Reliance Global Group, Inc.

Greetings. Welcome to the Reliance Global Second Quarter 2023 Financial Results and Business Update Conference Call. At this time, all participants are in a 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. You may begin.

Thank you, Holly. Good afternoon, and thank you for joining Reliance Global Group's 2023 Second Quarter Financial Results and Business Update Conference Call. On the call with us today are Ezra Bayman, Chairman and Chief Executive Officer of Reliance Global Group, Joel Markovits, Chief Financial Officer of Reliance, Grant Barra, Senior Vice President of Operations at Reliance, and Moish Fishman, Director of InsureTech Operations at Reliance. Earlier today, the company announced its operating results for the three months ended June 30th, 2023. The press release is posted on the company's website, www.relianceglobalgroup.com. In addition, the company has 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 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 quarter end of June 30, 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 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 and terms in 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, the 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 event 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 and level of activity, performance, or achievement. 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. We should evaluate all forward-looking statements made by the company in the context of these risks and uncertainties. Having said that, I'd now like to turn the call over to Ezra Baiman, Chairman and Chief Executive Officer of Reliant Global Group. Ezra?

Thank you, Ted. Good afternoon, and thanks for everyone for joining us today. We are pleased to report that our revenue grew 12% compared to the same period of 2022, which primarily reflects the organic growth of the business. It's important to note that we acquired Barron Associates in April of 2022, so we had two full months of revenue for the second quarter of last year, and all of our other acquisitions were reflected in our revenues in both periods. Since the acquisition of Barron and its rebranding as Rely Exchange, we have experienced steady growth of the agency network. And despite significant investment in Rely Exchange, we reduced our loss from operations by 30% in the first six months of 2023, over the same period in 2022. We view ReliExchange as core to the company's long-term strategic growth plan and are extremely pleased with our progress to date. ReliExchange continues to expand, currently supporting over 310 agency partners, representing a more than 100% increase since the beginning of the year. This achievement stems from the unique value proposition that ReliExchange offers independent insurance agents. By leveraging the most recent technologies and AI capabilities, the platform provides independent agents with a comprehensive toolbox for their businesses, allowing them to not only compete against larger national agencies, but also surpass them in their services and offerings. I would like now to turn the call over to Grant Barra, Senior Vice President of Operations, to provide an overview of how we at Reliance Global view the market opportunities and growth drivers in our industry. Grant?

Thanks, Ezra. And good afternoon to all the listeners. The total US insurance market is sizable. The current value is approximately $2.7 trillion, which accounts for more than 39% of the total global insurance market. is expected that by 2027, the US market will grow by 26%, reaching 3.4 trillion. Serving this industry are approximately 410,000 licensed US insurance agents. That's comprised of nearly 60% of them being independent and the other 40% being captive insurance agents. Of the 60% of the market that are independent agents, our strategy is to recruit many of these agents onto our platform. The feedback that we've been receiving from this group has been overwhelmingly positive. At the same time, amongst the 40% that are captive to a particular carrier, our goal is to either recruit them away offering them the ability to become independent agency partners with Relay Exchange, or simply winning the business controlled by the captive carriers with our much more attractive offerings. Not only are we focused on gaining market share, but the overall market is also expected to grow. So there's several factors driving this growth. including an aging population and a growing demand for health, property, casualty, and other forms of insurance. So it's also important to note that as an agency, we do not have the same risk exposure as the carriers. To the contrary, the increasing premiums positively affect our margins. Also with inflation and rising premiums, customers often seek alternative options, alternative quotes, replacing their existing policies with ones that offer greater value at a more competitive price. That's exactly how we're positioned. Customers are much more likely to get the best pricing through independent agencies as opposed to captive agents who can only sell policies from one single carrier. In fact, the average quote to close ratio for a captive agent is very low for that reason. In contrast, our platform allows agents to compare quotes across a very wide selection of carriers within minutes. It makes sure customers are not only getting the best price, but also the best offering to suit their specific needs. As a result, we believe Relay Exchange is perfectly positioned in the market to offer real value for both agents and the consumers. As we've discussed in the past, Relay Exchange allows agents to maintain their independent brand. And we can even provide them with their own professional and interactive website on day one. We not only allow them to access many of the major carriers in the insurance market, but we also provide support and mentorship both in the startup of their individual agencies and that mentorship continues as long as they're with Relay Exchange. So what does that mean to the agents and why are more and more of them switching to Relay Exchange? The answer is simple. We can offer them more opportunity. The way they are able to conduct business with their clients on our platform is easier. It's faster. It puts our agency partners in a more competitive position. When they start their agency, they are immediately able to compete against some of the biggest players in our industry. This results in more business. more premiums that drive more revenue into our company. I would like to now turn over the call to Moshe Fishman, Director of InsureTech and Operations, to review our operating subsidiaries and plans to consolidate them in the future. Moshe?

