Reliance Global Group, Inc.

Greetings and welcome to the Reliance Global first quarter 2023 financial results and business update conference call. At this time, all participants are in listen-only mode. A 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. Please note this conference is being recorded. I will now turn the conference over to your host, Ted Avis, Investor Relations. Ted, you may begin.

Thanks, Paul. Good afternoon, and thank you for joining Reliance Global Group's 2023 First Quarter Financial Results and Business Update Conference Call. On the call with us today are Ezra Baiman, Chairman and Chief Executive Officer of Reliance Global Group, and Joe Markovits, Chief Financial Officer of Reliance. Earlier today, the company announced its operating results for the three-month-ended March 31, 2023. The press release is posted on the company's website, www.relianceglobalgroup.com. In addition, the company will file its quarterly report on Form 10-Q with the U.S. Securities and Exchange Commission today as well, 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 Before Mr. Bayman reviews the company's operating results for the quarter ended March 31st, 2023, 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 this conference call, including statements regarding our future results of our 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, and 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 March 30, 2023. 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 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, level 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. With that, I will now turn the call over to Ezra Bayman, Chairman and Chief Executive Officer of Reliance Global Group. Ezra?

Thank you, Ted. Good afternoon, and thanks to everyone for joining us today. We are pleased to announce that our revenue grew 29% for the first quarter of 2023 compared to the same period in 2022, demonstrating the ongoing expansion and strong performance of our subsidiary operations. Reliance Exchange continues to outperform our forecast with over 250 partner agencies presently on our platform. We attribute the success to the extensive range of business tools provided to independent insurance agents, enabling them to effectively compete with and even surpass the larger national agencies. During the initial stages of rolling out Rely Exchange, our strategy was centered on recruiting newer, less experienced agency partners to the platform. However, with the platform's evolution and growth, we have shifted our focus to cater to more seasoned agents who possess robust client bases as we continue building out and growing the platform. Traditionally, most insurance agencies were bound to a single carrier, and due to the limited product offerings that particular carrier presented, they achieved a close rate of only 10% to 20%. On the Rely Exchange platform, we believe they can reach a close rate in excess of 80% due to their ability to offer a wider variety of competitive third-party quotes. We continually seek to introduce new products that our agency partners can present to their clients. In February 2023, we integrated a real-time life insurance quotation tool into both our rely exchange and 5minuteinsure.com platforms. This tool showcases life insurance quotes from over 15 life insurance companies and expands on the company's successful home and auto insurance offerings. The life insurance capabilities provide our relay exchange agency partners with the necessary technology to promptly compare life insurance policies and rates in less than one minute. This improvement will enhance client communication and speed up policy binding while adding a valuable new resource to their agency toolbox. The inclusion of the quotation tool on both the B2B and B2C platforms bolsters the value proposition for each platform. Additionally, it offers consumers complete transparency regarding the options available to them and the expected pricing. We remain dedicated to our mission of assisting clients in obtaining the appropriate insurance coverage to safeguard what matters most while guaranteeing they receive the best value for their investment. The Reliance Change platform experienced a significant upgrade in February as it implemented a state-of-the-art artificial intelligence engine that autonomously populates 90% of a customer's application, increasing efficiency for agents. Concurrently, a new tailor-made CRM system was rolled out, guiding agents through every step of customer engagement, sales, and closing by providing timely, smart coaching. While these AI-based improvements are significant, they are not intended to replace agents' experiences. experiences. Instead, they enhanced them, empowering agents to assess a greater number of quotes more quickly and provide a superior customer experience. These upgrades have further reinforced our position as a leading force in the inter-tech arena where our commitment to cut-engage A-based technologies has always distinguished us. This latest integration amplifies our stature as an inter-tech innovator. In March, we launched RELI University, and is an innovative training platform designed for our RELI Exchange agency partners. The new educational platform is unique in the independent insurance industry. This comprehensive learning resource equips both novice and seasoned agents with an in-depth knowledge of the entire suite of products, services, and tools available via RELI Exchange, keeps them informed regarding the latest carrier and industry and developments, and empowers them to grow their business. Rely University offers an extensive array of resources to optimize the success of our agency partners. Catering to both experienced insurance agents and those new to the field, Rely University is specifically designed to boost the productivity of each agency partner. Additionally, agents are encouraged to share feedback on improving productivity for their fellow agents, fostering a genuinely cooperative atmosphere. This collaborative spirit is a cornerstone of what we call the Rely Exchange agency partner community. It is extremely satisfying to watch agency partners help each other so that they can all write more business. Growing to more than 250 Rely Exchange agency partners in such a short span of time is something that we are very proud of at Reliance Global. Before I turn the call over to Joel to discuss our financial results for the 2023 first quarter, I would like to highlight that in February, I converted $645,000 of a $1.8 million company loan that I beneficially held into shares of Reliance Global at a price that was significantly above the closing market price at that time. The original loan was provided at extremely favorable terms to the company in order to accelerate the growth of Reliance Exchange while protecting the interests of all shareholders. By converting a portion of the node at a price significantly above the then market-market price, I further demonstrated my complete alignment with shareholders and utmost confidence in the bright future ahead for our business. In conclusion, as previously stated, VLI Exchange has seen a tremendous growth in agency partners since its inception in July of 2022, attributable to our team's outstanding dedication and steadfast commitment. Our business model is both unique and highly scalable, placing us at the forefront of the industry. We are proud of our strong first quarter results, which demonstrate the success of management's efforts to streamline operations and reduce costs, while at the same time growing revenues. It is important to note that our operating agencies on a standalone basis are performing well and operating profitably with healthy margins. We look forward to continuing this trajectory which we believe will position the company to become cash flow positive by later in the year. I would like now to turn the call over to Joel Markiewicz, Chief Financial Officer at Reliance Global, who will review the financial results for the quarter ended March 31, 2023. Joel.

