PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's discussion, and market risk disclosures [Financial Statements (Unaudited)](index=8&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Ryan Specialty Holdings, Inc.'s unaudited consolidated financial statements for Q2 2022 show **$70.1 million net income** and detailed financial positions [Consolidated Financial Statements](index=8&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements reflect significant year-over-year growth in revenue and net income, with total assets reaching **$6.44 billion** by June 30, 2022 Consolidated Statements of Income Highlights (in thousands) | | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Total revenue** | $491,292 | $390,012 | $878,182 | $701,470 | | **Operating income** | $105,528 | $92,262 | $148,915 | $132,105 | | **Net income** | $70,120 | $63,407 | $88,196 | $59,606 | | **Net income attributable to Ryan Specialty** | $24,501 | $63,407 | $31,412 | $57,156 | Consolidated Balance Sheet Highlights (in thousands) | | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | $3,955,440 | $3,011,007 | | **Total assets** | $6,442,417 | $5,458,708 | | **Total current liabilities** | $3,347,339 | $2,918,141 | | **Total liabilities** | $5,740,903 | $4,863,931 | | **Total stockholders' equity** | $701,514 | $594,777 | Consolidated Statements of Cash Flows Highlights (in thousands) | | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | **Cash flows provided by operating activities** | $164,711 | $107,715 | | **Cash flows used for investing activities** | $(6,790) | $(155) | | **Cash flows provided by (used in) financing activities** | $379,757 | $(19,421) | [Notes to the Consolidated Financial Statements (Unaudited)](index=14&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements%20(Unaudited)) Notes detail accounting policies, revenue disaggregation, debt structure including a **$400 million** senior secured note, and a **$293.8 million** Tax Receivable Agreement liability Revenue from Contracts with Customers by Specialty (in thousands) | Specialty | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Wholesale Brokerage | $574,051 | $447,083 | | Binding Authority | $122,744 | $108,641 | | Underwriting Management | $180,113 | $145,466 | | **Total Net commissions and fees** | **$876,908** | **$701,190** | - The restructuring plan initiated in 2020 was fully actioned by June 30, 2022, incurring cumulative costs of **$30.9 million** against an expected range of **$30.0-$35.0 million**, and is expected to generate annual savings of **$25.0 million**[61](index=61&type=chunk) - In February 2022, the LLC issued **$400.0 million** of **4.38% senior secured notes** due 2030. As of June 30, 2022, total debt was approximately **$1.98 billion**[69](index=69&type=chunk)[73](index=73&type=chunk) Tax Receivable Agreement (TRA) Liabilities (in thousands) | | Exchange Tax Attributes | Pre-IPO M&A Tax Attributes | TRA Payment Tax Attributes | Total TRA Liabilities | | :--- | :--- | :--- | :--- | :--- | | **Balance at Dec 31, 2021** | $136,704 | $83,389 | $52,007 | $272,100 | | Exchange of LLC Common Units | $9,897 | $1,435 | $3,159 | $14,491 | | Remeasurement - change in state rate | $2,884 | $1,759 | $2,530 | $7,173 | | **Balance at June 30, 2022** | **$149,485** | **$86,583** | **$57,696** | **$293,764** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2022 performance, highlighting **26.0% total revenue growth**, **22.3% organic growth**, and strong liquidity with **$866.7 million cash** [Results of Operations](index=47&type=section&id=Results%20of%20Operations) Q2 2022 total revenue grew **26.0%** to **$491.3 million**, driven by organic growth and acquisitions, with net income increasing to **$70.1 million** Q2 2022 vs Q2 2021 Revenue by Specialty (in thousands) | Specialty | Q2 2022 | Q2 2021 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Wholesale Brokerage | $329,225 | $255,959 | $73,266 | 28.6% | | Binding Authorities | $59,751 | $53,596 | $6,155 | 11.5% | | Underwriting Management | $101,251 | $80,291 | $20,960 | 26.1% | | **Total** | **$490,227** | **$389,846** | **$100,381** | **25.7%** | - Compensation and benefits expense for Q2 2022 increased by **$73.3 million (30.9%)** year-over-year, primarily driven by a **$33.9 million** increase in commissions, a **$14.1 million** increase from IPO-related compensation expense, and growth in headcount[228](index=228&type=chunk)[229](index=229&type=chunk) - General and administrative expense for Q2 2022 increased by **$17.8 million (58.0%)** year-over-year, mainly due to a **$7.8 million** increase in travel and entertainment, **$2.4 million** in higher insurance costs as a public company, and **$2.0 million** in restructuring costs[231](index=231&type=chunk) [Non-GAAP Financial Measures and Key Performance Indicators](index=52&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Key%20Performance%20Indicators) Non-GAAP metrics for Q2 2022 show **22.3% organic revenue growth**, **$166.1 million Adjusted EBITDAC**, and **$106.4 million Adjusted Net Income** Organic Revenue Growth Rate Reconciliation | | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Total revenue growth rate (GAAP) | 26.0% | 25.2% | | Less: Mergers and acquisitions | (2.8%) | (3.1%) | | Change in other | (0.9%) | (0.8%) | | **Organic revenue growth rate (Non-GAAP)** | **22.3%** | **21.3%** | Adjusted EBITDAC Reconciliation (in thousands) | | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | **Net income** | **$70,120** | **$63,407** | | Interest expense, net | 24,846 | 18,986 | | Income tax expense | 11,168 | 2,332 | | Depreciation | 1,229 | 1,222 | | Amortization | 26,233 | 27,319 | | Change in contingent consideration | (251) | 1,723 | | **EBITDAC** | **$133,345** | **$114,989** | | Adjustments (Acquisition, Restructuring, Equity-comp, etc.) | 32,730 | 25,498 | | **Adjusted EBITDAC** | **$166,075** | **$140,487** | Adjusted Net Income Reconciliation (in thousands) | | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | **Net income** | **$70,120** | **$63,407** | | Adjustments (Amortization, Equity-comp, Restructuring, etc.) | 73,053 | 59,626 | | **Adjusted income before income taxes** | **$143,173** | **$123,033** | | Adjusted tax expense | (36,724) | (30,758) | | **Adjusted net income** | **$106,449** | **$92,275** | [Liquidity and Capital Resources](index=62&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$866.7 million cash**, supported by credit facilities and a **$293.8 million** estimated TRA liability - Primary sources of liquidity are cash from operations, a **$600 million Revolving Credit Facility**, a **$1.65 billion Term Loan**, and **$400 million Senior Secured Notes**[289](index=289&type=chunk)[294](index=294&type=chunk)[296](index=296&type=chunk) - As of June 30, 2022, the company had **$866.6 million** in cash and cash equivalents and **$811.0 million** in cash held in a fiduciary capacity[292](index=292&type=chunk) - The company expects future payments under the Tax Receivable Agreement (TRA) to total **$293.8 million** in aggregate based on transactions as of June 30, 2022[301](index=301&type=chunk) All Risks Long-Term Incentive Plan Future Cash Outflows (in thousands) | Period | Projected Future Cash Outflows | | :--- | :--- | | 2022 | $106,618 | | 2023 | $0 | | 2024 | $0 | | 2025 | $0 | | Thereafter | $0 | [Quantitative and Qualitative Disclosure About Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) Market risk is primarily