Q3 2024 Reliance Global Group Inc Earnings Call

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Speaker Change: Good day and welcome to the Reliance Global Group third quarter business update conference call. At this time all participants have been placed on a listen-only mode and the floor will be open for your questions and comments following the presentation.

Speaker Change: It is now my pleasure to turn the floor over to your host, Ted Ayvas, Investor Relations at Reliance Global. Sir, the floor is yours.

Ted Ayvas: Thanks, Tom. Good afternoon and thank you for joining Reliance Global Group's 2024 Third Quarter Financial Results and Business Update Conference Call. On the call with us today are Ezra Beyman, Chairman and Chief Executive Officer of Reliance Global Group, and Joel Markovits, Chief Financial Officer of Reliance.

Ted Ayvas: Earlier today, the company announced its operating results for the quarter ending September 30, 2024. The press release is posted on the company's website, www.relianceglobalgroup.com.

Ted Ayvas: In addition, the company filed its quarterly report on Form 10-Q with the U.S. Securities and Exchange Commission today, which can also be accessed on the company's website as well as the SEC's website at www.sec.gov.

Ted Ayvas: If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at 212-671-1020.

Ted Ayvas: Before Mr. Beyman reviews the company's operating results for the quarter ended September 30, 2024, we would like to remind everyone that this conference call may contain forward-looking statements. All statements other than statements of historical facts contained in the conference call, including statements regarding our future results of operations and financial position, and the

Ted Ayvas: strategy and plans, and our expectations for future operations of forward-looking statements.

Ted Ayvas: The words anticipate, estimate, expect, project, plan, seek, intend, believe, may, might, will, should, could, likely, continue, design, and the negative of such terms, in other words, in terms of similar expression, are intended to identify forward-looking statements.

Ted Ayvas: These forward-looking statements are based largely on the company's current expectations and projections about future events and trends that it believes may affect its financial condition, results of operations, strategy, short-term and long-term business operations and objectives, and financial needs.

Ted Ayvas: These forward-looking statements are subject to several risks, uncertainties, and assumptions, as described in the company's Form 10-K filed with the U.S. Securities and Exchange Commission on April 4, 2024.

Ted Ayvas: Because of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this conference call may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statement.

You should not reply

Ted Ayvas: In addition, neither the company nor any other person assumes responsibility for the accuracy

Ted Ayvas: The company disclaims any duty to update any of these forward-looking statements.

Ted Ayvas: All forward-looking statements attributable to the company are expressly qualified in their entirety by these cautionary statements, as well as others made on this conference call. You should evaluate all forward-looking statements made by the company in the context of these risks and uncertainties.

Speaker Change: Having said that, I would now like to turn the call over to Ezra Beyman, Chairman and Chief Executive Officer of Reliance Global Group. Ezra?

Ezra Beyman: Thanks, Ted. Good afternoon, and thank you to everyone for joining us this afternoon.

Ezra Beyman: We are pleased to report a highly successful third quarter, marked by robust revenue growth and effective cost management. This reflects our commitment to driving sustained revenue while reducing expenses, leading to significantly improved net financial results.

Ezra Beyman: For the quarter ended September 30th, 2024, revenue grew by 5% to $3.4 million, while total operating expenses declined by 16% to $3.9 million. This positive shift significantly improved our loss from operations by refreshing 64%.

Ezra Beyman: despite a 30% rise in commission expense due to higher first-year commissions.

Ezra Beyman: Net loss for the quarter was approximately $837,000 when compared to the prior year's third quarter, a net loss of around $139,000, or $1.8 million when adjusted to exclude the $1.7 million gain from the fair value of warrant liability as this instrument was largely liquidated in 2024. This quarter's net loss reflects an improvement of approximately $1 million, or 54 percent over the previous years.

Comparable Quarter. Furthermore...

Ezra Beyman: We are very pleased to report that this quarter brings positive adjusted EBITDA, coming in at approximately $42,000 gain, representing a 121% increase from the same period in the prior year.

Ezra Beyman: These highly positive financial results underscore the success of one firm's strategy.

Ezra Beyman: which unifies our own then geographically dispersed insurance agencies into a cohesive, collaborative operation.

Ezra Beyman: This approach enables efficient core selling, collaboration, and optimized use of human capital.

Ezra Beyman: The benefits of the One Firm strategy are evident in this quarter's revenue growth, reduced operating costs, and positive shifts in net results. We feel strongly that our disciplined approach

Ezra Beyman: strengthens our financial foundation and paves the way for sustained growth and long-term value creation for our shareholders.

Ezra Beyman: We also remain focused and highly energized in anticipation of a close in the coming months of the previously announced acquisition of Spetner Associates, Inc.

