Q2 2022 Ryan Specialty Holdings Inc Earnings Call
Greetings and welcome to the Ryan specialty second quarter 2022 earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone.
Keypad as a reminder, this conference is being recorded its now my pleasure to introduce your host know what Andrew <unk> head of Investor Relations and Treasurer. Please go ahead.
Good afternoon, and thank you for joining us today for line specialty Holdings' second quarter 2022 earnings Conference call. In addition to this call we filed a press release with the SEC earlier. This afternoon, which has been posted to our website at <unk> Dot com on today's call management's prepared remarks and answers to your questions may contain forward looking statements investor.
You should not place undue reliance on any forward looking statements. These statements are based on management's current expectations and beliefs and are subject to risks and uncertainties that could cause actual results to differ materially from those discussed today, we encourage listeners to review the more detailed discussion of these risk factors contained in the company's filings with the FCC.
Seeing no duty to update such forward looking statements in the future except as required by law.
Additionally, certain non-GAAP financial measures will be discussed on this call and should not be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.
Reconciliations of these non-GAAP financial measures to the most closely comparable measures prepared in accordance with GAAP.
Included in our earnings release, which is filed with the SEC and available on the company's website.
With that I'd now like to turn the call over to the founder Chairman and Chief Executive Officer of Ryan Specialty Pat Ryan.
Good afternoon, and thank you for joining us to discuss our second quarter results.
Before diving into the quarter I want to acknowledge the teams efforts since we went public one year ago.
I am pleased with our strong results and.
And we continue to have a long runway ahead of us.
We remain true to our values.
We're well positioned to sustainably and profitably grow our business.
I believe that we will continue delivering long term value for.
For our shareholders.
I'm also incredibly proud of our front line.
The producers the underwriters and their teams are all competing and winning head to head in the field by innovating with new products and solutions.
Unrelenting in our pursuit of excellence.
The willing a substantial amount of new business.
Our performance in the second quarter again demonstrated the strengths of our business.
Continuing the track record of success.
We've established over the past 11 years.
We grew total revenue 26%.
What about standing organic revenue growth of 22%.
We also achieved another quarter of double digit growth.
Adjusted EBITDAX.
Adjusted net income on a year over year basis.
Through specialties, all performed very well.
It's generating strong double digit growth for the quarter.
Overall, I'm immensely pleased with a differentiated platform.
Which continues to prove that it's truly best in class.
Providing our clients and trading partners with the value and service they deserve.
Throughout the second quarter.
Marketplace remained robust.
In fact, you'll.
Overall flow of business into our E&S lines there's.
Still at historically high levels.
As we previously noted.
Dusted significantly in those lines.
Or we see clear opportunities to grow in addition to bolstering the lines of business, where we have a leadership position.
Through two two we remain in a prolonged stages.
Historically, a hard market.
Broadly speaking rates remained firm.
All of our lines of business.
Well rich moderated in certain lines.
We saw continued upward rate movement in other lines.
This is a standard or a bit of a carrier competition.
Observed on the periphery, unless we flagged it.
In prior earnings calls.
Is that to meaningfully impact rate or a flaw in the aggregate.
We.
To invest in our intellectual capital throughout the quarter.
I think to our already strong team a deep bench.
And again proving out that we are a destination of choice for the best talent in the industry.
There are a few of the many examples.
We've added accomplished teammates within our renewable energy lives.
And through our data and analytics and technology teams.
We are also making significant valuable additions in many of our lines of business.
Spanning new industry verticals.
The exceptional talent, we've assembled since our founding.
Clothing risen the distance over the last year.
It has been hard at work developing new programs.
Reducing new products.
Our M series and M Jews.
Bringing new and existing capital.
In addition to raising alternative capital.
Support our clients.
We're also pleased to note the productivity amongst our brokers.
It continues to improve or accelerate.
And as reflected in our strong Q2 earnings performance.