from interest rates, mitigated by a **$1.0 billion** interest rate cap on its variable-rate term loan, with foreign currency risk being immaterial - Foreign currency risk is considered immaterial, with approximately **3% of revenues** for the six months ended June 30, 2022, generated from activities in the UK, Europe, and Canada[322](index=322&type=chunk) - To manage interest rate risk on its **$1.62 billion variable-rate Term Loan**, the company entered into an interest rate cap agreement on April 7, 2022. The cap has a **$1.0 billion notional amount**, a **2.75% strike rate**, and terminates on December 31, 2025[325](index=325&type=chunk)[326](index=326&type=chunk) [Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that as of June 30, 2022, the company's disclosure controls and procedures were **effective at a reasonable assurance level**[330](index=330&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[332](index=332&type=chunk) PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other material information [Legal Proceedings](index=67&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - The company is not presently a party to any litigation the outcome of which, if determined adversely, would individually or taken together have a **material adverse effect** on its business, operating results, cash flows or financial condition[334](index=334&type=chunk) [Risk Factors](index=67&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - There have been **no material changes** to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021[335](index=335&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=67&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - None [Other Information](index=68&type=section&id=Item%205.%20Other%20Information) On August 9, 2022, the company amended its Tax Receivable Agreement (TRA) to limit elective termination and scope of payment obligations - On August 9, 2022, the Company amended and restated the Tax Receivable Agreement to limit its ability to electively terminate the agreement and to limit the reference property giving rise to payment obligations[339](index=339&type=chunk)

[Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines the nature of forward-looking statements, emphasizing inherent risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are subject to **substantial risks and uncertainties**, many amplified by the COVID-19 pandemic, potentially causing actual results to differ materially from expectations[10](index=10&type=chunk) - Key risk factors include failure to retain senior management, market cyclicality, reduced insurer capacity, loss of client relationships, competitive pressures, decreased commission rates, and M&A integration impacts[11](index=11&type=chunk)[12](index=12&type=chunk) - The company cautions that listed factors may not be exhaustive and undertakes no obligation to update or revise any forward-looking statement[15](index=15&type=chunk) [Commonly Used Defined Terms](index=6&type=section&id=Commonly%20Used%20Defined%20Terms) This section defines key terms used in the Form 10-Q for clarity and consistent understanding of company and industry-specific terminology [PART I. FINANCIAL INFORMATION](index=9&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=9&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements, including income, comprehensive income, balance sheets, cash flows, and equity [Consolidated Statements of Income (Unaudited)](index=9&type=section&id=Consolidated%20Statements%20of%20Income%20(Unaudited)) The Consolidated Statements of Income show significant profitability improvement for Q1 2022, with **total revenue increasing by 24.2%** and a shift from net loss to net income Consolidated Statements of Income (Unaudited) (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | :--------- | | Net commissions and fees | $386,681 | $311,344 | $75,337 | 24.2% | | Fiduciary investment income | $209 | $114 | $95 | 83.3% | | **Total revenue** | **$386,890** | **$311,458** | **$75,432** | **24.2%** | | Compensation and benefits | $274,274 | $214,486 | $59,788 | 27.9% | | General and administrative | $42,361 | $27,545 | $14,816 | 53.8% | | Amortization | $26,663 | $27,794 | $(1,131) | (4.1%) | | Total operating expenses | $343,501 | $271,615 | $71,886 | 26.5% | | **Operating income** | **$43,389** | **$39,843** | **$3,546** | **8.9%** | | Interest expense, net | $21,752 | $20,045 | $1,707 | 8.5% | | Income (loss) before income taxes | $13,573 | $(1,567) | $15,140 | (966.2%) | | Income tax expense (benefit) | $(4,503) | $2,234 | $(6,737) | (301.6%) | | **Net income (loss)** | **$18,076** | **$(3,801)** | **$21,877** | **(575.6%)** | | Net income (loss) attributable to Ryan Specialty Group Holdings, Inc. | $6,911 | $(6,251) | $13,162 | (210.6%) | | Basic EPS | $0.07 | — | — | — | | Diluted EPS | $0.06 | — | — | — | [Consolidated Statements of Comprehensive Income (Unaudited)](index=10&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) The Consolidated Statements of Comprehensive Income show a shift from a comprehensive loss in 2021 to a comprehensive income in 2022, primarily driven by improved net income Consolidated Statements of Comprehensive Income (Unaudited) (in thousands) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :---------------------------------------------------- | :------------------------------------------------- | :------------------------------------------------- | | Net income (loss) | $18,076 | $(3,801) | | Net income (loss) attributable to Ryan Specialty Group Holdings, Inc. | $6,911 | $(6,251) | | Foreign currency translation adjustments | $(58) | $(352) | | Change in share of equity method investment in related party other comprehensive loss | $(1,302) | $(738) | | Total other comprehensive loss, net of tax | $(1,360) | $(1,090) | | **Comprehensive income (loss) attributable to Ryan Specialty Group Holdings, Inc.** | **$5,551** | **$(7,341)** | [Consolidated Balance Sheets (Unaudited)](index=11&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)) The Consolidated Balance Sheets indicate a stable financial position with a slight increase in total assets and a decrease in total liabilities from December 31, 2021, to March 31, 2022 Consolidated Balance Sheets (Unaudited) (in thousands) | Asset/Liability Category | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | | :------------------------------------ | :------------------------------ | :------------------------------- | :-------------------- | | Cash and cash equivalents | $706,370 | $386,962 | $319,408 | | Commissions and fees receivable – net | $189,709 | $210,252 | $(20,543) | | Fiduciary cash and receivables | $2,123,702 | $2,390,185 | $(266,483) | | Total current assets | $3,040,635 | $3,011,007 | $29,628 | | Goodwill | $1,314,266 | $1,309,267 | $4,999 | | Other intangible assets | $549,125 | $573,930 | $(24,805) | | Deferred tax assets | $391,777 | $382,753 | $9,024 | | **Total assets** | **$5,485,637** | **$5,458,708** | **$26,929** | | Accrued compensation (current) | $231,387 | $386,301 | $(154,914) | | Fiduciary liabilities | $2,123,702 | $2,390,185 | $(266,483) | | Total current liabilities | $2,505,309 | $2,918,141 | $(412,832) | | Long-term debt | $1,956,631 | $1,566,627 | $390,004 | | Tax receivable agreement liabilities | $272,730 | $272,100 | $630 | | **Total liabilities** | **$4,861,598** | **$4,863,931** | **$(2,333)** | | Total stockholders' equity | $624,039 | $594,777 | $29,262 | [Consolidated Statements of Cash Flows (Unaudited)](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) The Consolidated Statements of Cash Flows show a significant increase in cash, cash equivalents, and cash held in a fiduciary capacity, primarily driven by financing activities Consolidated Statements of Cash Flows (Unaudited) (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | | :------------------------------------------ | :------------------------------------------------- | :------------------------------------------------- | :-------------------- | | Net income | $18,076 | $(3,801) | $21,877 | | Total cash flows used for operating activities | $(65,470) | $(74,805) | $9,335 | | Total cash flows used for investing activities | $(2,721) | $(2,208) | $(513) | | Total cash flows provided by (used for) financing activities | $308,731 | $(138,166) | $446,897 | | Net change in cash, cash equivalents, and cash held in a fiduciary capacity | $241,356 | $(215,963) | $457,319 | | Cash, cash equivalents, and cash held in a fiduciary capacity—Ending balance | $1,381,017 | $679,741 | $701,276 | [Consolidated Statements of Mezzanine Equity and Stockholders'/Members' Equity (Unaudited)](index=13&type=section&id=Consolidated%20Statements%20of%20Mezzanine%20Equity%20and%20Stockholders'%2FMembers'%20Equity%20(Unaudited)) The Consolidated

Part I [Business](index=8&type=section&id=Item%201.%20Business) Ryan Specialty Group is a leading specialty insurance service provider, primarily operating as a wholesale broker and managing underwriter in the E&S market, driving growth through organic expansion, M&A, and technology - Ryan Specialty is a **service provider** of specialty insurance products, focusing on distribution, underwriting, and risk management, primarily acting as a **wholesale broker** and **managing underwriter**[25](index=25&type=chunk) - A significant majority of premiums placed are in the Excess & Surplus (E&S) market, which offers greater flexibility in terms and rates. In 2021, **73%** of total premiums placed were in the E&S market[26](index=26&type=chunk)[29](index=29&type=chunk) Revenue Contribution by Specialty (FY 2021 & 2020) | Specialty | FY 2021 Net Commission & Fees (millions) | % of Total | FY 2020 Net Commission & Fees (millions) | % of Total | | :--- | :--- | :--- | :--- | :--- | | **Wholesale Brokerage** | $932.0 | 65.1% | $673.1 | 66.2% | | **Binding Authority** | $209.6 | 14.6% | $144.8 | 14.2% | | **Underwriting Management** | $290.6 | 20.3% | $198.8 | 19.6% | - The company has a strong M&A track record, having acquired **over 40 firms** since inception. The largest acquisition was **All Risks** in September 2020, which was the **fourth largest US wholesale distributor** at the time[41](index=41&type=chunk)[44](index=44&type=chunk) - The company utilizes a digital marketplace called **'The Connector'** for retail clients and internal producers to receive quotes and bind policies online, enhancing efficiency for smaller-premium accounts[46](index=46&type=chunk) [Risk Factors](index=23&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including leadership succession, market cyclicality, M&A integration, cybersecurity threats, substantial indebtedness, and concentrated voting control - The business is **highly dependent** on its senior management, particularly founder Patrick G. Ryan, and its ability to recruit and retain key revenue producers. Failure in succession planning or retention poses a a **significant risk**[126](index=126&type=chunk)[128](index=128&type=chunk) - The company's revenues are subject to the **cyclicality** of the P&C insurance market. A "soft" market with declining premium rates could **negatively impact** commission revenues, which are typically a percentage of premiums[129](index=129&type=chunk) - The company faces **risks from its M&A strategy**, including the potential for not realizing anticipated benefits, challenges in integrating acquired businesses, and risks associated with unaudited historical financials of acquired entities[184](index=184&type=chunk)[185](index=185&type=chunk) - **Significant cybersecurity risks** exist, including system disruptions from cyberattacks, ransomware, and security breaches. A cyber-phishing event in April 2021 resulted in unauthorized access to five employee email accounts, potentially exposing PII of **fewer than 2,000 individuals**[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) - The company has **substantial indebtedness** (**$2.029 billion** as of Dec 31, 2021, pro forma for a February 2022 notes issuance), which could restrict operational flexibility, require significant cash flow for debt service, and limit the ability to pursue business opportunities[260](index=260&type=chunk) - The **dual-class stock structure** concentrates approximately **71% of voting power** with the Ryan Parties, limiting the influence of Class A stockholders on major corporate decisions and potentially creating conflicts of interest[304](index=304&type=chunk) [Unresolved Staff Comments](index=62&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - There are **no unresolved staff comments**[334](index=334&type=chunk) [Properties](index=62&type=section&id=Item%202.%20Properties) The company's corporate headquarters are in Chicago, with extensive leased office space across the U.S., Canada, and Europe, while exploring remote work flexibility - The corporate headquarters are in **Chicago, Illinois**, with a lease for **56,250 square feet** expiring in 2028[335](index=335&type=chunk) - The company leases a total of approximately **1,115,000 square feet** for its additional office locations across the U.S., Canada, and Europe[335](index=335&type=chunk) [Legal Proceedings](index=62&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, with management expecting no material adverse effect on its business or financial condition - The company is **not currently a party** to any litigation that is expected to have **no material adverse effect** on its business or financial condition[336](index=336&type=chunk) [Mine Safety Disclosure](index=62&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This disclosure item is not applicable to the company's operations - **Not applicable**[337](index=337&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=63&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Ryan Specialty's Class A common stock trades on the NYSE, with no anticipated cash dividends, and its 2021 IPO generated $1.448 billion in net proceeds for corporate purposes - Class A common stock is traded on the **NYSE** under the symbol **'RYAN'**. Class B common stock is not listed or traded[340](index=340&type=chunk) - The company **does not anticipate paying cash dividends** in the foreseeable future, prioritizing the use of funds for business growth and debt repayment[341](index=341&type=chunk) - The company closed its **IPO** on July 26, 2021, receiving net proceeds of approximately **$1.448 billion**, which have been used for general corporate purposes[345](index=345&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=65&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In FY2021, revenue grew 40.7% to $1.43 billion, driven by acquisitions and organic growth, while net income decreased, but Adjusted EBITDAC and its margin significantly improved, supported by strong liquidity and strategic initiatives FY 2021 Financial Performance Highlights | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $1,432.8M | $1,018.3M | +40.7% | | **Organic Revenue Growth** | 22.4% | 20.4% | +2.0 p.p. | | **Operating Income** | $186.6M | $158.5M | +17.7% | | **Net Income** | $56.6M | $70.5M | -19.7% | | **Net Income Margin** | 4.0% | 6.9% | -2.9 p.p. | | **Adjusted EBITDAC** | $460.2M | $293.5M | +56.8% | | **Adjusted EBITDAC Margin** | 32.1% | 28.8% | +3.3 p.p. | | **Adjusted Net Income** | $290.1M | $185.4M | +56.5% | - The **40.9% increase** in Net commissions and fees in 2021 was driven by **18.3% growth** from the All Risks and Crouse acquisitions and **22.4% organic revenue growth**[401](index=401&type=chunk) - Compensation and benefits expense increased by **44.5% increase** in 2021, driven by higher commissions from revenue growth, **$75.9 million** in IPO-related compensation expense, and costs associated with the All Risks acquisition[410](index=410&type=chunk)[413](index=413&type=chunk) - The company initiated a **Restructuring Plan** in 2020, which is expected to generate **$25.0 million in annual savings** by June 30, 2023, with cumulative one-time charges of **$30.0-$35.0 million**[362](index=362&type=chunk) - The company entered into a **Tax Receivable Agreement (TRA)** in connection with its IPO, recording a liability of **$272.1 million** as of December 31, 2021, for expected future payments to pre-IPO unitholders[472](index=472&type=chunk)[475](index=475&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=94&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks primarily from interest rate changes on its $1.63 billion floating-rate debt, while foreign currency risk is minimal - Foreign currency risk is **minimal**, with approximately **3%** of 2021 revenues generated from operations in the UK, Europe, and Canada[509](index=509&type=chunk) - The company has **significant interest rate risk** due to **$1.629 billion** of outstanding floating-rate term loan borrowings as of December 31, 2021, which are subject to LIBOR changes above a 0.75% floor[512](index=512&type=chunk) [Financial Statements and Supplementary Data](index=95&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for Ryan Specialty Group Holdings, Inc., including income, balance sheets, cash flows, and equity, along with auditor's report and notes - The financial statements were audited by **Deloitte & Touche LLP**, which issued an **unqualified opinion**. Critical audit matters identified were related to the valuation of **Equity-Based Compensation** following the IPO modification and the realizability of **Deferred Tax Assets**[520](index=520&type=chunk)[524](index=524&type=chunk)[525](index=525&type=chunk)[528](index=528&type=chunk) Consolidated Statements of Income (in thousands) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Total revenue** | $1,432,771 | $1,018,274 | $765,111 | | **Total operating expenses** | $1,246,147 | $859,736 | $664,073 | | **Operating income** | $186,624 | $158,538 | $101,038 | | **Net income** | $56,632 | $70,513 | $63,057 | | **Net income attributable to Ryan Specialty** | $65,873 | $68,104 | $64,166 | Consolidated Balance Sheets (in thousands) | | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Total current assets** | $3,011,007 | $2,493,350 | | **Total non-current assets** | $2,447,701 | $2,036,032 | | **Total Assets** | **$5,458,708** | **$4,529,382** | | **Total current liabilities** | $2,918,141 | $2,482,321 | | **Total non-current liabilities** | $1,945,790 | $1,736,336 | | **Total Liabilities** | **$4,863,931** | **$4,218,657** | | **Total stockholders'/members' equity** | $594,777 | $71,090 | Consolidated Statements of Cash Flow (in thousands) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Net cash provided by operating activities** | $273,493 | $135,393 | $149,507 | | **Net cash used for investing activities** | ($457,937) | ($768,508) | ($147,997) | | **Net cash provided by financing activities** | $429,284 | $1,125,304 | $62,274 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=151&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants regarding accounting principles, financial disclosure, or auditing scope - **None**[802](index=802&type=chunk) [Controls and Procedures](index=151&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of December 31, 2021, with no material changes to internal controls during Q4 2021 - The company's principal executive and financial officers concluded that disclosure controls and procedures were **effective** as of December 31, 2021[803](index=803&type=chunk) - A management report on internal control over financial reporting is **not included** due to the **transition period** for newly public companies[804](index=804&type=chunk) - **No material changes** were made to internal control over financial reporting in Q4 2021[805](index=805&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Compensation, and Security Ownership](index=152&type=section&id=Items%2010-14) This section incorporates information on directors, executive officers, corporate governance, compensation, and security ownership by reference from the 2022 Proxy Statement - Information required for Items 10, 11, 12, 13, and 14 is **incorporated by reference** from the company's 2022 Proxy Statement[809](index=809&type=chunk)[811](index=811&type=chunk)[813](index=813&type=chunk)[814](index=814&type=chunk)[815](index=815&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=153&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements from Item 8 and all exhibits filed with the Form 10-K, including corporate governance documents and material agreements - This section lists **all exhibits** filed with the Form 10-K, including corporate governance documents, material contracts, and required certifications[820](index=820&type=chunk) - All financial statement schedules are **omitted** as the required information is either inapplicable or included within the consolidated financial statements and related notes[819](index=819&type=chunk) [Form 10-K Summary](index=155&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that no Form 10-K summary is provided - **None**[823](index=823&type=chunk)

[PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents Ryan Specialty Group's unaudited consolidated financial statements, covering income, balance sheets, cash flows, equity, and accounting notes [Consolidated Statements of Income (Unaudited)](index=6&type=section&id=Consolidated%20Statements%20of%20Income%20(Unaudited)) Consolidated Statements of Income (Unaudited) (in thousands) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | **Revenue** | | | | | | Net commissions and fees | $352,610 | $236,683 | $1,053,800 | $689,833 | | Fiduciary investment income | $156 | $128 | $436 | $1,494 | | **Total revenue** | **$352,766** | **$236,811** | **$1,054,236** | **$691,327** | | **Operating Expenses** | | | | | | Compensation and benefits | $286,538 | $162,981 | $737,825 | $461,094 | | General and administrative | $38,754 | $31,370 | $96,984 | $81,755 | | Amortization | $26,982 | $15,640 | $82,095 | $34,789 | | Depreciation | $1,179 | $1,029 | $3,601 | $2,658 | | Change in contingent consideration | $43 | $(35) | $2,356 | $997 | | **Total operating expenses** | **$353,496** | **$210,985** | **$922,861** | **$581,293** | | **Operating Income (Loss)** | **$(730)** | **$25,826** | **$131,375** | **$110,034** | | Interest expense | $21,193 | $10,859 | $60,224 | $26,295 | | Income from equity method investment in related party | $176 | $326 | $610 | $413 | | Other non-operating loss | $(16,211) | $(1,574) | $(45,547) | $(4,066) | | **Income (Loss) Before Income Taxes** | **$(37,958)** | **$13,719** | **$26,214** | **$80,086** | | Income tax expense (benefit) | $(5,368) | $2,923 | $(802) | $6,085 | | **NET INCOME (LOSS)** | **$(32,590)** | **$10,796** | **$27,016** | **$74,001** | | Net income (loss) attributable to non-controlling interests, net of tax | $(31,256) | $585 | $(28,806) | $1,531 | | **NET INCOME (LOSS) ATTRIBUTABLE TO RYAN SPECIALTY GROUP HOLDINGS, INC.