Reliance Global Group, Inc. (EZRA) Earnings Call Transcript & Summary

Good day, and welcome to the Reliance Global Group Second Quarter Business Update Conference Call. [Operator Instructions] 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.

Thanks, Paul. Good afternoon, and thank you for joining Reliance Global Group's 2024 Second 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. Earlier today, the company announced its operating results for the year ended June 30, 2024. The press release is posted on the company's website, www.relianceglobalgroup.com. 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. If you have any questions after the call, would like additional information about the company, please contact Crescendo Communications at (212) 671-1020. Before Mr. Beyman reviews the company's operating results for the quarter ended June 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, strategy and plans and our expectations for future operations are forward-looking statements. 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 expressions are intended to identify forward-looking statements. 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. 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. 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 statements. You should not rely upon forward-looking statements as predictions of future events. Although the company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. In addition, neither the company nor any person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The company disclaims any duty to update any of these forward-looking statements. All forward-looking statements attributable to the company are expressly qualified in their entirety by these cautionary statements as well as others made in this conference call. You should evaluate all forward-looking statements made by the company in the context of these risks and uncertainties. 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?

Thanks, Ted. Good afternoon, and thank you to everyone for joining us today. We are pleased to report that we attend consistent and sustained revenue levels for the first 3 and 6 months of 2024 with revenue of $3.2 million and $7.3 million, respectively, which represents 1% and 3% growth from the same period in the prior year, respectively. Additionally, we have successfully reduced our operating expenses, achieving a 13% efficiency improvement in the second quarter of 2024 compared to the same period in 2023. Our net loss from continuing operations for the second quarter has also improved by 62% from the same period last year. Our key non-GAAP metric, AEBITDA showed a nominal loss of $178,000 or just under 6% of revenues in the second quarter of 2024. Building on our strong performance in the first quarter, we sustained the momentum of organic growth into the second quarter. We continue to emphasize our foundational OneFirm strategy integrating our 9 owned and operated agencies nationwide into one cohesive business unit. This strategy has granted us access to higher commission tiers and created extensive cross-selling opportunities driving significant revenue growth. A key initiative of the OneFirm strategy is cross collaboration. This approach maximizes the utilization of our exceptional talent across the organization, promote enhanced data access and sharing and segment specialized support services. Additionally, this has another company to consolidate vendor relationships and contracts reducing our rural operating expenses as demonstrated in our second quarter financial results. We also believe that the OneFirm unified approach will position us to scale rapidly as we continue to seek out and integrate accretive acquisitions such as Spetner Associates acquisition, which we believe will further broaden Reliance Global Group's industry and market reach. As OneFirm continues to gain momentum, we anticipate significant improvements in both our revenue and profitability. Turning to the Spetner acquisition. It's anticipated impact is far exceeding our initial expectations. Since announcing our plans, Spetner's BenManage voluntary benefit insurance segment has experienced significant growth now covering more than 85,000 employees, a substantial jump from the 45,000 covered employees when we initially announced the planned transaction. Integrating Spetner expertise, an extensive client base into our operations is expected to significantly enhance our market position, expand our service offerings and accelerate our growth by aligning Spetner's innovative benefit solutions with our strategic goals, we aim to create more value for our stakeholders and strengthen our competitive edge in the industry. This acquisition is not just about growth, it's about setting a new standard in our industry, bringing enhanced services to a broader audience. We believe that Spetner's unique voluntary benefits programs and extensive market search -- market reach will provide considerable synergistic opportunities once the transaction is completed, particularly in expanding our personal insurance lines through the RELI Exchange platform. This acquisition would be one of the largest in our company's history to date will be transformational and marks a pivotal time for Reliance. According to our projections, acquiring Spetner, will double our annual revenues to approximately $28 million as well as significantly boost our AEBITDA. This acquisition is progressing smoothly, and we anticipate the closing of the transaction by the end of 2024. Our mission remains to build a multibillion-dollar highly profitable business enterprise that deliver substantial and sustainable returns to our shareholders. We are confident that this game-changing acquisition will create significant opportunities that align perfectly with our OneFirm go-to-market strategy. We are committed to establishing Reliance as a powerful technology-driven enterprise that prioritizes sustainable profitability and increase shareholder value. We believe the acquisition of Spetner Associates will significantly accelerate Reliance with growth trajectory. In early July and July, we announced we were launching a significant initiative, a new division with Reliance dedicated to the acquisition of multifamily and commercial real estate properties. This is an area where I personally have had great success in the past building the third largest mortgage brokerage in the nation and accumulating a multibillion-dollar portfolio of multifamily properties. Abe Miller, a successful real estate investor and M&A executive will be joining the company to head this new division, and will provide strategic guidance on our future real estate endeavors. His remarkable track record including the successful creation of a $3 billion real estate portfolio through strategic acquisitions, not only showcases its ability to enhance asset value, but also a skill in navigating complex market dynamics to generate substantial investment returns. Having worked with Abe, in my prior real estate business, I have personally witnessed the immense value his insights bring to an organization. With Abe extensive experience and strategic vision, we are confident this initiative will accelerate our progress towards achieving our objectives. Abe will not receive a fixed salary for [ provided ] services, instead, he will be compensated entirely on a success-based model. We believe this new real estate division set the launch following the closing of the Spetner acquisition aligns perfectly with our ongoing strategy focused on accretive and cash flow positive acquisitions. A strategy where we have a proven track record of successful integration, particularly in the insurance brokerage sector. Furthermore, the new division will broaden our company's portfolio by diversifying into multiple business lines and asset categories. Through this expansion into real estate, Reliance will be positioned to leverage nondilutive financing sources supported by both the intrinsic value of the assets and our operational cash flows. Finally, as publicly announced, Reliance has significantly simplified its capital structure, pursuant to exercise of all outstanding Series B and Series G warrants, which remove Series B derivative instruments from our balance sheet and eliminated the potentially perceived significant warrant overhang, which we believe may have also adversely impacted our publicly traded share price. We are confident that our enhanced capital table will resonate well both with our current shareholders as well as future investors as we continue to advance our key initiatives through 2024 and beyond. I would now like to turn the call over to Joel Markovits, Chief Financial Officer of Reliance Global, who will review the financial results for the quarter ended June 30, 2024. Joel?