The September will Mark the two year anniversary of our acquisition of all risks.
This has exceeded our expectations in all facets.
All risks is further proof that our business model.
<unk> provides a powerful platform.
But those looking to join Ryan supposedly.
And validates our M&A thesis that we make strong businesses even better.
As we look ahead to the rest of 'twenty two.
We're mindful of the elevated uncertainty in the global economy.
And then the geopolitical environment.
That said.
We believe we remain well positioned.
But favorable, especially insurance market dynamics to persist.
We also continued to invest in their various strategies.
Taking advantage of the resilient.
Increasing flow into this market.
And further expand our market share.
I building, what we believe to be the most differentiated platform and.
And deepest bench in the industry.
We have benefited from a flight to quality.
I believe we have positioned ourselves well outperform our competition through the cycle.
Moreover, we maintain a highly active M&A pipeline.
As we look for additional opportunities or tuck ins.
Large acquisitions too.
To enhance and differentiate our platform and capabilities.
We're working from a position of strength.
Given our strong balance sheet.
And Apple capacity.
Which enables us to act when we find the right opportunities.
As I've said before.
We remain disciplined in our pursuit of acquisitions.
Any deal we consider it must meet our criteria.
<unk> cultural fit.
Strategic and accretive to our returns.
Our M&A strategy is and will remain supplemental to our organic growth story.
No not a roll up.
We do not require acquisitions.
To achieve our growth targets.
In summary, it was another team up for that Ryan supposedly.
That contributed to a fantastic second quarter.
The first half of 'twenty to 'twenty two.
With that I'll now turn the call over to our president.
Tim Turner Tim.
Thank you very much Pat.
As Pat highlighted it was another outstanding quarter across all three of our specialties in may for the first time in three years, we hosted our annual Ryan specialty broker and underwriting management conferences with over 800 of our teammates in attendance. It was incredibly exciting to bring the team together.
Got it.
The event led by Patting myself exemplified our culture of collaboration and you could feel the tremendous energy generated by the many talented and driven underwriters producers and corporate leaders all in one place.
Diving into our specialties, our wholesale brokerage specialty continued to achieve excellent growth.
Cross all property and casualty lines of business.
Particular cat property, including when flood and fire has been the strongest driver of new business.
Into the non admitted market today, and an absolute stalwart for us.
As we noted on our last call admitted markets.
Faced pressure from reinsurers derisking their portfolios, which pushes more business into the E&S market.
During the quarter, we saw an acceleration of this trend driven by one of the most challenging reinsurance renewal cycles in a number of years.
To that end, we've continued to develop innovative products and solutions in our brokerage MGA and M. G. You business in these high hazard niches.
Ciber continues to grow in importance due to its complexity. We believe the majority of cyber risks in America will flow into the E&S channel.
We are seeing solid double digit increases in submissions and expect that to continue.
We complement our brokers with capacity from our cyber M G as in M. G use.
Construction is another class, where we continue to see significant increases in flow.
Our industry, leading team with its depth and breadth in the channel is seeing solid double digit increases in submissions for both infrastructure projects and habitation all construction.
We don't see this slowing down and the pipeline for these classes remains at historic highs.
Our transportation practice continues to grow nicely trucking.
Trucking in particular has remained very challenging and the.
The class a business is very risky and as a result that business is increasingly being directed into the E&S market.
We added Krauss and associates at the perfect time.
And we remain well positioned to capitalize on the growth opportunities in this line.
Our health care practice continues to grow with the addition of wholesale brokers and the development of products in our delegated underwriting authority specialties.
In our binding authority specialty.
We continue to experience solid growth in our small commercial lines.
We have made additional progress hiring industry, leading talent and we expect to continue to invest significantly in the specialty to drive organic growth.
We are keeping a close eye on opportunities in the delegated authority market.
To consolidate into Ryan specialty and we continue on the path toward creating the first truly 50 state binding authority operation.