Thanks, Grant, and good afternoon. Before discussing our one firm plan, which is well underway, designed to consolidate our wholly owned standalone operating agencies to have the strength and efficiencies of a single firm, I would like to quickly take a look at each of our current offices. Fortman Insurance Services provides all lines of insurance and operates in 49 states across the United States. Altruist provides group and individual health insurance. Southwest Montana Insurance Center provides group health insurance and is very respected amongst government clients. Employee Benefit Solutions provides group health to middle market customers. U.S. Benefits Alliance provides individual and group health insurance. UIS Agency provides specialty line transportation insurance. J.P. Cush & Associates provides individual health insurance across the United States. And lastly, Relay Exchange, our exclusive agency partner network and distribution platform. So as you can see, we have very broad capabilities across a wide range of insurance categories, and we now have a very strong nationwide presence. Collectively, these agencies have more than 1,100 total producing agents with an estimated 58,500 active policies under management. representing an estimated $450 million of premiums. Looking ahead, we are in the process of merging our standalone agencies under a single brand of the Reliance Global Group. We anticipate that this consolidation will furnish the company with considerable advantages and operational efficiencies. By uniting under one brand across all lines of business, Reliance Global Group's market presence throughout the United States will be immediately enhanced. Furthermore, the consolidation is expected to improve our commissions and bonus structures with the carriers due to increased volume. It will also foster greater cross-selling opportunities and enable more effective utilization of our talent across the organization with their respective insurance specialties. With the majority of the investment of Relay Exchange now behind us and consistent strong performance across our operating subsidiaries, we have effectively built what we consider to be a highly scalable business model. As we persist in our organic growth and deepen our presence across the United States, We believe we are well positioned for success in the immediate future while simultaneously laying the groundwork for substantial and sustained long-term growth. Our strategic, cost-effective, and unique approach to the market gives us tremendous confidence in our ability to generate significant long-term returns for our shareholders. I would now like to turn the call over to Joel Markowitz, Chief Financial Officer of Reliant Global, who will review the financial results for the quarter ended June 30th, 2023. Joel. Thanks, Moshe.

Good afternoon, all. Great to be here with you today. Super excited to share our financial results for the second quarter of 2023. To get presented, our proxies. The company's revenue for the three and six months ended June 30, 2023, was $3.2 million and $7.1 million, respectively. For the three months, this represents a 12% increase from $2.8 million in the previous year. For the six months, this presents a 21% increase from $5.9 million in the previous year. Ezra and the team did a great job presenting the movement behind these positive revenue increases. Total operating expense for the three months ended June 30, 2023 increased by only 9% of $414,000 from the same period in the prior year, notwithstanding a 12% increase in top-line revenue. For the six months ended June 30, 2023, total operating expense decreased by 1%, notwithstanding a 21% increase in top-line revenue. This illustrates the efficiencies the company has incorporated, which are demonstrated in these enhanced financial results. Lost from operations increased by a modest 4% or $65,000 for the three months ended June 30, 2023, whereas for the six months, lost from operations decreased by 31% or $1.3 million. Net loss to the three and six months ended June 30, 2023 was $1.1 million and $2.8 million respectively. The same period in the prior year, there was net income that was due to significant unrealized gains in the valuation of our derivative positions, which did not occur in 2023. Welcome capital increased by $6.8 million or 150% as of June 30, 2023 from December 31st, 2022. This represents a healthy balance sheet where current assets outdo current liabilities by close to one and a half times. With this, we conclude our prepared remarks. Happy to answer any questions or comments participants may have. Operator, kindly open the lines.

Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 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. One moment please while we poll for questions. Your first question for today is coming from Mike Albanese with EF Hutton.

Yeah, guys, thanks for taking my question. I just want to dive into the agency consolidation a bit. Can you just kind of walk us through how, you know, or what your expectation is regarding kind of the, I guess, uptick in commissions and volumes as a result of the rebranding? Could you just kind of dissect that a little bit?

Sure. Thank you, Mike. It's Moshe Fishman speaking. With the different carrier relationships that we have, when you come with a bigger book of business to a particular carrier, not only do you have better bargaining power on the first commission, but you also open up for better bonuses based on the loss ratios. So the simple consolidation, even before writing new business, should immediately enhance the revenue with the consolidation, aside from all the other benefits that it brings.

Got it. Thank you. Okay. And then just regarding kind of reaching that inflection point of producing positive cash flow, I guess just bluntly, how do you get there from here? What is kind of your expectation on reaching that milestone?

