Reliance Global Group, Inc.

Good morning, ladies and gentlemen, and welcome to the Reliance Global Group's second quarter 2022 business update conference. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, David Waldman.

Good afternoon, everyone, and thank you for joining Reliance Global Group's second quarter 2022 conference call. On the call with us today is Ezra Baiman, Chairman and Chief Executive Officer of Reliance Global Group, and William Leibovitz, Chief Financial Officer of Reliance. Earlier this morning, the company announced its operating results for the quarter ended June 30th, 2022. 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. earlier 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 or would like any additional information about the company, please contact Crescendo Communications at 212-671-1020. Before Mr. Bayman reviews the company's operating results for the second quarter of 2022, we'd like to remind everyone that this conference call may contain forward-looking statements. All statements other than statements of historical facts contained in this 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. Thank you. 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 March 31, 2022. 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 prediction of future events, although the company believes that the expectations reflected in the forward-looking statements are reasonable and cannot guarantee future results, level of activity, performance, or achievements. In addition, neither the company nor any other 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. With that, I'll now turn the call over to Ezra Baiman. Please go ahead, Ezra.

Thank you, David, and good afternoon, and thanks to everyone for joining us today. I am very pleased to report in the second quarter of 2022 that we achieved a 92% year-over-year increase in revenue compared to the last year's second quarter. This growth has been driven by our proven acquisition strategy and the increasing successes of our recent acquisitions, J.P. Cushion Associates, Medigap Health Insurance Company, and most recently, Barron & Associates, which have subsequently relaunched as a highly successful real-life exchange. We were enthusiastic when we acquired Barra & Associates in April of this year. We viewed Barra as a highly strategic acquisition, one that was extremely complementary to our existing offerings and, more importantly, the perfect vehicle with which to support our nationwide expansion plans. This was exactly the type of transaction we had been searching for, as it added more than 60 agents, and agency partners to our existing agency partner network, and we believed we could scale the business both rapidly and cost-effectively. More importantly, Vyra brought an advanced technology infrastructure that was well aligned with our acquisition strategy. By combining 5minuteinsured.com with the Vyra technology infrastructure, we saw this acquisition as an opportunity to create synergies for growth, including the affiliated agent business model. Barrow was eventually relaunched as RelyExchange, a first-in-class business-to-business insurtech platform, an agency partner network that builds on the unofficial intelligence and data mining backbone of 5minuteinsurer.com, a platform that was designed to target the direct consumer market. We are proud to report that in just three short months, we have aggressively grown our agency partner network by more than 30%. I will parathetically add that The number is actually significantly higher than that, which illustrates both the strength of the platform as well as its popularity with our agency partners. The platform is designed to provide instant and competitive insurance quotes for more than 30 insurance carriers nationwide in just a few minutes. In addition, it reduces an agency's back office burden and expenses by eliminating paperwork, thus providing the agent with more time to focus on their clients selling policies, and building their businesses. Unlike a franchise model, Reliance Exchange was designed with both a low barrier to entry as well as a compelling value proposition that we believe has contributed to the accelerated growth of our agency partner network, which we are currently experiencing. The response from agents using the platform, whether our in-house agents now transitioning to Rely Exchange or our new outside agents partners that have embraced the platform, has been overwhelmingly positive. They are reporting to us that they are experiencing a positive impact on their business since moving on to Rely Exchange platform. We believe that we have a best-in-class platform and not aware of any other offering in the insurance industry with the speed or versatility of real-life change. We look forward to continuing to aggressively add new agency partners to our network and believe this will have a multiplier effect on the growth of our business. Using our proprietary software, which we developed, the agency network we have built is highly scalable, and we believe it will provide us with the ability to grow our business line significantly with little additional costs. Our goal is to build ReliExchange into the largest agency partner network in the U.S., and we believe the results we have experienced already demonstrate we are indeed on the right path. We actually surprised ourselves as the tremendous response. Like ReliExchange, Medigap Health Insurance Company has also experienced robust organic growth since we acquired the company earlier this year. Their acquisition was a significant step in Reliance's evolution as it significantly expanded our geographic footprint as well as broadened our capabilities within the Medicare supplement market. Our goal was to aggressively expand their operations as well as capitalize on cross-selling opportunities across our existing portfolio companies. With both Reliance Exchange and Medigap experiencing such strong organic growth, since we acquired them earlier this year, further validates our strategy of buy and build, as well as our ability to acquire cash flow positive companies and agencies at attractive multiples. I would now like to turn over the call to William Lebovitz, Chief Financial Officer of Reliance Global, who will review the financial results for the three-month period ending June 30th, 2022. William?