Our underwriting management specialty posted another strong quarter, while continuing to deliver solid underwriting results for our carrier trading partners.
We are excited by the recent additions to our renewable energy M. G U.
And the recent launch of new products.
In addition, our harleysville and New York arrangement with nationwide is beginning to bear fruit.
Axel our alternative risk de Novo M. G U and Emerald are excess general liability M. G. You are both gaining traction and actively quoting and binding accounts.
In terms of the E&S market as Pat mentioned, the environment remains very resilient and strong.
Pricing remains firm in nearly all classes of business and we're seeing material firming in some niche lines. After multiple years of significant rate increases we are seeing rate decreases and public company D&O.
But as Pat noted other lines, such as cyber are still firming and flow remained solid.
And thus the overall E&S market is still growing at a healthy rate.
As we said before we expect the increasing flow of business into the non admitted market to continue to be a significant driver of Ryan specialties growth.
More so than rate.
With that I will now turn the call over to our Chief Financial Officer, Jeremiah Beckham, who will give you more detail on the financial results of our second quarter.
Thank you.
Thank you Tim in Q2, we grew total revenue, 26% period over period to 491 million, which was fueled by another excellent quarter of organic revenue growth coming in at 22, 3% for the quarter, which reflects the continued tailwind we're seeing in the E&S market and as patent.
Tim noted winning a substantial amount of new business.
Net income for Q2, 'twenty, two was $70 million or 22 per diluted share.
Adjusted net income for the quarter, which excludes IPO related and other unusual items increased 15% period over period to 106 million or <unk> 39 per diluted share.
Adjusted EBITDAX for the second quarter grew 18% period over period to 166 billion.
While adjusted EBIT margin declined 220 basis points to 33, 8%.
Our margin was impacted by continued investments in the business public company cost as we were private in Q2 of 'twenty, one and T&D continuing to return to normalized levels. It should be noted that relative to Q2 of 2019, which had a full run rate load of <unk> expense our margin was up 640.
Basis points this quarter.
In addition, we completed a restructuring plan on schedule and are pleased to report that we have achieved $29 million of run rate savings exceeding our initial goal of $25 million.
As Pat and Tim noted the current environment presents a unique and very exciting opportunity to hire a plus level underwriters and brokers and we expect to capitalize on this opportunity in future quarters to pursue an onboard top tier talent.
We fully intend to continue investing in our platform, which allows us to generate sustainable margins, while producing industry, leading organic growth.
Furthermore, our balance sheet remains fortified with $867 million of cash and cash equivalents at June 30, and our undrawn $600 million revolving credit facilities.
Based on the current forward curve projections for sofa, we expect to record GAAP interest expense, which is net of interest income on our operating funds and includes amortization on our interest rate cap of.
Of approximately $30 million in Q3 and $31 million in Q4.
It is important to be mindful that this increase is partially offset by the natural hedge in our fiduciary balances, which benefit from the rising rate environment.
Given our strong execution through the first half of 2022 and the resilient E&S environment. We have raised our full year 2022 outlook for organic revenue growth and adjusted EBITDAX margin as follows.
We are now guiding organic revenue growth rate for the full year of 2022 to be between $16 five at 18.0%, which is up from the previous guide range of $13 five to 15, 5%.
We are now guiding that our adjusted EBITDA margin for the full year 'twenty two to be between 29.0, and 30.0% up from the previous guide range of $28, 5% to 30.0%.
Our business is clearly capable of exceptional growth rates, but it is important to keep in mind that our updated guidance prudently assumes less favorable external conditions than we saw in each one of this year.
In summary, we are very pleased with our performance, particularly given the challenging macro environment and we remain very excited about the path ahead for Ryan specialty with that we thank you for your time and we'd like to open up the call for Q&A.
Operator.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for.
It's using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Your first question comes from Elyse Greenspan with Wells Fargo. Please go ahead.
Hi, Thanks.
My first question is just.