Thank you very much, Ezra, and good afternoon, all. It's great to be here today. We're excited to present financial results for the company's first quarter in 2023. Note that figures presented are approximates. Company's revenue for the three months ended March 31st, 2023 was $3.9 million. This represents a 29% increase from $3.1 million for the same period in a prior year. Increase is primarily driven by organic growth and second quarter 2022 acquisition for live exchange. For expenses, commission expense was $1.1 million for the three months ended March 31st, 2023 compared to $786,000 for the 2022 comparable period. Salaries and wages totaled $1.7 million for the Q1 2023 period versus $1.6 million in Q1 2022. G&A or general and administrative expense totaled $1.4 million for this quarter, down from $2.3 million for the 2022 comparable period. Marketing and advertising, totaled $137,000 in Q1 of 2023 versus $90,000 in Q1 of 2022. Depreciation and amortization was $542,000 for the three months ended March 31, 2023 versus $468,000 for the same period in a prior year. With regards to other income and other expenses, reported $3.9 million of other income for the three months ended March 31st, 2023, compared to approximately $11.7 million for the same period in the prior year. Flux is attributable primarily to the change in the fair value of warrant liabilities offset by interest expense. Net income or loss for the first quarter of 2023 was a net loss of $1.8 million compared to net income of $9.3 million for the three months ended March 31st, 2022. Before we open the call for questions, let's briefly highlight our March 2023 capital raise. The company closed on a securities purchase agreement with a single institutional investor through a private placement selling a mix of shares and warrants and receiving respectively gross and net proceeds of $4 million and $3.4 million with terms favorable to the company. Proceeds provide additional liquidity and strengthen the company's balance sheet. With that, We conclude our prepared remarks. Happy to answer any questions or comments participants may have. Operator, kindly open the lines for conversation.

Thank you. At this time, we will 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 participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star 1 on your phone at this time if you wish to ask a question. And please hold while we pull for questions. The first question today is coming from Edward Riley from EF Hutton. Edward, your line is live.

Hey, guys. Nice to hear that you'll be cash flow positive later in the year. Just wondering, what needs to happen within the business for you to be cash flow positive by the end of the year, specifically relating to the Y exchange and the number of partners you expect to have?

Yes, I can go first, Ed, and thank you for the question. So I think it's a mix of cost-cutting measures and efficiencies that we're implementing as well as growing revenues. As you see with the strong results here in Q1, we plan to continue that in the future. And there's other things in the works that we may not be privy to discuss right now, but we do plan to grow the company in this fiscal year. Regarding Reliance Exchange, I could maybe have Ezra speak a little bit about that.

