, with strong capabilities in property and casualty, including a new high-net-worth personal lines facility [85][107][108] Question: ACCELERATE 2025 savings timing - Savings from the program are expected to materialize in 2024, with the full $35 million annual impact in 2025 [104] Question: Fiduciary assets and seasonality - Fiduciary asset fluctuations are normal and driven by timing factors, with no material changes to DSO or business mix [69] Question: Competitor T&E spending and growth opportunities - No significant pullback in competitor T&E spending has been observed, with the market remaining highly competitive [90]