Fred, two ways. I mean, the organic growth is picking up, and we're actually now focused on going after... agents that produce business on day one. That helps. And we're only actually one acquisition away in all probability from being cash positive. And we're looking at various options, and we're close enough to the break-even point that any acquisition should, God willing, bring us over the line. And that combined with the organic and the streamlining of the consolidation, as Mosch Fishman was talking about, which is already well underway, It doesn't reflect yet in this quarter as much, but it's not long-term. So I think all these components combined should be a very healthy, profitable operation.

Got it. Thank you. And then just my last question, I think you said in your prepared remarks you have about 310 agencies on the platform, up significantly. I mean, can you give us some additional color maybe on what way your expectations for that number is, you know, call it the end of the year or maybe like a monthly growth rate or just how you're thinking about scaling the platform?

I think, Grant, that's in your ballpark.

Yeah, this is Grant Barra. Let me go ahead and take that question. So the growth of the agency partner network is a core focus of the organization. And the way that that happens is there's really two target markets, two targets candidate prospect pools that we find drive the best results. The first prospect pools is gonna be an independent or a captive individual that works for an agent or an agency owner. And they aspire to, with time, as most insurance agents in our industry, to have their own agency. These are experienced individuals who have existing relationships and have a very dialed-in process in how to generate information. new opportunities and new clients that will allow them to quote them in the existing system that they have in place. The second group are captive agency owners. So these are agency owners that are captive with a single insurance carrier. And these are also individuals that have a very dialed in new business process. So they're very good at developing opportunities that allow them to quote through their existing platform. Now, in many of these circumstances, these agency partners are only able to offer a single, I'm sorry, these agency owners in the field are only able to offer a single carrier as a solution for the end clients. That is very limiting and does not allow them to be competitive very often in the field. that rate really hovers in the very low teens. So by bringing those agency partners onto our platform, they are immediately able to continue the same existing prospecting, new business prospecting process that they have already established and proven successful at a lower close rate It allows them to be on our platform instantly increasing the number of opportunities that they have to close new business because of our wide variety of existing carrier relations and also the technology that allows them to process all the information from all the different carriers much faster, much more efficient, and much more accurate in order to give those rates to the end clients. So these are tremendous benefits. We continue to grow our agency partner offering through courting of these captive and independent insurance agents through our team of sales directors in the office who have experience in our industry and court them and help them understand the advantages in the industry of coming over and transitioning from being captive to independent or transitioning from working for an agent or agency owner to having their own agency as an agency partner with Relay Exchange. If you'd like me to go into any additional detail, please ask more questions.

Sure. No, that's all great context. I appreciate it. So I guess specifically regarding Rally Exchange, I mean, I think 310 agents on the platform, I mean, what's your expectation for growth? I mean, you know, there's win-win. It seems like a good value proposition, obviously, to the agents and then the customers as well. I mean... You grew it over 100% from, I think, Q4. I'm just trying to come up with some perspective in terms of moving forward. 100% growth rate maybe is unsustainable or maybe it's sustainable for a short amount of time. Can you just help provide some perspective in what I can expect for growth there?

Yeah, let me add some color around that. If we chose to, I do believe we can grow Relay Exchange at just about any clip that we choose to. I mean, there's that many opportunities out there to bring agents into a platform that provides them significant benefits and being able to close business and drive revenue into their agencies. With that said, we... want to focus our efforts on agencies who are going to drive the most value to both for themselves and for the organization. So we have a rating system of every individual that we potentially are going to work with in the field. And we prioritize these agents based on their experience, their past activity, their attitude, and we want to make sure we're spending a majority of our time with the individuals who are going to drive the most revenue. So while I do not believe our recruiting is going to slow because we've continued to ramp up, I actually believe our current pace where we've added more than 150 agency partners this year will remain stable to increase. So we will over the next, same period, we will increase the number that we've brought on. With that said, though, the individuals that we bring on are significantly stronger as we've dialed in our process and will be able to return significantly more premium volume into the company. Ultimately, they're going to earn more on an individual basis. So I wanted to go into a little detail on why our focus is on the individuals.

why our focus is on these these individuals so the growth rate will be 20 plus experienced agency partners on a monthly basis got it okay great and then you know you take these agents you essentially put them on a better platform higher um you know conversion rates i mean You only have so many quarters here of data. I understand that. But I mean, if you just think about this on kind of like a unit level basis, meaning, you know, the agent being the unit, this should be driving higher revenues per unit moving forward. Is that fair to say that's kind of the expectation?

No, that's fair to say. So they're going to be driving higher revenues on a per unit basis. But you also need to take into consideration that the revenues that they produce year one for themselves, it's not like those revenues go away. Those revenues continue to renew year after year. So any additional efforts in new business that are put in year two, year three, year four, stack on top of the new business from all previous years that we're able to retain. And I'd estimate a retention ratio of those premiums upwards of 90-plus percent.

