Reliance Global Group’s Revenue Grows by 17% and 40% in 2023 Compared to 2022 and 2021, respectively
- 17% revenue increase in 2023 compared to 2022
- 67% organic growth and 33% acquisition related
- Net loss of $12.0 million in 2023
- AEBITDA improved by 75% to $687,000
- Focus on strategic acquisitions in the insurance agency market
- None.
Insights
The reported 17% year-over-year revenue increase for Reliance Global Group is a robust indicator of growth, particularly as it includes a significant portion of organic growth. This suggests that the company's core business operations are scaling effectively. However, the net loss of $12.0 million, compared to the previous year's net income, raises concerns about the company's current profitability and the sustainability of its growth trajectory. The goodwill impairment charge is a red flag, indicating potential overvaluation of assets in the past. Investors should scrutinize the details of such charges, as they can impact the perception of a company's financial health.
Moreover, the improvement in AEBITDA is noteworthy. It reflects management's efforts to optimize operations, as seen with the 'OneFirm' strategy. This strategy's focus on cross-selling and collaboration among the company's agencies could lead to improved margins and operational efficiency over time. The increase in working capital and cash reserves are positive signs for the company's liquidity, which is important for supporting ongoing operations and future growth initiatives.
For investors, the company's ongoing negotiations to acquire a provider of voluntary benefits is a potential catalyst for future growth. However, the success of such acquisitions hinges on effective integration and realization of projected AEBITDA contributions. Investors should also consider the broader market potential, as indicated by the estimated growth of the global insurance agency/brokerage market. Reliance's strategic positioning within this market could present opportunities for expansion and increased market share.
Reliance Global Group's expansion of its RELI Exchange agency partner digital platform is a strategic move that aligns with digital transformation trends within the insurance industry. By offering solutions in 46 states and partnering with 35 carriers, the company is significantly increasing its distribution channels and market reach. Such digital platforms are becoming increasingly important for insurance agencies to maintain competitiveness and meet evolving consumer preferences for digital services.
The insurance agency/brokerage market's projected growth to $613 billion by 2028 underscores the importance of strategic mergers and acquisitions (M&A). With M&A deal volume comprising a substantial portion of the market value, Reliance's active role in identifying and executing strategic acquisitions could be a major growth driver. However, investors should be aware that M&A activities come with integration risks and the potential for cultural clashes that can affect the anticipated synergies.
Reliance's focus on voluntary benefits also taps into a growing niche within the insurance industry. As employers increasingly offer voluntary benefit options to employees, providers that can effectively service this demand are well-positioned for growth. The acquisition target's projected AEBITDA suggests a strong financial performance, which could enhance Reliance's portfolio if the acquisition is completed successfully.
The progression to final stages of a definitive agreement for an acquisition is a critical juncture, with significant legal and regulatory considerations. Due diligence is paramount to ensure that all liabilities, including potential regulatory compliance issues and contractual obligations, are fully understood and managed. The legal complexities of integrating a new entity, particularly in the highly regulated insurance industry, require careful planning to avoid future legal pitfalls.
Investors should also be cognizant of the goodwill impairment charge reported by Reliance. Goodwill impairment can often result from changes in market conditions or company performance that negatively affect the value of acquired assets. It's important for investors to consider the reasons behind such impairments, as they may indicate deeper issues within the acquired entities or the valuation methods used during the acquisition process.
Additionally, the use of non-GAAP metrics like AEBITDA requires careful analysis. While such metrics can provide a clearer picture of operational performance by excluding certain items, they are not standardized and can vary in calculation from one company to another. Investors should understand the adjustments made and consider them alongside GAAP measures to gain a comprehensive understanding of the company's financial position.
Acquisition letter of intent previously announced progresses to final stages of definitive agreement discussions
Company to Host Conference Call Today at 1:00 PM Eastern Time
LAKEWOOD, N.J., April 04, 2024 (GLOBE NEWSWIRE) -- Reliance Global Group, Inc. (Nasdaq: RELI; RELIW) (“Reliance”, “we” or the “Company”) today provided a business update and reported financial results for the year ended December 31, 2023.