** | **$(1,334)** | **$10,211** | **$55,822** | **$72,470** | | **NET (LOSS) PER SHARE OF CLASS A COMMON STOCK:** | | | | | | Basic and diluted | $(0.16) | | $(0.16) | | | **WEIGHTED-AVERAGE SHARES OF CLASS A COMMON STOCK OUTSTANDING:** | | | | | | Basic and diluted | 105,309,406 | | 105,309,406 | | - For the three months ended September 30, 2021, Ryan Specialty Group Holdings, Inc. reported a **net loss of $(32.59) million**, a significant decrease from a net income of $10.80 million in the prior year period, resulting in a **net loss attributable to the company of $(1.33) million**, down from $10.21 million[21](index=21&type=chunk) - For the nine months ended September 30, 2021, **net income decreased to $27.02 million** from $74.00 million in the prior year, with **net income attributable to the company falling to $55.82 million** from $72.47 million[21](index=21&type=chunk) - Total revenue for the three months ended September 30, 2021, **increased by 49.0% to $352.77 million**, primarily driven by a **49.0% increase in net commissions and fees**, and for the nine months, **total revenue grew by 52.5% to $1,054.24 million**[21](index=21&type=chunk) - Operating expenses for the three months ended September 30, 2021, **increased by 67.5% to $353.50 million**, leading to an **operating loss of $(0.73) million** compared to an operating income of $25.83 million in the prior year, while for the nine months, **operating expenses increased by 58.8% to $922.86 million**, with **operating income rising by 19.4% to $131.38 million**[21](index=21&type=chunk) [Consolidated Statements of Comprehensive Income (Unaudited)](index=10&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) Consolidated Statements of Comprehensive Income (Unaudited) (in thousands) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | NET INCOME (LOSS) | $(32,590) | $10,796 | $27,016 | $74,001 | | Net income (loss) attributable to non-controlling interests, net of tax | $(31,256) | $585 | $(28,806) | $1,531 | | NET INCOME (LOSS) ATTRIBUTABLE TO RYAN SPECIALTY GROUP HOLDINGS, INC. | $(1,334) | $10,211 | $55,822 | $72,470 | | Other comprehensive loss, net of tax: | | | | | | Foreign currency translation adjustments | $(648) | $(1,747) | $(204) | $(1,045) | | Change in share of equity method investment in related party other comprehensive loss | — | — | $(738) | — | | Total other comprehensive loss, net of tax | $(648) | $(1,747) | $(942) | $(1,045) | | **COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO RYAN SPECIALTY GROUP HOLDINGS, INC.** | **$(1,982)** | **$8,464** | **$54,880** | **$71,425** | - Comprehensive loss attributable to Ryan Specialty Group Holdings, Inc. for the three months ended September 30, 2021, was **$(1.98) million**, a decrease from comprehensive income of $8.46 million in the prior year, and for the nine months, **comprehensive income decreased to $54.88 million** from $71.43 million[23](index=23&type=chunk) - Foreign currency translation adjustments contributed to other comprehensive loss, with **$(648) thousand for the three months** and **$(204) thousand for the nine months** ended September 30, 2021[23](index=23&type=chunk) [Consolidated Balance Sheets (Unaudited)](index=11&type=section&id=Consolidated%20Balance%20Sheets%20(Unaudited)) Consolidated Balance Sheets (Unaudited) (in thousands) | Metric (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :-------------------- | :----------- | :----------- | | **ASSETS** | | | | Cash and cash equivalents | $413,695 | $312,651 | | Fiduciary assets | $1,916,585 | $1,978,152 | | Total current assets | $2,530,919 | $2,493,350 | | Goodwill | $1,223,957 | $1,224,196 | | Other intangible assets | $527,804 | $604,764 | | Deferred tax assets | $395,805 | — | | Total non-current assets | $2,327,537 | $2,036,032 | | **TOTAL ASSETS** | **$4,858,456** | **$4,529,382** | | **LIABILITIES** | | | | Fiduciary liabilities | $1,916,585 | $1,978,152 | | Total current liabilities | $2,376,865 | $2,482,321 | | Long-term debt | $1,568,410 | $1,566,192 | | Tax receivable agreement liabilities | $282,470 | — | | Total non-current liabilities | $1,926,493 | $1,736,336 | | **TOTAL LIABILITIES** | **$4,303,358** | **$4,218,657** | | **EQUITY** | | | | Total stockholders'/members' equity | $555,098 | $71,090 | - Total assets **increased to $4.86 billion** as of September 30, 2021, from $4.53 billion at December 31, 2020, primarily driven by an increase in cash and cash equivalents and deferred tax assets[25](index=25&type=chunk) - Deferred tax assets significantly **increased to $395.81 million** as of September 30, 2021, from zero at December 31, 2020, due to Organizational Transactions and the IPO[25](index=25&type=chunk) - Total liabilities **increased to $4.30 billion** from $4.22 billion, with **Tax Receivable Agreement liabilities of $282.47 million** recorded as of September 30, 2021[25](index=25&type=chunk) - Total stockholders'/members' equity saw a substantial **increase to $555.10 million** as of September 30, 2021, from $71.09 million at December 31, 2020, reflecting the impact of the IPO and related organizational transactions[25](index=25&type=chunk) [Consolidated Statements of Cash Flows (Unaudited)](index=13&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Consolidated Statements of Cash Flows (Unaudited) (in thousands) | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | | **CASH FLOWS FROM OPERATING ACTIVITIES** | | | | Net income | $27,016 | $74,001 | | Total cash flows provided by operating activities | $154,375 | $2,264 | | **CASH FLOWS FROM INVESTING ACTIVITIES** | | | | Cash paid for acquisitions - net of cash acquired | — | $(808,546) | | Asset acquisitions | $(343,158) | $(5,236) | | Total cash flows used for investing activities | $(345,451) | $(854,091) | | **CASH FLOWS FROM FINANCING ACTIVITIES** | | | | Issuance of Class A common stock in the IPO, net of offering costs paid | $1,455,184 | — | | Repurchase of pre-IPO LLC Units and payment of Alternative TRA Payments | $(780,352) | — | | Total cash flows provided by financing activities | $293,694 | $1,013,698 | | **NET CHANGE IN CASH AND CASH EQUIVALENTS** | **$101,044** | **$160,776** | | CASH AND CASH EQUIVALENTS—Ending balance | $413,695 | $212,792 | - Net cash provided by operating activities significantly **increased to $154.38 million** for the nine months ended September 30, 2021, from $2.26 million in the prior year, driven by strong organic revenue growth and the All Risks Acquisition, despite a decrease in net income[28](index=28&type=chunk)[332](index=332&type=chunk) - Cash flows used for investing activities **decreased to $345.45 million** in 2021 from $854.09 million in 2020, primarily due to the acquisition of the Preferred Blocker Entity in 2021, compared to the All Risks Acquisition and capital commitment to Geneva Re in 2020[28](index=28&type=chunk)[333](index=333&type=chunk) - Cash flows provided by financing activities **decreased to $293.69 million** in 