Thank you very much, Ezra. And very good afternoon to you all. It's my pleasure to share with you some of our financial results for the second quarter of 2024. All figures presented are approximate. As mentioned by Ezra, revenues for the 3- and 6-month periods ended June 30, 2024, increased to 1% and 3%, respectively, from the same period in 2023 and resulting in revenues of $3.2 million for the quarter and $7.3 million for the year-to-date period. Our solid sustained and expanded revenue levels are primarily attributed to organic growth. Our operating expenses for the second quarter of 2024 decreased by 13% or $654,000 from $5 million in the second quarter of 2023 to $4.4 million in 2024. Some key drivers include a decrease of 12% in our general and administrative costs, a decrease of 30% in our marketing costs. And considering with [ company ] terms and/or paid [ all line ] out agreements and were not related to have value adjustments that would have affected our operating results. These expense efficiencies were offset by increases in commission and employee compensation costs, driven primarily by the company's continued expansion and inflationary impacts. The sustained revenues and decreased operating costs this quarter resulted in a vastly improved net result from continuing operations. Compared to the same 3-month period ended June 30, 2023, loss from continuing operations decreased by 62% from $3.9 million to $1.5 million. AEBITDA, our adjusted EBITDA metric, which is a non-GAAP measure, but a key company performance indicator, came essentially flat for this quarter versus prior at a marginal loss of $178,000 or just under 6% of the quarter's revenues. In the 6-month period ended June 30, 2024, EBITDA loss was $252,000, just around a nominal 3% of 6-month revenues. We do expect EBITDA to continuously improve as we progress through the fiscal year and especially post growth and post onboarding Spetner entity [ skewing ] to the acquisition discussed earlier by Ezra. With this, we conclude our prepared remarks. We'll be happy to answer any questions or comments that participants may have. With that, operator, kindly open the lines.

[Operator Instructions] And the first question today is coming from [ Nick Pincus ] from Forest Capital.

Well, congratulations on the continued progress that you guys are making with the business. The first question was, I was wondering if you could provide some more color on the new real estate division that you're launching.

Okay. Yes, that's something that we're excited about. As many people know, the last several years when real estate has been with the ups and the rate being up and some people buying property and maybe at higher levels, they would have wanted to, we feel, and based on our probably close to 3 days decades of experience prior to that, that the opportunity is right to really pick up some good value primarily in multifamily, which we feel that's where we have the experience. And that's also the safest everyone needs a place to put their head down [indiscernible] as opposed to other types of real estate. And we're excited. And Abe Miller is he's -- I like to say in my crackerjack of the industry. He's known closing deals, big, small giants and getting them at the right deal and we're really excited. So of course, we look forward to defining the deals and then working on them. But as we mentioned, we want at first take care of the Spetner acquisition, which is -- we're very involved and very important, but we are looking forward to some excitement as well in a positive way in the real estate sector.

Well, that actually takes on my second question. The Spetner acquisition, which seems pretty exciting, and it sounds like it's moving forward. I was wondering if you -- if there were any additional detail if we share on the -- both the progress, the status of the acquisition as well as any other developments as it may relate to Spetner.

So as far as the progress, we're getting thank God, we're in due diligence behind us and a lot of the other requirements and the contracts and everything that's really behind us. We're not focusing on getting it closed. And we're getting closer and closer, actually. And as far as the business itself, we're really floored and excited because it's let really growing by the day, as we mentioned, went from servicing 85,000 employees, to 85,000 employees from less than half of them or about half of that when we started this transaction, and it's growing and growing. It's a very strong fourth generational business, actually. They're a very strong team, and we're really watching it and excited and they're excited, we're excited. So gearing up for that. That's a big -- no question about it.

That's great. Well, congrats again on progress and good luck.

[Operator Instructions] And there were no other questions from the line. I will now turn the call back to the management team for closing remarks.

Thank you very much. On behalf of Ezra, and entire Reliance team, thank you for your participation in this business update. We're supercharged and excited by the prospect of Reliance Global Group. I'm very happy to be sharing and traveling on this onward journey with you, our value to shareholders and other interested parties. Until next time, we wish you a very good evening and all the very best.

Thank you. This does conclude today's conference call. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.