“We are pleased to report
“Our net loss was substantially driven by non-core operating and non-cash expense charges, such as, net estimate & fair value changes in acquisition earn-out payables & warrant liabilities, goodwill impairment, amortization, interest, share based compensation and discontinued operations results, tallying a net total of
2023 Financial Highlights*:
(approximates)
- Commission income increased by
$2.0 million , or17% , to$13.7 million in 2023, compared to$11.8 million in 2022, of which67% is organic growth and33% , is acquisition related. - Commission expense increased by
$592,000 , or19% , to$3.7 million in 2023, compared to$3.1 million in 2022, driven primarily by the Company’s increased commission income revenues. - Salaries and wages remained relatively flat at
$7.5 million , representing a nominal decrease of$5,000 , or0.1% , during 2023 compared to 2022, demonstrating the Company’s ability to effectively leverage its in-place talent (human capital) despite robust increases in top-line revenue. - General and administrative expenses decreased by
$869,000 , or18% , to$4.1 million in 2023, compared to$5.0 million in 2022, driven in part by OneFirm efficiencies gained, coupled with lower acquisition-related costs. - Net loss was
$12.0 million in 2023, compared to net income of$6.5 million in 2022. The change and swing were primarily driven by a 2023 goodwill impairment charge of$7.6 million combined with a gain in the fair value change of warrant liabilities of only$5.5 million in 2023 compared to$23.5 million in 2022. - AEBITDA improved in 2023 by
75% or$2.1 million , from a loss of$2.8 million in 2022 to$687,000 in 2023, a result of increased revenues and decreased AEBITDA costs, driven by OneFirm, our strategy to operate leaner coupled with lower acquisition-related costs. - Working capital increased by
$5.8 million , or126% , to$1.2 million in 2023, compared to negative working capital of$4.6 million in 2022. - Cash and restricted cash of
$2.7 million at the end of 2023 increased by$829,000 , or43% , compared to$1.9 million at the end of 2022.
*Complete financial results are available in the Company’s Annual Report on Form 10-K, which was filed with the U.S. Securities & Exchange Commission today.
“As illustrated by our financial highlights, we’ve had great growth momentum and strong performance throughout 2023, a real testament to the significant contributions and commitment of my friends and colleagues here at Reliance. We’ve also effectively expanded our cutting-edge RELI Exchange agency partner digital platform, which now boasts solutions in 46 states, access to 35 carriers, and a network of hundreds of committed agency partners.”
“We continue to see vast potential in the global insurance agency/brokerage market, which in 2023 had an estimated value of
“As previously announced, the Company has an open letter of intent to acquire a leading provider of voluntary benefits to more than 45,000 employee lives throughout the United States, with projected AEBITDA of more than
Conference Call
Reliance Global Group will host a conference call today at 1:00 PM Eastern Time to discuss the Company’s financial results for the quarter and year ended December 31, 2023, as well as the Company’s corporate progress and other developments.
The conference call will be available via telephone by dialing toll-free +1 888-506-0062 for U.S. callers or +1 973-528-0011 for international callers and using entry code: 515451. A webcast of the call may be accessed at https://www.webcaster4.com/Webcast/Page/2381/50129 or on the investor relations section of the Company’s website at https://relianceglobalgroup.com/events-and-presentations/.
A webcast replay will also be available on the Company’s Investors section of the website (https://relianceglobalgroup.com/events-and-presentations/) through April 1, 2025. A telephone replay of the call will be available approximately one hour following the call, through April 18, 2024, and can be accessed by dialing 877-481-4010 for U.S. callers or +1 919-882-2331 for international callers and entering conference ID: 50129.
About Reliance Global Group, Inc.
Reliance Global Group, Inc. (NASDAQ: RELI; RELIW) is an InsurTech pioneer, leveraging artificial intelligence (AI), and cloud-based technologies, to transform and improve efficiencies in the insurance agency/brokerage industry. The Company’s business-to-business InsurTech platform, RELI Exchange, provides independent insurance agencies an entire suite of business development tools, enabling them to effectively compete with large-scale national insurance agencies, whilst reducing back-office cost and burden. The Company’s business-to-consumer platform, 5minuteinsure.com, utilizes AI and data mining, to provide competitive online insurance quotes within minutes to everyday consumers seeking to purchase auto, home, and life insurance. In addition, the Company operates its own portfolio of select retail “brick and mortar” insurance agencies which are leaders and pioneers in their respective regions throughout the United States, offering a wide variety of insurance products. Further information about the Company can be found at https://www.relianceglobalgroup.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. In some cases, forward-looking statements can be identified by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions and include statements such as the Company having built a best-in-class InsurTech platform, making RELI Exchange an even more compelling value proposition and further accelerating growth of the platform, rolling out several other services in the near future to RELI Exchange agency partners, building RELI Exchange into the largest agency partner network in the U.S., the Company moving in the right direction and the Company’s highly scalable business model driving significant shareholder value. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in our filings with the Securities and Exchange Commission and elsewhere and risks as and uncertainties related to: the Company’s ability to generate the revenue anticipated and the ability to build the RELI Exchange into the largest agency partner network in the U.S., and the other factors described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as the same may be updated from time to time. The foregoing review of important factors that could cause actual events to differ from expectations should not be construed as exhaustive and should be read in conjunction with statements that are included herein and elsewhere, including the risk factors included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, the Company’s Quarterly Reports on Form 10-Q, the Company’s Current Reports on Form 8-K and other subsequent filings with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.