Thanks, Ezra, and good afternoon, everyone. The company reported revenues of 4.2 million for the three months ended June 30, 2022, as compared to 2.2 million for the three months ended June 30, 2021. The increase of 2 million, or 92%, was primarily due to expanded operations, which include the insurance agency acquired during 2021 reporting a full year of revenue, and include the two insurance agencies acquired in 2022. Total commission expense of $850,000 for the quarter ended June 30, 2022, increased by $290,000, which is attributable to an increase in operations, including the additional insurance agency acquired during 2021, reporting a full year of commission expense, and including commission expenses of the two insurance agencies acquired in 2022. Salaries and wages expense total $2.2 million for the three months ended June 30, 2022, compared to $1.1 million for the three months ended June 30, 2021. The increase is largely due to the company's growth compared to the prior period. General and administrative expenses totaled $1.8 million for the quarter ended June 30, 2022, compared to $1.2 million for the year-ago quarters. The increase is the result of increased operations and acquisitions the company made in 2021 and 2022. Marketing and advertising expense totaled $605,000 for the three months ended June 30, 2022, compared to $55,000 for the three months ended June 30, 2021. The increase is primarily the result of the company's efforts to increase branding and outreach to achieve a greater presence in the insurance industry compared to the prior year. The company reported $12.4 million of other income for the three months ended June 30, 2022, compared to a $170,000 other expense for the three months ended June 30, 2021. The increase of $12.6 million is attributable primarily to the recognition and change in fair value of warrant liabilities of $12.6 million. Net income for the three months ended June 30, 2022 totaled $10.5 million, or $0.56 per share, compared to a loss of 1.3 million or 12 cents per share. That concludes our prepared remarks. We will now be happy to answer any questions. Operator, please assist as per usual.

Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your questions, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Thank you. Our first question is coming from Edward Riley with EF Hutton. Sir, please go ahead.

Hi, guys. Thanks for taking my question. Just wondering what you expect organic growth to look like for the rest of the year. And are you planning on maybe issuing guidance going forward at all?

So I think with Ed, we do, and right now I'm not sure, but we probably will soon talk about guidance. I will say that in granting growth, especially in Medigap as well, but especially in iExchange, the response has been overwhelming. I mean, it's the truth. The numbers we put in as far as the growth, are understated significantly. The amount of agents joining is, at this stage, as things are being rolled out and things are being finalized, the response is overwhelming, really. In fact, we're in, we have, I think we could say this, I'm sure, because we are actually in serious conversations with several partnerships and business alliances that could even grow this exponentially, really. So we're excited, and I guess as that happens and we see, I mean, I'm talking about recent, like a few hours ago, a conversation I had with Graham Bauer, actually, in Chicago. So I think as this happens, we'll be more ready and available to give guidance, but right now we're excited about the response. It's really beyond our expectations, I'll say that much.

Okay, gotcha. And of the $6.2 million in operating expenses, I'm wondering if there's anything, any one-time material costs in there that you might want to mention?

Definitely. I'm going to let Joel answer that, our Chief Accounting Officer.

Hi, everyone. Of course, yes. There are some one-time, non-recurring items. And they relate to the pipe offering that we had earlier this year. So we have the numbers, if anyone wants to know. But yes, there was some one-time expenses. Oh, of course, yes. So the number for the three months would be about $666,000 for non-recurrent for the six months, and at 6-30-2022 would be about $877,000. All right.

There were also some non-cash items in there, by the way, which is probably important to know.

Of course. So non-cash would be for the six months, about $2.6 million. So again, for the six months in total, we'd be looking at adjustments to loss from operations of about $3.5 million, which is about 81%. Less than what we report now. Thank you. So thank you is 4.3 million Lost from operations. Once you back out these Adjustments would be looking at about 800 827,000 in the loss. So that's a decrease over 81% And so the six months the three months A similar story, about 80% less, so we do better in our loss from operations, and it comes down from about a million. What we reported was $1,900,000 as the loss from operations. That comes down to about $395,000.

So as you can see, when you back out the non-recurring and the non-cash, it puts us in a pretty healthy situation at that stage of our company.

Okay, great. And last one for me, just wondering about the acquisition pipeline, any increasing competition you're seeing? Just wanted you to unpack that a little bit for me.

So, I didn't know what, there was competition. That was just a joke. But we are looking, we're looking, if we're doing things in acquisitions as we have done, I think we're about up to 10 acquisitions since we started. We said we would do it and we did it. This last one was very strategic. I just want to answer, before I go into the acquisitions we always look at, when we look at things now, we want something that's going to move the needle. So if something is going to catch our fancy, it's going to have to be something really significant. But we are looking at, we're talking, we are in talks of different potentials. But I want to remind you that Reliance Exchange in itself is a significant acquisition. platform because every time we acquire another agent, in fact, without paying for it pretty much, it's very significant. It's a tremendous cost effectiveness, much to the credit of Grant Barrett's, besides technology, but his infrastructure in place is remarkable. So it makes it extremely scalable, really. There's very few organizations that I know of in the industry that are disorganized and scalable because of their very strong platform in place. So that in itself is an acquisition platform. But we are looking, if we could do something, of course, we're open. I wouldn't say if Amazon's for sale, because we're a different business, but we're not afraid of big things. Let's put it that way. Those who know me from the private world and the public world, I'm not afraid of big acquisitions. We look to do some very big things. Great, thank you.

