Ryan Specialty (US:RYAN)2022-05-13 21:03Forward-Looking Statements 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 expectations10 - 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 impacts1112 - The company cautions that listed factors may not be exhaustive and undertakes no obligation to update or revise any forward-looking statement15 Commonly Used Defined Terms 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 Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements, including income, comprehensive income, balance sheets, cash flows, and equity Consolidated Statements of Income (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) 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) 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) 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) The Consolidated