Starting with the M&A outlook on you mentioned bolt on as well as larger deals can you just give us a sense of what's in the pipeline and how that's changed over the past quarter I know on last quarter's call I walked away thinking you know you guys had an active pipeline and maybe close to stopping and we haven't seen anything get announced no there's something happened.
But multiples or is it just you know taking a while.
Closed transactions in this environment.
Well the.
Explanation of.
Larger than tuck ins.
Well as far as specific because.
There are some opportunities that are larger.
And when you have larger acquisition potentials.
There was a lot of.
Work to do in terms of when they're ready to sell.
Sometimes it's a little bit earlier than they planned.
Sometimes it takes longer to get.
To the value that they want.
Identify us as well.
Place they'd like to.
Join.
But we have to see more evidence of.
Of the projections. So there are lots of variables.
Tuck ins.
Uh huh.
Looked at many several.
Neither.
After examination through due diligence.
Found that it wasn't exactly what we.
So it was a good fit for their cultural reasons or.
Our.
Financial reasons.
So youre right, we havent closed on that day, but.
Were just crazy.
We held or what.
Acquisitions.
Well put our culture.
We will be strategic.
Most importantly, it will be a good well.
Very importantly, though most importantly, very importantly will be accretive.
And as we all know the.
So there's a lot of competition, but.
We don't usually compete.
Like a lot of people do.
In this field.
Our field of acquisitions.
And that for the majority of the people that join US we were their destination of choice.
So we're working with people.
I'd like to join us and we'd like to have them join us.
But rich conclusions yet.
Okay and then my second question is.
On.
Organic outlook as well as what you're seeing in E&S market. It sounds like Youre seeing no slowdown and just new business coming into the E&S market from the standard market yet.
Second half of your guidance does imply a slowdown relative to the first half is that just conservatism and are you expecting any slowdown to emerge in the second half of this year.
Yeah.
Hi, Lisa.
The outlook for the remainder of the year is our typical prudent view and incorporates the variability of forecast and most importantly, the fact that and we've said this on a couple of calls by now the circumstances that lead to.
20% organic growth quarter are really hard to predict quite frankly, and even if you felt like you had pretty good line of sight, it's questionable whether.
How prudent it is to put that in our guide.
Tim can can talk more if if necessary, but I think he had really good color in his prepared remarks about the healthiness of the market right now and what we've seen in I think.
Seven of the last nine quarters, when there have been opportunities, we've been able to significantly overachieve and that's always our goal.
But the implied performance of H two is still <unk>.
Very strong in the double digit territory.
Would represent a great finish to the year.
We're just not.
We're just trying to stay prudent in terms of what we guide to.
Okay, great. Thanks for the color.
Next question Weston Bloomer with UBS. Please go ahead.
Hey, Thanks for taking my question. My first one was just a follow up to Lisa's question. So if I'm interpreting that.
The guidance range is really the main change between kind of the first half and the second man has just the amount of paper that could flow into the E&S channel.
Or is there some variability with with potentially lower nominal GDP.
Am I thinking about that correctly overall or is there may be more difficult comps from the back half of the year.
Last year there.
The the some western of everything that we know about the market and.
The macro environment, including the uncertainty of the macro environment is factored in but if you think about the.
The implied range that we're talking about and really where we started the year like.
It should make sense that what we're guiding to what were expecting is a really strong finish but you have to remember like the baseline that we've said is double digits, it's not 20% just because we've.
<unk> been fortunate enough and seize the opportunities to do that so frequently recently doesn't mean that that's the baseline of expectation we're trying to set.
All right.
Oh go ahead go ahead go ahead.
Yeah.
Uh huh.
I was going to switch to another question. So I just wanted to follow up there.
Well I was just going to add that.
In order to achieve 20%, particularly with the increased scale that we've grown them too.
Barry.
Africa.
Rate of growth.
And insurance brokerage failed.
Scale.
So.
You have to have everything aligned properly.