Yeah, I'm sorry, yeah.

Thank you, ladies and gentlemen. Sorry, I do apologize. I just want to remind you that if there are any questions or comments, please press star 1 on your phone at this time. Our next question is coming from Bill Jordan with TA Investments. Please go ahead.

Congratulations, guys, on the strong results that you reported today. Very impressive. My question was really asked, but I guess I just was wondering, could you provide maybe a little bit more color on the growth strategy for Rely Exchange, and maybe touch on the cost structure, revenue growth, how much incremental expense you need to add to the business, just trying to get an idea of where it might be in six to 12 months.

Great. That's a very good, valid question. I'm glad you brought that up. Adding, it's hard to believe even the low cost of adding the structure. We need to add, which we have already added, several recruiting agents, and they're busy, but the ratio of adding to revenue and the ratio of adding to revenue with the recruiting, marketing, we're very happy to say, is extremely low on this end because they're very targeted audience. We're not targeting 300 million Americans. We're targeting insurance agents, and there are direct ways of reaching them that we have a system in place that Grant did restart on a smaller scale when it got to 60 agents. We're already way over that, more than we said in our press release, actually. The numbers are growing significantly. A lot of them are in the boarding process and everything else. But it's remarkable. Meaning, if we want to add another 500 agents, which you could do the arithmetic, just dividing what our current revenue is by what what it was with the existing amount of agents, you're talking about not that much more recruiting and very little marketing. The infrastructure and technology in place is there. I'll give you some non-committal numbers, but adding 500 agents, and we do have goals of what we want to do per month going forward, which are way more than they were before we made the acquisition, is minimal. You're talking about We're talking about maybe a half a million dollars in salaries. I'm not going to extrapolate right now, but you could figure out what 500 agents can do. Of course, it's always the rule of some of the agents, sometimes fewer, the ones with the bigger numbers, but it really pays for them to join us because they can concentrate on selling. We do the back office, which is becoming more streamlined with more technology and and with the infrastructure in place. So the numbers are very, very encouraging. I don't want to give them my guidance now, but anyone who looks at them, and we've discussed it internally, is blown away. And we're already doing it. It's not like hypothetical. This was the whole concept we wanted. We looked to make this type of acquisition. Actually, for a year in advance, we were looking for an existing platform that had agents in place with a platform to do this because we felt it was a space launch. It's not just one from a bicycle to a rocket ship because the interest is amazing. And of course, we were building behind the scenes our licensing, 46 states plus Washington, D.C., all the carriers we've been accumulating. So all the basis and all the infrastructure and the weaponry, so to speak, is in place. And now we're just going in, and we're watching it, and it's really, thank God, it's phenomenal. So answering your question, it does not take that much for us to build out. Just get more and more agents in, and our cost is really minimal. I'm almost ashamed to say I'm afraid I'll get too much competition, but I don't think they can do it because there's no one, and I feel confidence in saying this, anyone in the world, just listen to this call, that we know of, there is no one absolutely out there in a franchise model or not or not franchise, who has the combination of factors that we have in place. There's nothing else like it, period.

I hope that answers your question. Oh, it absolutely did. Thanks.

I appreciate all the color. Thank you.

Our next question is coming from Edward Riley with EF Hutton. Please go ahead.

Hey, guys, just to piggyback off the last questions, with the goal of 500 agents, how long do you think it'll take you to sign that many agents from where you are today?

I could tell you what I'm thinking. I'll tell you I'll be a little more conservative. It's not far-fetched to say a year, but I think 18 months is certainly realistic. at the rate we're going and at the infrastructure in place. And that doesn't even take into consideration some of the strategic partnerships that add services that we haven't rolled out yet. And that's going to blow it away. I mean, I could really, really see people wanting to break their franchise agreements to join us, to be honest with you, because we're offering something that no one is offering. Okay, great. I know I'm sorry if I'm excited. I really am.

Okay, great. And just to confirm, you're at 60 at the end of Q2?

No, we're actually more than that. We went up by 30%. We're about closer to 90, and I'm really above that number. It's already above that number as of this morning, but some of them are in the process of finishing the licensing and boarding, but we're above the 90, and we're above the 60, and we're shooting to much bigger numbers. Two digits are in the past, that's in the rear view mirror. We're looking now at three digits and four digits.

Okay, great, thanks so much.

There appear to be no further questions in the queue at this time, so I'm going to hand it back to management for any closing comments they'd like to finish with.

Okay, so we're excited about the revenue growth we achieved during the second quarter. which we see as validation of our InsureTech platform. We look forward to Reliance Exchange continuing to gain traction with independent agents and agency partners across the United States as we continue to make progress in our strategy to expand our nationwide footprint. We are now licensed to sell policies for more than 30 carriers in 49 states across the country. I would like to thank everyone for participating on our second quarter 2022 conference call. The future is very bright for Reliance and we look forward to updating you again next quarter.

Thank you.

Thank you, ladies and gentlemen. 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.