Yeah, I think that it's important, as we mentioned earlier in my remarks, we now have a focus on zeroing in on primarily experienced agents. Those agents, as opposed to rookies, bring revenue almost immediately. And it really doesn't because our scalability and the platform has been set up and it's ready to go. We really do not have much increase in expenses when we increase the revenue coming, except for the commissions we pay out. But everything else, the base is set. whether we have 250 agents or 1,000, it would not be that much difference actually in expenses. So as we ramp up and the team and the recruiters are being added and everything else, we've had extensive talks with the corporate team, and we're all geared up. It does really not take that much to cross the line with adding. Way before we get to 1,000 agents, we should be able to cross the line nicely.

Okay, great. And just for modeling purposes, based on the kind of shifting strategy towards more experienced partners, should I maybe expect revenue per agent to increase sequentially throughout the year?

Definitely. Definitely. That's the whole point. I mean, it should be substantial. Remember, these agents, when they're coming, some of them have 5, 10, 20 years of business Some vacatex are not, but definitely we're talking about a very significant increase in revenue when you're talking about experienced agents.

Yeah, gotcha. And then I was wondering if you could maybe talk about the cost-cutting measures and how that might affect partner acquisition within real life insurance

Yeah, so we don't expect it to impact rely exchange and partner acquisitions. I think there's very minimal cost, and much of that cost was already invested, I believe, today. So I don't think that will impact our overall cost-cutting measures that we have planned for the year.

But as far as looking at how we've been sharing certain expenses between different agencies and streamlining and really zeroing in, I will say that grants, who was a part of our executive team, and he comes with a lot of experience. And that's part of his role also, because Michael Doback is mainly running Rai Exchange now, and Grant has been very instrumental. So we've already seen some cuts, as you can see, and the efficiencies are, and there we have other things in mind, which are very substantial. So that combined with some adding of the somewhat more agents, not even tremendous and aiding and talking about the other things that, as Joel said, we couldn't speak about yet. We are looking forward to, you know, really crossing the line, God willing, very strongly.

Okay, great. Thank you very much.

You're very welcome. Thank you. And once again, ladies and gentlemen, please press star one on your phone if you wish to ask a question. That's star one on your phone if you wish to enter the Q&A queue. And the next question is coming from Elon Friedman from VKC Funds. Elon, your line is live.

Thank you. How do the business tools on the LIA Exchange help the agents compete with and even outperform larger national agencies?

I'm sorry. It wasn't clear the last part of your question. One more time.

How do the business tools on Reliance Exchange help the agents compete with and even outperform larger national agencies?

Okay. Actually, I have Mike Fishman here who is very involved in Reliance Exchange on a daily basis. He's going to be answering you.

Thank you. Thank you for that question. That's a very common question to ask. The national agencies, when we're dealing with a captive carrier, which is only selling one product is really catering to a different client than the independent agent that we are. We're coming to the table with tens of options for one client. So it's not much of a competition in that regard. People are not married to a particular carrier. They're looking for value that the agent's providing at a competitive price.

I've always said that no one really gets emotionally attached to their insurance policy. If they're giving basically the same coverage and we're competitive, and in some cases we've seen extreme competitiveness, saving people 60% in some cases, it doesn't take much to make the sale. But when they can only sell, like much says, from whatever it is, that particular carrier, they're much more limited. So we've seen good success with that.

Thank you. And one last question. Can you elaborate on your decision to convert $645,000 of a $1.8 million company loan into shares of Alliance Global?

I guess you could say it's pretty straightforward that I have confidence in the company. Anyone who knows my private world before becoming public, we've done a lot of big, successful things. And I have confidence in the company. I mean, that's besides the $5 million that I invested into the company, by the way. So I show a lot of confidence. I don't think we can count just a typical NASDAQ company that comes to the streets and milks the street. We didn't do that. I put my money where my mouth is. I don't take a big salary. None of my executives do. We're all very committed to the growth. And I think, I guess, the very simple cliche, and it's true here, I put my money where my mouth is.

Thank you.

Thank you. There were no other questions in the queue at this time. I would now like to hand the call back to the management team for closing remarks.

Thank you very much. On behalf of Ezra and the entire Reliance team, We appreciate you joining us for this business update and first quarter 2023 financial results conference call. We have much enthusiasm for the company's future and growth potential. We look forward to staying in touch and keeping you informed as new developments unfold. Thank you. Have a great rest of the day.

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