2021 from $1,013.70 million in 2020, with key activities including **$1,455.18 million from IPO stock issuance**, offset by **$780.35 million for pre-IPO LLC unit repurchases** and TRA payments, and **$183.62 million for Class A common stock repurchases**[28](index=28&type=chunk)[335](index=335&type=chunk) [Consolidated Statements of Mezzanine Equity and Stockholders'/Members' Equity (Unaudited)](index=15&type=section&id=Consolidated%20Statements%20of%20Mezzanine%20Equity%20and%20Stockholders'%2FMembers'%20Equity%20(Unaudited)) - The statements detail significant changes in equity structure due to the IPO and Organizational Transactions, including the reclassification of LLC units, issuance of Class A, B, and X common stock, and establishment of additional paid-in capital and accumulated deficit[35](index=35&type=chunk)[106](index=106&type=chunk) - Mezzanine equity, which included preferred units, was **reduced to zero by September 30, 2021**, from $239.64 million at January 1, 2021, as preferred units were repurchased or converted in connection with the IPO[35](index=35&type=chunk)[107](index=107&type=chunk)[110](index=110&type=chunk) - Total stockholders'/members' equity **increased substantially from $71.09 million** at January 1, 2021, **to $555.10 million** at September 30, 2021, reflecting the net impact of IPO proceeds, repurchases, and equity grants[35](index=35&type=chunk) [Notes to the Consolidated Financial Statements (Unaudited)](index=19&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements%20(Unaudited)) - Ryan Specialty Group Holdings, Inc. completed its IPO on July 26, 2021, issuing **65,456,020 shares of Class A common stock at $23.50 per share**, generating **net proceeds of $1,448.1 million**, which were used to purchase LLC Common Units, acquire Redeemable Preferred Units from Onex, and repurchase Class A common stock[42](index=42&type=chunk) - The company underwent significant Organizational Transactions, including reclassifying RSG LLC units, engaging in Common Blocker Mergers, exchanging LLC Common Units for Class A common stock, and repurchasing Class A common stock from Onex[43](index=43&type=chunk) - A Tax Receivable Agreement (TRA) was entered into, obligating the company to pay certain pre-IPO LLC Unitholders **85% of the tax benefits** realized from increases in tax basis and other tax attributes, with **TRA liabilities of $282.5 million** and **deferred tax assets of $395.8 million** recorded as of September 30, 2021[44](index=44&type=chunk)[201](index=201&type=chunk) - The company initiated a restructuring plan in 2020, in conjunction with the All Risks Acquisition, to reduce costs and increase efficiencies, aiming for **$25.0 million in annual savings by June 30, 2022**, with **cumulative restructuring costs of $24.0 million** incurred as of September 30, 2021[81](index=81&type=chunk)[82](index=82&type=chunk) - Equity-based compensation expense for the three months ended September 30, 2021, was **$58.0 million**, significantly higher than $2.2 million in the prior year, primarily due to IPO-related revaluation of existing equity grants and new awards[141](index=141&type=chunk) - The company's long-term debt includes a 7-year term loan facility with an **outstanding principal of $1,633.5 million** as of September 30, 2021, and a revolving credit facility **increased to $600.0 million** in July 2021[92](index=92&type=chunk)[93](index=93&type=chunk) - Contingent consideration liabilities related to acquisitions were **$19.38 million** as of September 30, 2021, with a **current portion of $14.1 million** and a **non-current portion of $5.3 million**[80](index=80&type=chunk)[166](index=166&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operations, liquidity, and cash flows, highlighting IPO, acquisitions, restructuring, and market impacts [Overview](index=40&type=section&id=Overview) - Ryan Specialty Group, founded in 2010, is a rapidly growing service provider of specialty products and solutions for insurance brokers, agents, and carriers, offering distribution, underwriting, product development, administration, and risk management services[207](index=207&type=chunk) - A significant majority of premiums are placed in the Excess & Surplus (E&S) market, which offers greater flexibility in terms, conditions, and rates compared to the Admitted market, enabling unique solutions and innovation[208](index=208&type=chunk) [Significant Events and Transactions](index=40&type=section&id=Significant%20Events%20and%20Transactions) - The company completed its IPO in July 2021, becoming a publicly traded holding company with a controlling equity interest in New RSG Holdings, which in turn controls RSG LLC, impacting tax structure and financial reporting[210](index=210&type=chunk)[211](index=211&type=chunk) - The COVID-19 pandemic, while detrimental to many sectors, created opportunities for Ryan Specialty's Wholesale Brokerage, Binding Authority, and Underwriting Management Specialties, leading to increased submissions into the E&S market and hardening insurance rates[213](index=213&type=chunk) - The 2020 Restructuring Plan, initiated with the All Risks Acquisition, aims to reduce costs and increase efficiencies, targeting **$25.0 million in annual savings by June 30, 2022**, with **cumulative restructuring costs reaching $24.0 million** by September 30, 2021, offset by **$16.7 million in realized savings** for the nine months[216](index=216&type=chunk)[217](index=217&type=chunk) [Key Factors Affecting Our Performance](index=41&type=section&id=Key%20Factors%20Affecting%20Our%20Performance) - The company's performance is driven by strategic acquisitions, deepening relationships with retail broker partners, building its national binding authority business, investing in operations and growth, generating commissions regardless of market state, leveraging E&S market growth, and addressing public company costs[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk) - The company intends to continue targeted acquisitions to enhance human capital, product capabilities, and geographic footprint, while also focusing on developing new solutions for the evolving specialty insurance industry[219](index=219&type=chunk)[223](index=223&type=chunk) - The growing complexity of the E&S market, driven by large, complex, and high-hazard risks, is expected to favor wholesale firms with sufficient scale and intellectual capital, leading to market share consolidation[225](index=225&type=chunk) [Summary of Financial Performance Highlights](index=43&type=section&id=Summary%20of%20Financial%20Performance%20Highlights) Summary of Financial Performance Highlights (3 Months Ended Sep 30) (in thousands, except percentages) | Metric (in thousands, except percentages) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :---------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total revenue | $352,766 | $236,811 | $115,955 | 49.0% | | Compensation and benefits | $286,538 | $162,981 | $123,557 | 75.8% | | General and administrative | $38,754 | $31,370 | $7,384 | 23.5% | | Total operating expenses | $353,496 | $210,985 | $142,511 | 67.5% | | Operating income (loss) | $(730) | $25,826 | $(26,556) | (102.8)% | | Net income (loss) | $(32,590) | $10,796 | $(43,386) | (401.9)% | | Net income (loss) attributable to members | $(1,334) | $10,211 | $(11,545) | (113.1)% | | Compensation and Benefits Expense Ratio | 81.2% | 68.8% | | 12.4% pts | | General and Administrative Expense Ratio | 