Ezra Beyman: a leading voluntary benefits insurance agency provider to over 85,000 employees nationally.

Ezra Beyman: We are confident that the integration of Spentner will close to double our consolidated

Ezra Beyman: revenues and serve as a catalyst for additional accelerated revenue growth by having an expanded combined range of service offerings, enhancing our market position, and paving the way for sustained profitability and longer-term success.

Ezra Beyman: Since we originally announced our plans, we have become even more excited about the future prospects for the acquisitions as Ben has managed.

Ezra Beyman: voluntary benefit insurance segment has experienced significant growth, more than doubling the number of covered employees they serve from 45,000 when we initially announced the planned transaction to more than 85,000 today.

Ezra Beyman: By aligning Spetna's innovative benefit solutions with our strategic goals, we are not just driving growth, we are setting a new industry standard and bringing enhanced services to a broader audience.

Ezra Beyman: We are committed to establishing Reliance as a powerful, technology-driven enterprise that prioritizes sustainable profitability.

Ezra Beyman: Our mission continues to focus on building a multi-billion dollar highly profitable business and to provide substantial and sustainable returns to our shareholders.

Ezra Beyman: This game-changing acquisition marks the beginning of a transformative period for Reliance and we believe that the acquisition of Spentner Associates

Ezra Beyman: with its unique voluntary benefits program and extensive market reach will create substantial synergies and significantly increase, I'm sorry, significantly accelerate Reliance's growth trajectory as we expand our personal insurance offering through the Reliance Exchange platform.

Ezra Beyman: Additionally, in the third quarter of 2024, we launched an AI-powered commercial quote-unbind solution on the ReliExchange platform ahead of schedule. This cutting-edge solution encompasses a broad spectrum of commercial insurance policies.

by leveraging AI

Ezra Beyman: Our commercial quote and bind platform transforms the traditionally time-sensitive quoting process, enabling agents to offer clients faster, more competitive quotes, and seamless policy binding.

directly benefiting RealEye Exchange through its commission-sharing model.

Ezra Beyman: As I mentioned earlier, and I've stated in the past, our goal is to transform Reliance into a highly profitable multi-billion dollar enterprise that consistently delivers exceptional returns for our shareholders.

Ezra Beyman: We are committed to driving sustained growth and strengthening our market position through strategic initiatives, innovation, and disciplined fiscal management. We are excited to advance on this path and we are confident in our ability to achieve financial success.

Ezra Beyman: As we discussed in our second quarter conference call, we significantly simplified our capital structure pursuant to exercises of all outstanding Series B and Series G warrants, which we believe has eliminated the potentially perceived significant warrants overhang that may have adversely impacted our publicly traded share price.

Ezra Beyman: As we continue executing on our growth strategy, including the planned acquisitions,

Ezra Beyman: We believe our enhanced capital structure will enable us to unlock significant value for shareholders. I would like now to turn the call over to Joel Markovits, Chief Financial Officer of Reliance Global, who will review the financial results for the quarter ended September 30, 2024. Joel?

Joel Markovits: Thank you very much, Ezra, and good afternoon. It's great to be here with you all today.

Joel Markovits: It's going to be a pleasure to share with you some key financial highlights for the third quarter ended September 30, 2024.

All figures presented are approximates.

Speaker Change: As Ezra mentioned, it's been a great quarter with increases to top line revenues, decreases to operating costs, and vastly improved net results.

So, let's get into details.

Speaker Change: Revenues for the quarter ended at $930,024, increased by 5% from the same period in 2023, or from $3.3 million to $3.4 million rounded, which represents a $175,000 increase.

Speaker Change: For the year-to-date period ending 9-30-2024, revenues increased by 3% or $350,000.

Speaker Change: These strong growth trends are attributed primarily to organic growth, which is telling, and a good indicator about the future positive prospects for the company.

Speaker Change: Total operating expenses for the quarter decreased by around 16%, or $760,000 compared to the prior year's quarter.

This resulted in a very...

Speaker Change: Invigorating change are lost from operations which improved by 64% or close to 1 million dollars.

Speaker Change: Our one-firm approach and strategy to doing business is proving to provide significant returns as you cross-utilize talent and consolidate vendor contracts.

Speaker Change: and results shine through the Quarter's financial results. As illustrated by the 5% efficiency rate in salaries and wages, 23% decrease in general and administrative costs, and 15% decrease in marketing and advertising costs.

The nine-month period ended 9-30-2024.

Speaker Change: Total operating costs increased by 19% due primarily to a $3.2 million intangible asset impairment charge.

Speaker Change: However, when removing the impact of this impairment, which had no bearing on operations of the company, net total operating expense actually comes in lower by around 1.2 million dollars or 8 percent, versus the same period in the prior year.