Wow. Okay. Great. Thanks for answering my question, guys. That's really it for me today.

Once again, if there are any questions, please press star 1 on your touch-tone phone. Your next question for today is coming from Nick Pincus at Forest Capital.

Thanks for taking my call. Congrats on another solid quarter. You actually answered part of my question in your earlier response. But the second part is, are you finding more success recruiting agents that are already independent, or is it easier to recruit talent from the captive agencies? And can you talk about the feedback that you've gotten from the agents once they're onboarded to the network? Yeah.

So this is grandpa. Let me, let me jump on this one again. We are, we are finding exponentially more success with agents coming from captive platforms. So these agents on captive platforms are, are restricted in what they're able to offer the end clients. So they're going to provide the best solution that they have available to them for the clients. Unfortunately, that solution is one carrier. And no matter what the client's circumstances are, it's always their best solution is always going to be the one carrier that they have access to. It just doesn't work for everyone. The future is in independent agencies. Now, as these captive agents continue to lose premiums, to the ultra competitive independent agencies like Relay Exchange in the field, I mean their eyes are open. They have to make a change and if they want to grow the organization at the same clip they did in the past or even faster. So when we're able to take a captive agent who already has the new business prospecting process absolutely dialed in, we can move them over to our platform and it's instantaneous that they're able to have a significantly higher close ratio. Now, when I say significantly higher close ratio, I'm talking a multiple of where they're coming from. So their ability to write, and scale, write new business, and scale the amount of business that they're able to not only quote, but close and bring into their agency is very, very high. The feedback that we're getting from these captive agents, a lot of times the feedback's along the lines of, I wish I never joined a captive organization because of the limitations that are in place. Why didn't I start out as independent? But the reality is most insurance agents in our industry have no idea that when they're entering the insurance industry, an independent opportunity even exists. That's why we have the team of sales directors in place. So we can manage that outreach, educate these individuals and court them from their existing situation, which is good to become independence on the relay exchange platform, which essentially makes their situation very good. I hope that answers your question.

Definitely. Thanks. The other part of it is it seems like a very scalable model. Can you talk about your costs to onboard the agents onto the platform?

Grant, I'm going to just start and hand it over to you. I'm excited about that part. really the infrastructure is in place. We now have, I think, nine or 10, we call them sales directors or recruiters, and the technology is in place. So going from here to thousands of agents cost us almost nothing, relatively speaking, to increase. That's the beautiful part of it. It's not like the you know, the direct-to-consumer model that are spending literally hundreds of million dollars in marketing. We're spending almost nothing in marketing because the agents bring their business, and we only pay for that business when money comes in. You bring money to the bank, we give you money. So, I guarantee you could elaborate if you like, but that's the beauty of it. We've been working on the infrastructure for the last, now, a little over a year. Not too bad, the in this world to get everything in place, ready to go. And now we want to go from a sedan to a rocket ship. Go ahead, Grant.

You know, Ezra, so this is Grant Barra. Ezra really hit the nail on the head here. We have the existing infrastructure in place. There's little to no cost to grow from this point on. An individual that we are able to contract and bring into the fold, a cost to the company of our employees' time in the training and the setup and getting them up and running, which is incredibly fast. I'm not sure any organization can onboard people as fast as we can today. But as we are able to continue to do that, there's really no variable costs that we're experiencing.

That's great. Thank you.

Your next question is coming from Emmanuel Kramer, a private investor.

Good morning. Thanks for the quarter improvement. I recently got about $3 million from an investment. The court approved it, and you got it. The investors have been suffering for a while due to reverse splits. Do you think investors can... participate in those cash that you received?

That and that's, that's really part of the business. And, you know, I think the way the investors can enjoy and benefit will be a little bit patient. And as we carry out our plan, and the reverse blitz were not something that we chose, we were required to do them. But to grow, but I think a little patience and we'll, I know I'm disappointed as well. I'm the largest shareholder by far, or at least individual shareholder. So, and I put a lot of millions of my own money into the company besides. So I think just holding out, you letting us, you know, using the money that we have to grow the business more and have a little more patience. The model works. Now we just have to scale it big time, like I mentioned before. So that would be the best use of the funds. And we treat this like a private business. No one takes their crazy salaries, not extravagant offices, very practical, down-to-earth, treating it like our own. So you should have confidence that we're running it. There were some hitches and delays, but we're on the way. God willing, we'll get there pretty quick. Thank you very much.

We have reached the end of the question and answer session, and I will now turn the call over to Ezra for closing remarks.

Think of Joel, yeah. Yeah, this is Joel. I'll take this and wrap Nicole up. So on behalf of Ezra, Grunt, Moshe, and the entire Reliance team, we very much appreciate your participation in this business update. We're thrilled about the outlook of the business and considerable growth landscape. Until next time, thank you.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.