11.0% | 13.2% | | (2.2)% pts | | Net Income (Loss) Margin | (9.2)% | 4.6% | | (13.8)% pts | | Earnings (Loss) per Share (Basic & Diluted) | $(0.16) | | | | | Organic Revenue Growth Rate (Non-GAAP) | 28.9% | 13.6% | | 15.3% pts | | Adjusted EBITDAC (Non-GAAP) | $105,023 | $67,360 | $37,663 | 55.9% | | Adjusted EBITDAC Margin (Non-GAAP) | 29.8% | 28.4% | | 1.4% pts | | Adjusted Net Income (Non-GAAP) | $62,949 | $41,664 | $21,285 | 51.1% | | Adjusted Net Income Margin (Non-GAAP) | 17.8% | 17.6% | | 0.2% pts | | Adjusted Diluted Earnings per Share (Non-GAAP) | $0.24 | | | | Summary of Financial Performance Highlights (9 Months Ended Sep 30) (in thousands, except percentages) | Metric (in thousands, except percentages) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change ($) | Change (%) | | :---------------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total revenue | $1,054,236 | $691,327 | $362,909 | 52.5% | | Compensation and benefits | $737,825 | $461,094 | $276,731 | 60.0% | | General and administrative | $96,984 | $81,755 | $15,229 | 18.6% | | Total operating expenses | $922,861 | $581,293 | $341,568 | 58.8% | | Operating income | $131,375 | $110,034 | $21,341 | 19.4% | | Net income | $27,016 | $74,001 | $(46,985) | (63.5)% | | Net income (loss) attributable to members | $55,822 | $72,470 | $(16,648) | (23.0)% | | Compensation and Benefits Expense Ratio | 70.0% | 66.7% | | 3.3% pts | | General and Administrative Expense Ratio | 9.2% | 11.8% | | (2.6)% pts | | Net Income Margin | 2.6% | 10.7% | | (8.1)% pts | | Earnings (Loss) per Share (Basic & Diluted) | $(0.16) | | | | | Organic Revenue Growth Rate (Non-GAAP) | 25.6% | 19.8% | | 5.8% pts | | Adjusted EBITDAC (Non-GAAP) | $339,914 | $191,752 | $148,162 | 77.3% | | Adjusted EBITDAC Margin (Non-GAAP) | 32.2% | 27.7% | | 4.5% pts | | Adjusted Net Income (Non-GAAP) | $209,739 | $121,261 | $88,478 | 73.0% | | Adjusted Net Income Margin (Non-GAAP) | 19.9% | 17.5% | | 2.4% pts | | Adjusted Diluted Earnings per Share (Non-GAAP) | $0.78 | | | | [Components of Results of Operations](index=45&type=section&id=Components%20of%20Results%20of%20Operations) - Net commissions and fees **increased by 49.0% to $352.6 million** for the three months ended September 30, 2021, driven by **18.8% growth from the All Risks Acquisition** and **28.9% organic revenue growth**, while for the nine months, growth was **52.8%**, with **26.7% from All Risks** and **25.6% organic**[248](index=248&type=chunk)[266](index=266&type=chunk) Net Commissions and Fees by Specialty (3 Months Ended Sep 30) (in thousands) | Specialty | 2021 (in thousands) | % of total | 2020 (in thousands) | % of total | Change ($) | Change (%) | | :------------------ | :------------------ | :--------- | :------------------ | :--------- | :--------- | :--------- | | Wholesale Brokerage | $229,146 | 65.0% | $154,484 | 65.3% | $74,662 | 48.3% | | Binding Authorities | $52,795 | 15.0% | $36,130 | 15.3% | $16,665 | 46.1% | | Underwriting Management | $70,669 | 20.0% | $46,069 | 19.4% | $24,600 | 53.4% | | **Total** | **$352,610** | | **$236,683** | | **$115,927** | **49.0%** | Net Commissions and Fees by Specialty (9 Months Ended Sep 30) (in thousands) | Specialty | 2021 (in thousands) | % of total | 2020 (in thousands) | % of total | Change ($) | Change (%) | | :------------------ | :------------------ | :--------- | :------------------ | :--------- | :--------- | :--------- | | Wholesale Brokerage | $676,229 | 64.2% | $460,706 | 66.8% | $215,523 | 46.8% | | Binding Authorities | $161,436 | 15.3% | $101,837 | 14.8% | $59,599 | 58.5% | | Underwriting Management | $216,135 | 20.5% | $127,290 | 18.4% | $88,845 | 69.8% | | **Total** | **$1,053,800** | | **$689,833** | | **$363,967** | **52.8%** | - Compensation and benefits expense **increased by 75.8% to $286.5 million** for the three months and **60.0% to $737.8 million** for the nine months ended September 30, 2021, primarily due to IPO-related compensation expense (**$57.6 million**), increased commissions, and acquisition-related long-term incentive compensation[255](index=255&type=chunk)[256](index=256&type=chunk)[272](index=272&type=chunk) - General and administrative expense **increased by 23.5% to $38.8 million** for the three months and **18.6% to $97.0 million** for the nine months, driven by increased travel and entertainment, IT, professional services, and occupancy costs related to revenue expansion and the All Risks Acquisition[257](index=257&type=chunk)[275](index=275&type=chunk) - Other non-operating loss significantly **increased to $16.2 million** for the three months and **$45.5 million** for the nine months, mainly due to the change in fair value of embedded derivatives on Redeemable Preferred Units, triggered by the IPO's 'Realization Event'[261](index=261&type=chunk)[279](index=279&type=chunk) [Non-GAAP Financial Measures and Key Performance Indicators](index=52&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Key%20Performance%20Indicators) - The company uses Non-GAAP measures like Organic Revenue Growth Rate, Adjusted Compensation and Benefits Expense, Adjusted General and Administrative Expense, Adjusted EBITDAC, Adjusted Net Income, and Adjusted Diluted Earnings per Share to provide a clearer view of core performance, improve comparability, and eliminate impacts unrelated to ongoing operations[284](index=284&type=chunk) Organic Revenue Growth Rate Reconciliation | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Revenue Growth Rate (GAAP) | 49.0% | 22.4% | 52.5% | 26.8% | | Less: Mergers and Acquisitions | (18.8)% | (9.8)% | (26.7)% | (7.5)% | | Change in Other | (1.3)% | 1.0% | (0.2)% | 0.5% | | **Organic Revenue Growth Rate (Non-GAAP)** | **28.9%** | **13.6%** | **25.6%** | **19.8%** | Adjusted EBITDAC Reconciliation (in thousands) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income (loss) | $(32,590) | $10,796 | $27,016 | $74,001 | | EBITDAC | $11,439 | $41,212 | $174,490 | $144,825 | | Adjustments | $93,584 | $26,148 | $165,424 | $46,927 | | **Adjusted EBITDAC** | **$105,023** | **$67,360** | **$339,914** | **$191,752** | | Adjusted EBITDAC Margin | 29.8% | 28.4% | 32.2% | 27.7% | Adjusted Net Income Reconciliation (in thousands) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net Income (loss) | $(32,590) | $10,796 | $27,016 | $74,001 | | Adjusted Income before Income Taxes | $85,428 | $56,542 | $284,635 | $164,562 | | Adjusted tax expense | $(22,479) | $(14,878) | $(74,896) | $(43,301) | | **Adjusted Net Income** | **$62,949** | **$41,664** | **$209,739** | **$121,261** | | Adjusted Net Income Margin | 17.8% | 17.6% | 19.9% | 17.5% | Adjusted Diluted Earnings per Share Reconciliation (in thousands, except per share data) | Metric (in thousands, except per share data) | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2021 | | :------------------------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) attributable to Class A common shareholders- diluted | $(17,115) | $(17,115) | | Adjusted Diluted Earnings per Share | $0.24 | $0.78 | | Weighted-average shares of Class A common stock outstanding- diluted | 105,309 | 105,309 | | Adjusted Diluted Shares Outstanding | 267,721 | 267,721 | [Liquidity and Capital Resources](index=84&type=section&id=Liquidity%20and%20Capital%20Resources) - The company believes its balance sheet, strong cash flow, and available debt capacity provide adequate liquidity to meet operational needs for the next 12 months and beyond[329](index=329&type=chunk) - Cash