It's never wise are prudent.
Everything's going to align.
What's been happening out of seven of nine quarters.
We're not saying it won't.
And it's imprudent to predict that.
Our forecast though.
Understood.
Just a follow up you've talked about the potential youre seeing.
Higher competition getting more admitted riders moving over to E&S I know you're on the at the early stages of that but I'm. Just curious when do you think that's going to start to more materially happen is it is it just due to pricing in either the admitted market would potentially go below loss cost or is it another factor that I'm not thinking about and then how.
Ryan adjust once they start to see that more.
Material competition that need an E&S.
Less than the current conditions that we see.
Indicated a 30% plus.
Growth and volume into the channel and that comes right from the stamping offices.
So we see no real let up on flow into the channel what we do see in a few lines like public D&O are some premium decreases and some migration back to the standard market and I think thats, what youre looking for in referring to and we do see some signs in that line.
And then in excess casualty and some of the large.
Shared and layered towers, some migration back into the standard market, but all of it is overshadowed by this increased flow of other E&S business into the channel led by Cat property cyber.
Health care habitation all.
Construction transportation is an example.
That that flow continues to grow and we're perfectly aligned in our practice groups to capture that so we see no let up in our ability to convert that new flow into the channel.
Great. Thanks for taking my questions.
Next question Tracy Benji G with Barclays. Please go ahead.
Thank you can you comment on what you're seeing with respect to increases in inflationary type of exposure I'm not talking about unit economics, more like higher insured values higher gross receipts et cetera, and I'm. Just wondering if you think inflationary type of exposure growth is going to be.
Type of true up right now some more episodic or Kenneth piece of premium growth maintain momentum.
Well, we clearly believe that inflation will drive up exposure growth.
So that's a.
A portion of the increase in premium.
So that's pretty well established.
You know it depends on how you view of the future of inflation.
In this country, but.
There is certainly a factor thus driving premiums up.
In terms of.
Our ability to adjust.
Inflationary front as you know.
No.
The majority of our operating expenses are variable.
And so we have the benefit of all.
Of that variability.
I think you also know that we.
We have.
Principally.
A high percentage of our business are compulsory products.
They have to buy it.
Rates go up they still have to buy.
So there's the inflationary pressure.
A band.
Systems.
And so were just raising those points but.
Well you have to keep in mind that at some point.
People say the premiums too high.
And some of those take a larger deductible things like that to adjust the cost of our premium.
The reality is that the insured.
Guided by good solid advice from the broker.
Both the retail broker in this case.
The wholesale broker.
Come to the right conclusion for that particular client, but then let the client mix the choice.
So giving that back the <unk>.
Flows back and forth between higher deductibles and high inflationary type of exposure. It was that a net driver of your organic revenue growth this quarter.
That's it's early in that but yes to a modest degree.
But if it continues as it is.
It'll be a more significant driver.
Got it.
So I'm wondering do you guys play in the personal line space because there is talk about within some cat exposed states that some of the larger insurers I'm wanting to push that risk more and theyre not embedded arms is that is that somewhere that you transact.
It is Tracy and specifically, it's the high net worth part of personal lines that we're active in we have a practice group vertical we have proprietary capacity in that space and that really is a combination of our brokerage capabilities and our delegated underwriting authority.
Expertise, so we're bringing more capital into that space very very significant high demand.
For solutions their.
Due to global warming and its impact so it's a great opportunity.
Space for us.
Yeah.
And how would you say where you rank.
Amongst peers.
Personal lines.
I'm not sure about that.
Well I would say that there's no published data.
But just intuitively what we've seen in the marketplace.
A robust high net worth homeowners practice.
Barry.
Exceptional talent.
So we're a significant player in that space.
Thank you.
Next question, Robert Cox with Goldman Sachs. Please go ahead.
Hi, Thanks for taking my question.
I was just looking for an update on your thoughts regarding double digit organic growth for the foreseeable future. It feels like your revenue base is a little higher than maybe what what you would have anticipated.
