Yahoo Finance Reliance Global Group Inc (RELI) Q4 2023 Earnings Call Transcript Highlights: Strategic Moves ...
Revenue: Increased by 17% year-over-year to $13.7 million in 2023.
Net Loss: Totaled $12 million in 2023.
Adjusted EBITDA: Loss improved by 75% to $687,000 in 2023.
Commission Income: Grew by $2 million, or 17%, to $13.7 million in 2023.
Commission Expense: Increased by $592,000, or 19%, to $3.7 million in 2023.
Salaries and Wages: Remained flat at $7.5 million in 2023.
General and Administrative Expenses: Decreased by $869,000, or 18%, to $4.1 million in 2023.
Goodwill Impairment: Charge of $7.6 million in 2023.
Fair Value Change of Warrant Liabilities: Gain of $5.5 million in 2023.
Working Capital: Increased by $5.8 million to $1.2 million in 2023.
Cash and Restricted Cash: Increased by $829,000, or 43%, to $2.7 million at the end of 2023.
Release Date: April 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Reliance Global Group achieved a 17% year-over-year increase in revenue for 2023, with two-thirds of this growth being organic.
Adjusted EBITDA loss in 2023 improved by $2.1 million, or 75%, from 2022, indicating better operational efficiency.
The OneFirm strategy has been successful in increasing top and bottom line results through efficient cross-selling and collaboration.
The acquisition of Barra and Associates and the expansion of the RELI Exchange agency partner digital platform has enhanced the company's technological edge and market reach.
Reliance Global Group has an open letter of intent to acquire a company expected to generate an adjusted EBITDA of more than $4 million in 2024, which could more than double current revenue.
Negative Points
The company reported a GAAP net loss of $12 million for 2023, substantially driven by non-core operating and non-cash expense charges.
A goodwill impairment charge of $7.6 million was a major contributor to the net loss in 2023.
The gain in the fair value change of warrant liabilities was significantly lower in 2023 compared to 2022, contributing to the net loss.
Despite the increase in revenue, commission expenses also rose by 19% to $3.7 million in 2023.
General and administrative expenses, while decreased from the previous year, still amounted to $4.1 million in 2023.
Q & A Highlights
Q: What were the key financial highlights for Reliance Global Group in 2023? A: Reliance Global Group reported a 17% year-over-year increase in revenue, with two-thirds coming from organic growth and one-third from acquisitions. The GAAP net loss was $12 million, primarily due to non-core operating and non-cash expense charges. However, adjusted EBITDA loss improved by 75% to $687,000, indicating better operational efficiency.
Q: Can you elaborate on the OneFirm strategy and its impact on the company? A: The OneFirm strategy involves integrating Reliance's nine owned and operated agencies across the US to function as a single unit, enhancing cross-selling opportunities and collaboration. This strategy has led to increases in both top and bottom line results and is expected to strengthen relationships with carriers for better commission and bonus contracts.
Q: How has the acquisition of Barra and Associates impacted Reliance Global Group? A: The acquisition, rebranded as RELI Exchange, has been transformed with cutting-edge technologies, allowing agents to swiftly offer competitive quotes from various carriers. It has expanded the RELI Exchange agency partner digital platform to 46 states, with access to 35 carriers and a network of hundreds of agency partners.
Q: What is the potential market size for the US global insurance agency brokerage market, and what is Reliance's position in it? A: The US global insurance agency brokerage market was valued at $436 billion in 2023 and is forecast to grow to $613 billion by 2028. Reliance aims to lead in this expansive yet fragmented market through its innovative strategies and operational efficiencies.
Q: What are the details of the planned acquisition and its expected impact on Reliance Global Group? A: Reliance has an open letter of intent to acquire a leading provider of voluntary benefits, expected to generate an adjusted EBITDA of more than $4 million in 2024. The acquisition is expected to more than double Reliance's current revenue, with the target company projected to generate over $14 million in revenue in fiscal 2024.
Q: How does the planned acquisition fit into Reliance's broader strategy? A: The acquisition fits well within Reliance's strategy, offering potential synergies for cross-selling personal lines of insurance through the RELI Exchange. It is considered accretive on its own and even more valuable with Reliance's existing infrastructure.
Q: Can you discuss the company's commitment to technology and innovation? A: Reliance is committed to deploying technology, specifically AI and machine learning, to redefine the insurance landscape. This commitment is part of the company's mission to operate efficiently and strategically, with the goal of becoming an industry-leading powerhouse.
Q: What are the financial results for commission income and expenses, and what do they indicate? A: Commission income increased by 17% to $13.7 million in 2023, with commission expense also increasing by 19% to $3.7 million. These figures reflect the company's increased commission income revenues and its ability to leverage in-place talent despite revenue growth.
Q: How did general and administrative expenses change in 2023, and what contributed to this change? A: General and administrative expenses decreased by 18% to $4.1 million in 2023, due to efficiencies gained from the OneFirm strategy and the absence of acquisition-related costs.
Q: What improvements were seen in adjusted EBITDA, and what does this signify for the company? A: Adjusted EBITDA improved by 75% to a loss of $687,000, showing significant improvement due to increased revenues and decreased costs. This improvement is attributed to the OneFirm strategy and lower acquisition-related costs.
Q: What changes occurred in working capital and cash positions by the end of 2023? A: Working capital increased by 126% to $1.2 million, and cash and restricted cash increased by 43% to $2.7 million at the end of 2023, indicating a stronger financial position.
This article first appeared on GuruFocus.