Speaker Change: Staying with this analysis, loss from operations also improves by 35% or $1.5 million.

Speaker Change: Turning to EBITDA, our adjusted EBITDA metric, a non-gap measure but key company performance indicator.

Speaker Change: which came in at a $43,000 gain for Q3 of 2014.

Speaker Change: improvement from 2023, and for year-to-date, this year versus last year, APRES results also improved by around 55%.

Speaker Change: So, hopefully these financial highlights are helpful and to close out our prepared remarks.

Speaker Change: Let's conclude with, we're absolutely thrilled to be at the tail end of the acquisition process for the Spetna M&A deal, which is expected to further increase our revenues and EBITDA.

Speaker Change: Honestly, this really drives home the execution of our mission to build a highly profitable business enterprise through expansion and innovation, both mechanically and with M&A, strengthen our market share, and provide meaningful returns and long-lasting value to our shareholders.

Speaker Change: With that, we'll hand back the reins to the operator to kindly open the line for any questions, comments or other feedback participants may have.

Speaker Change: Operator? Thank you. The floor is now open for questions or comments. If you wish to join the queue at this time to ask a question or make a comment, please press star 1 on your telephone keypad. We do ask if listening on speakerphone today that you pick up your handset while asking your question to provide optimal sound quality.

Speaker Change: Once again, please press star 1 on your telephone keypad at this time if you wish to join the queue to ask a question. Please hold a moment while we poll for questions.

[inaudible]

Speaker Change: And we have a question from Nick Pincus from Morris Capital. Nick, your line is live. Please go ahead.

Nick Pincus: Congrats everyone on achieving positive adjusted EBITDA, a very big milestone. Spentner also appears to be generating very strong cash flow. I was wondering if you could just provide some more color on the synergies and additional cost savings that could come with the acquisition.

Speaker Change: It's almost, it's phenomenal the potential for the cross-selling. Remember we're dealing with, as we mentioned, over 85,000 employees. They all need...

Speaker Change: Aside from the benefits they're getting through this program through Spentner, they all need auto insurance.

Speaker Change: insurance, other types of insurance that we sell, and the really exciting part is when we did our testing of 5-Minute Insure a little while ago.

Speaker Change: The savings are so substantial, in some cases 30 to 60 percent, we think we can have a pretty decent ratio of interested customers in making those changes. So that could be really exciting when you're dealing with an amount of people here.

Speaker Change: And, of course, the back office, which we've already been trimming, as we mentioned, but, you know, utilizing Spetner's phenomenal technology is really way above average. We think that could also help us.

Speaker Change: in Streamlining Expenses and Backoffice Support. So I think all around, it's a win-win. It's a company that has been growing. We mentioned before this is a very strong business. It's already in its fourth generation. So I think it's... We're all excited. It really is.

Joel Markovits: Joel, anything? Yeah, sure. Just to build on what Ezra was saying, thank you for that.

You know, um...

There's very strong revenue at Spetna, you know, close to

Joel Markovits: and Epidermogen is very healthy, around 40% or even north of that.

Joel Markovits: So, that should, you know, provide significant benefits, you know, as we merge together as one company. We definitely increase our revenues.

Joel Markovits: I'm almost doubling essentially and the costs are limited that we're going to have to assume so, you know, we're excited about that

Speaker Change: That's all really amazing, especially when you put that in perspective of the current market cap of the company. I'm just wondering, following the acquisition, it'll be a good problem to have, but what would be your plans for the excess cash flow? Would you consider buying back stock or other things?

That's that's certainly a possibility, you know, we

Speaker Change: The stock we feel, most people in the industry feel, is the bargain of the century. So, yeah, I think we would want to take advantage of that, and you know, in the past I've already bought significant blocks of stock. So that may be, as the company rebinds, that's definitely on the horizon. Yeah.

Speaker Change: And of course, growing the company and also using the extra cash to grow the company, you know, whether it's, you know, getting new lines, advancing technology and or acquisitions. So, you know, we want to be, you know, deploy the capital smartly.

Congratulations. Thanks. Thank you very much.

Speaker Change: Thank you and again if anyone has a question at this time please press star 1 on your telephone keypad to join the queue.

Speaker Change: And there are no further questions in queue at this time. I would now like to turn the call back to management for closing remarks.

Speaker Change: Thank you very much. On behalf of Ezra and the entire Reliance team.

Speaker Change: We appreciate your participation in this business update. We're truly excited and energized by Alliance's prospects and very happy to be sharing this onward journey with you, our valued shareholders, and other interested parties.

Speaker Change: Until next time, we wish you a very good rest of the day and all the very best.