And so I was just looking for an update on.
How what kind of timeframe youre thinking about for that type of guidance and is it like the next couple of years can it go further than that and is it how dependent is it on pricing increases.
I would answer the first part and give Jeremy my the ball.
They're higher than what we forecasted.
We're optimistic that we have.
All of the talent.
And the.
Resources.
To enjoy it.
Market.
Come so we are not shocked by how well we've done in that market. The market has continued to improve as you know Jeremy you pick up the rest.
Yep, So when we talk about.
Our growth engine, we talk about being built.
Specifically used the word built for double digit organic growth and we talk about the foreseeable future.
Now the foreseeable future means different things to different people, but it's it's.
It is unwise to try and predict with too much precision out past like just say a couple of years and the reason we're so confident about a couple of years is because of the actual industry fundamentals the secular.
Tailwind and secular features of our growth engine that have gotten us here so far those can't change on a dime.
And recently, we've had a lot of those.
Aspects of our growth engine like take the E&S market for example at a a supercharged growth rate that's not going to last forever. We've tried to communicate that that 20% is not the baseline, but double digits goes all the way down to 10% and we did that and much better.
Without the benefit of rate in fact win rate was going against us for several years, we printed.
Comfortable double digit organic growth than we're comfortable that we're still capable of that that are our growth foundation of our growth engine can do that for years to come but we can't overemphasize enough that double digits doesn't mean, 20%.
Okay, I think that that's great.
And just in regards to the talent that you have hired this year or maybe even in the quarter.
How does that compare to your history.
Maybe as like a percentage of your employee base or something like that just trying to get a sense of how many people you've hired this year.
Compared to historical levels.
Well.
Compared to historical normal levels, because there are periods of our early days of a higher large numbers of people off a small base.
Yeah.
But directly to your question this has been a hurdle.
<unk> four <unk>.
I can tell of.
Filling.
Retirement.
Polls in terms of.
People.
<unk> performed really well for us by there.
Retire.
Attracting really high quality people to replace them and also to build.
Yes.
Additional a players.
Several several several of our specialties.
Additionally, we've.
And emphasizing data and analytics.
We've continued to add talent there.
To really put ourselves in a leadership position as.
As we go forward.
So we've been using this tourism.
Talking about adding talent.
Hello.
We've done that.
Or is satisfactorily for us.
<unk>.
Through the first two quarters.
Yeah.
Great and if I could just ask one more question I know you had hired a new leader for the employee benefits practice.
So my question is have you continue to invest in an employee benefits and in either talent or infrastructure.
Despite no revenues at this point.
We have invested in talent.
And particularly in infrastructure.
We brought some really.
And a plus level talent.
Sector.
Actuarial Microsoft for example.
Executive leadership.
They're doing a fantastic job in our opinion.
Yeah.
Analyzing the market.
Identifying the targets.
Working with those targets.
And frankly.
Just as we've had on the P&C Emma.
M&A space.
I think we are emerging as.
A destination of choice.
Our people on the benefit side.
Who are getting ready to anticipate.
A change in terms of.
Joining with.
Somewhat I think.
Quite a good position.
Or is it because of the talent we brought in the commitment we've made.
Capital that we've shown we're willing to commit to it.
Yes.
Thanks for the answers.
Next question, Jimmy Buhler with J P. Morgan. Please go ahead.
Hi, most of my questions were answered, but maybe if you could talk about the various drivers of your organic growth, whether it's and growth in the E&S market in terms of exposure pricing and then any changes in market share can you to the extent, you're able to quantify or just rank order, which ones have been.
The biggest drivers of your growth over the past year or so.
I think the biggest driver of our growth is winning competitively.
In the marketplace.
Because everybody is.
Factors and exposure factors.
What's differentiated us in those.
Data published on this.
Is that we're growing faster than.
And our peers are.
Our competitors I should say.