and cash equivalents **increased by $200.9 million** from September 30, 2020, **to $413.7 million** at September 30, 2021, with operating cash flows **increasing by $152.1 million to $154.3 million** for the nine months ended September 30, 2021[332](index=332&type=chunk) - Fiduciary assets, totaling **$1.92 billion** at September 30, 2021, are held for insurance policyholders, clients, and carriers and cannot be used for general corporate purposes, though **$134.4 million of collected revenue** in fiduciary accounts is available for transfer to operating accounts[331](index=331&type=chunk) - The company's credit facilities include a **$1,650.0 million term loan** and a revolving credit facility, which was **increased from $300.0 million to $600.0 million** on July 26, 2021, with the term loan interest rate repriced in March 2021 to LIBOR + 3.00%[343](index=343&type=chunk)[345](index=345&type=chunk)[346](index=346&type=chunk) - Future payments under the Tax Receivable Agreement (TRA) are estimated to be **$282.5 million**, with additional substantial payments expected from subsequent exchanges or financings, funded by cash on hand and operations[348](index=348&type=chunk) Projected Future Cash Outflows for All Risks Long-Term Incentive Plan (in thousands) | Year | Amount (in thousands) | | :--- | :-------------------- | | 2021 | $67,288 | | 2022 | $113,005 | | 2023 | — | | 2024 | — | | Thereafter | — | Projected Future Cash Outflows for Contingent Consideration (in thousands) | Year | Amount (in thousands) | | :--- | :-------------------- | | 2021 | — | | 2022 | $14,359 | | 2023 | $5,484 | | 2024 | — | | Thereafter | — | [Off-Balance Sheet Arrangements](index=88&type=section&id=Off-Balance%20Sheet%20Arrangements) - As of September 30, 2021, the company did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K[356](index=356&type=chunk) [Critical Accounting Policies and Estimates](index=88&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - The company's critical accounting policies and estimates, which involve significant judgment and assumptions, include revenue recognition, fair value measurements, and goodwill and intangibles, where changes could materially impact financial results[358](index=358&type=chunk) [Recent Accounting Pronouncements](index=88&type=section&id=Recent%20Accounting%20Pronouncements) - The company adopted ASU 2020-10 Codification Improvements and ASU 2021-04 Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options as of January 1, 2021, with no material impact on financial statements[72](index=72&type=chunk)[73](index=73&type=chunk) [Emerging Growth Company](index=88&type=section&id=Emerging%20Growth%20Company) - The company qualifies as an 'emerging growth company' under the JOBS Act, allowing it to take advantage of certain exemptions from reporting requirements, and has elected to 'opt out' of the extended transition period for new accounting standards[363](index=363&type=chunk)[364](index=364&type=chunk) - The company expects to cease qualifying as an 'emerging growth company' after the completion of its 2021 fiscal year[366](index=366&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=89&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) Discusses the company's exposure to market risks, focusing on interest rate and foreign currency exchange rate fluctuations and their management - The company is exposed to market risks from changes in interest rates and foreign currency exchange rates, with approximately **3% of revenues generated from the United Kingdom and Europe**[367](index=367&type=chunk)[368](index=368&type=chunk) - Interest rate risk primarily stems from the **$1,633.5 million outstanding principal** on its floating-rate term loan, and historically, the company used interest rate derivatives (swaps) to mitigate this exposure, but currently has none outstanding as of September 30, 2021[371](index=371&type=chunk) [Item 4. Controls and Procedures](index=89&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures, reporting no material changes in internal control over financial reporting during the quarter - As of September 30, 2021, the company's disclosure controls and procedures were deemed **effective at a reasonable assurance level** by its principal executive and financial officers[374](index=374&type=chunk) - There have been **no material changes in internal control over financial reporting** during the quarter ended September 30, 2021[376](index=376&type=chunk) [PART II OTHER INFORMATION](index=70&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=70&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any litigation expected to materially adversely affect its business, operating results, cash flows, or financial condition - The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its business, operating results, cash flows, or financial condition[378](index=378&type=chunk) [Item 1A. Risk Factors](index=70&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's IPO Prospectus - No material changes have occurred to the risk factors previously disclosed in the company's IPO Prospectus[379](index=379&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=70&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the use of proceeds from the Initial Public Offering (IPO) of Class A Common Stock and related equity security repurchases - The company closed its IPO on July 26, 2021, selling **65,456,020 shares of Class A common stock at $23.50 per share**, generating approximately **$1,449.7 million in net proceeds**[381](index=381&type=chunk) - Proceeds were used to acquire newly issued LLC Units, acquire an entity holding preferred unit interest, acquire outstanding LLC Units from existing holders, and repurchase Class A common stock from Onex[337](index=337&type=chunk) - The company repurchased a total of **8,224,708 shares of Class A common stock from Onex** in connection with the IPO, at an **average price of $22.33 per share**[383](index=383&type=chunk)[384](index=384&type=chunk) [Item 3. Defaults Upon Senior Securities](index=70&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Reports no defaults upon senior securities - There were no defaults upon senior securities[385](index=385&type=chunk) [Item 4. Mine Safety Disclosures](index=70&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[386](index=386&type=chunk) [Item 5. Other Information](index=70&type=section&id=Item%205.%20Other%20Information) No other information is applicable - No other information is applicable[387](index=387&type=chunk) [Item 6. Exhibits](index=71&type=section&id=Item%206.%20Exhibits) Provides a comprehensive list of all exhibits filed or furnished as part of this quarterly report, including organizational documents, agreements, and certifications - The report includes various exhibits such as the Amended and Restated Certificate of Incorporation, Bylaws, Registration Rights Agreement, Tax Receivable Agreement, and the 2021 Omnibus Incentive Plan[388](index=388&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer, pursuant to Exchange Act Rules and 18 U.S.C. Section 1350, are furnished as Exhibits 31.1, 31.2, 32.1, and 32.2[388](index=388&type=chunk)

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 1934 For the quarterly period ended June 30, 2021 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 GROUP HOLDINGS, INC. Two Prudential Plaza 180 N. Stetson Avenue Suite 4600 Chicago, IL 60601 (Address of principal exe ...