Contact:
Crescendo Communications, LLC
Tel: +1 (212) 671-1020
Email: RELI@crescendo-ir.com
INFORMATION REGARDING A NON-GAAP MEASURE
The Company believes certain financial measures which meet the definition of non-GAAP financial measures, as defined in Regulation G of the SEC rules, provide important supplemental information. Namely our key financial performance metric Adjusted EBITDA (“AEBITDA”) is a non-GAAP financial measure that is not in accordance with, or an alternative to, measures prepared in accordance with GAAP. “AEBITDA” is defined as earnings before interest, taxes, depreciation and amortization (EBITDA) with additional adjustments as further outlined below, to result in Adjusted EBITDA. The Company considers AEBITDA an important financial metric because it provides a meaningful financial measure of the quality of the Company’s operational, cash impacted and recurring earnings and operating performance across reporting periods. Other companies may calculate Adjusted EBITDA differently than we do, which might limit its usefulness as a comparative measure to other companies in the industry. AEBITDA is used by management in addition to and in conjunction (and not as a substitute) with the results presented in accordance with GAAP. Management uses AEBITDA to evaluate the Company’s operational performance, including earnings across reporting periods and the merits for implementing cost-cutting measures. We have presented AEBITDA solely as supplemental disclosure because we believe it allows for a more complete analysis of results of operations and assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Consistent with Regulation G, a description of such information and tabular reconciliations of this supplemental non-GAAP financial information to our most comparable GAAP information are provided below.
We exclude the following items, and the following items define our non-GAAP financial measure AEBITDA:
- Interest and related party interest expense: Unrelated to core Company operations and excluded to provide more meaningful supplemental information regarding the Company’s core operational performance.
- Depreciation and amortization: Non-cash charge, excluded to provide more meaningful supplemental information regarding the Company’s core operational performance.
- Goodwill impairment: Non-cash charge, excluded to provide more meaningful supplemental information regarding the Company’s core operational performance.
- Equity-based compensation: Non-cash compensation provided to employees and service providers, excluded to provide more meaningful supplemental information regarding the Company’s core cash impacted operational performance.
- Change in estimated acquisition earn-out payables: An Earn-out liability is a liability to the seller upon an acquisition which is contingent on future earnings. These liabilities are valued at each reporting period and the changes are reported as either a gain or loss in the change in estimated acquisition earn-out payables account in the consolidated statements of operations. The gain or loss is non-cash, can be highly volatile and overall is not deemed relevant to ongoing operations, thus, it’s excluded to provide more meaningful supplemental information regarding the Company’s core operational performance.
- Recognition and change in fair value of warrant liabilities: This account includes changes to derivative warrant liabilities which are valued at each reporting period and could result in either a gain or loss. The period changes do not impact cash, can be highly volatile, and are unrelated to ongoing operations, and thus are excluded to provide more meaningful supplemental information regarding the Company’s core operational performance.
- Other income (expense), net: This account includes non-routine income or expenses and other individually de minimis items and is thus excluded as unrelated to core operations of the company.
- Loss from discontinued operations before tax: This account includes the net results from discontinued operations and since discontinued, are unrelated to the Company’s ongoing operations and thus excluded to provide more meaningful supplemental information regarding the Company’s core operational performance.
The following table provides a reconciliation from net (loss) income to Adjusted EBITDA for the years ended December 31, 2023, and December 31, 2022:
| December 31, 2023 | December 31, 2022 | |||||||
| Net income (loss) | $ | (12,009,982 | ) | $ | 6,466,162 | |||
| Adjustments: | ||||||||
| Interest and related party interest expense | 1,656,253 | 918,026 | ||||||
| Depreciation and amortization | 2,609,191 | 2,563,518 | ||||||
| Goodwill impairment | 7,594,000 | - | ||||||
| Equity based compensation employees, directors, and service providers | 1,272,155 | 1,249,873 | ||||||
| Change in estimated acquisition earn-out payables | 1,716,873 | 524 | ||||||
| Other (income) expense, net | (6,530 | ) | 4,341 | |||||
| Recognition and change in fair value of warrant liabilities | (5,503,647 | ) | (29,064,958 | ) | ||||
| Loss from discontinued operations before tax | 1,984,714 | 15,095,770 | ||||||
| Total adjustments | 11,323,009 | (9,232,906 | ) | |||||
| Adjusted EBITDA | $ | (686,973 | ) | $ | (2,766,744 | ) | ||
FAQ
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