Ryan Specialty (RYAN) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (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) 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] - 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] - 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] - 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] Consolidated Statements of Comprehensive Income (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] - 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] Consolidated Balance Sheets (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] - 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] - 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] - 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] Consolidated Statements of Cash Flows (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][332] - 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][333] - 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][335] Consolidated Statements of Mezzanine Equity and Stockholders'/Members' Equity (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][106] - 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][107][110] - 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] Notes to the Consolidated Financial Statements (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] - 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] - 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][201] - 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][82] - 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] - 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][93] - 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][166] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operations, liquidity, and cash flows, highlighting IPO, acquisitions, restructuring, and market impacts 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] - 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] Significant Events and Transactions - 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][211] - 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] - 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 $16.7 million in realized savings for the nine months[216][217] Key Factors Affecting Our Performance - The company's performance is driven by strategic acquisitions, deepening relationships with retail broker partners, building its national binding authority business, investing in operations and growth, generating commissions regardless of market state, leveraging E&S market growth, and addressing public company costs[219][220][221][222][223][224][225][226] - The company intends to continue targeted acquisitions to enhance human capital, product capabilities, and geographic footprint, while also focusing on developing new solutions for the evolving specialty insurance industry[219][223] - The growing complexity of the E&S market, driven by large, complex, and high-hazard risks, is expected to favor wholesale firms with sufficient scale and intellectual capital, leading to market share consolidation[225] Summary of Financial Performance Highlights Summary of Financial Performance Highlights (3 Months Ended Sep 30) (in thousands, except percentages) | Metric (in thousands, except percentages) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change ($) | 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 - Net commissions and fees increased by 49.0% to $352.6 million for the three months ended September 30, 2021, driven by 18.8% growth from the All Risks Acquisition and 28.9% organic revenue growth, while for the nine months, growth was 52.8%, with 26.7% from All Risks and 25.6% organic[248][266] Net Commissions and Fees by Specialty (3 Months Ended Sep 30) (in thousands) | Specialty | 2021 (in thousands) | % of total | 2020 (in thousands) | % of total | Change ($) | 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][256][272] - 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][275] - 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][279] Non-GAAP Financial Measures and Key Performance Indicators - 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] 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 - 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] - 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] - 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] - 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][345][346] - 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] 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 - 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] Critical Accounting Policies and Estimates - 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] Recent Accounting Pronouncements - 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][73] Emerging Growth Company - 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][364] - The company expects to cease qualifying as an 'emerging growth company' after the completion of its 2021 fiscal year[366] Item 3. Quantitative and Qualitative Disclosure About Market Risk 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][368] - 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] Item 4. Controls and Procedures 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] - There have been no material changes in internal control over financial reporting during the quarter ended September 30, 2021[376] PART II OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - 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] - 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][384] Item 3. Defaults Upon Senior Securities Reports no defaults upon senior securities - There were no defaults upon senior securities[385] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[386] Item 5. Other Information No other information is applicable - No other information is applicable[387] Item 6. Exhibits 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] - 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]