And that's because.
Our commitment.
Two high level talent.
It's also our.
The initial commitment and sustaining commitment.
Commitment independents no conflicts.
With our clients.
You'll see stark difference between.
The wholesale growth of.
Of our position as an independent.
For those who own.
Captive.
Wholesalers.
So I'm not going to get into any other details on that but its public data.
And so yes, we're winning the biggest driver is we're winning more and more of them.
And the market.
But we've been doing that all 11 plus years is.
Particularly strong right now.
And maybe another one just on margins typically with growth. This strong you should see a lot of expansion in margins, but I'm, assuming you and then do.
<unk> continued to invest in the business as long as you see this type of growth. So should we assume a fairly stable margins at least in the near term or should we assume that margins would extend commensurately with the growth in revenues.
Well I I won't go out beyond 2022 for guidance, but we have been consistent about the.
Imperative to continue striking that right balance of investment and healthy margins I think the healthy healthy margins as an example represented by our guidance, but Jimmy you've.
Studied us long enough to see that exceptional growth does lead to scale and we're committed to banking some of that most of the time.
Said publicly that we intend we expect two on a reported basis show margin improvement most years, but there are times. This year is a great example, where it is the right long term decision for both organic growth and margin.
To make investments so we're going to we're going to stick to that plan.
And just lastly, with the oldest business flowing from the standard to the E&S market and then also I think theres been consolidation of like annual consolidation on the part of the some of the retail brokers are you envisioning any changes in sort of commission or fee structures and commissions you shared.
With the with the retail brokers up or down.
No I think it's very stable.
We have a very strong relationship with our clients.
They use us because we bring value add.
Yes, I don't think we can bring value add.
It is not over commission thats over whether they need this or not their mind.
And so fortunately.
I continue to believe that they are doing we deliver.
Talk about execution execution.
Outcomes for our clients drives everything we do.
Thank you.
Thanks for your questions.
We have one more question coming from Meyer Shields with Kate BW. Please go ahead.
Thanks, I have one real question and then just one.
Repetition.
Tim you've talked frequently about building a 50 state binding authority operation other than acquisitions can you talk about what's going on internally or organically to get there.
Well historically.
Mayor These binding authority companies, we're very regionally oriented and so they they tend to give the underwriting authority out locally and not on a 50 state basis. So over the last several years, we've been able to get all of our trading partners to give US 50 State authority.
Which allows us to distribute binding authority in small commercial solutions more aggressively and to really.
Have a strong opportunity to consolidate.
The <unk>.
Small commercial business on a binding basis, our electronic trading platform has been a big investment there and so.
Yes.
<unk> platform that we have is created out of 50 states solution based.
Ability.
No one has ever had before so we're bringing that to the market.
And we're winning Rfps and the increase in flow and small commercial continues to grow for us. So great long runway ahead in that space.
Okay understood that's helpful.
And then Jeremy you.
Gabe sort of definition.
Definition of interest expense with regard to the third and the fourth quarter and I'm not sure I caught all the details I was hoping to get you to repeat that please.
Yes, so thats going to be our interest expense layer, which is the interest that it's three pieces. It's the interest we pay on our term loan on our bond. It's also the amortization of our interest rate cap, which is.
We're very happy we did we put on earlier this year and then it's offset by.
Interest income on our operating cash so that's why you see on our financials as interest expense net and so just based on the current so for curve, we thought we would take.
As much guesswork out of that for those at home playing the model game and just give give our best guess of that for the next two quarters, assuming no major <unk>.
M&A.
Okay, but the corresponding number in the second quarter, that's at 24 eight.
Yes.
Okay perfect. Thank you very much.
Yeah.
I would like to turn the floor over to Pat Ryan for closing remarks.
Yeah.
Thank you all for your excellent questions and your support.
Enjoy the chance to.
Playing our company to growth I'm proud of our company and our results.
And thank you for your continued support and have a good evening.
This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
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