Reliance Global Group, Inc.

Greetings. Welcome to the Reliance Global Third 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. Ted, you may begin.

Thanks, Paul. Good afternoon, and thank you for joining Reliance Global Group's 2023 Third 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 Joel Markovich, Chief Financial Officer at Reliance. Earlier today, the company announced its operating results for the three months ended September 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 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 212-671-1020. Before Mr. Bayman reviews the company's operating results for the quarter ended September 30th, 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 plan, 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 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 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, level of activity, performance, or achievements. In addition, neither the company or 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 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 report a 16% and 90% year-over increase in revenue for the third quarter and first nine months of 2023, respectively. This growth primarily stems from the organic expansion of our business, bolstered by our acquisition of Baro Associates in April 2022. Following the acquisition and the rebranding to RelyExchange, our agency network has demonstrated consistent growth. Despite substantial investments in RelyExchange, We managed to cut our operational losses by over 21% in the first nine months of 2023, compared to the same period last year. Additionally, our working capital has increased $5.3 million, or 117%, since the end of the 2022 fiscal year. RELI Exchange is crucial to our long-term strategic vision and growth, and we are extremely pleased with the significant progress we've made in such a short time. By equipping independent agencies with a robust array of business tools, which include cutting-edge technologies and AI capabilities, Rely Exchange enables these agencies to not only compete but often outperform larger national agencies in their services. Looking ahead, we're moving to consolidate our standalone agencies under the umbrella of Rely Exchange. We're confident this move will bring substantial benefits and efficiencies to both our agents and their clients. This consolidation is expected to significantly enhance the company's market presence across the U.S. as Reliance Global Group will now operate under a unified brand across all business lines. We also anticipate that this will fortify our relationships with carriers, enabling us to negotiate better commissions and bonus contracts thanks to increased business volumes. This strategy will empower our Reliance Exchange Agency partners, assuring them that the company can assist in effectively securing policies along a broad range of insurance products. It will also create more cross-selling opportunities for our agency partners and allow the company to more efficiently leverage the extensive talent within our organization, particularly in their insurance specialty. Lastly, we believe this unified single firm approach will position us to scale rapidly and seamlessly integrate new acquisitions. I would now like to turn the call over to Joel Markiewicz, Chief Financial Officer of Reliance Global, who will review the financial results for the quarter ended September 30th, 2023.

Thank you, Ezra, and good afternoon. Great to be here with you all today. I'm super charged to share our financial results for the third quarter of 2023. The goods presented are approximates. The company's revenue for the three and nine months ended September 30, 2023, was $3.3 million and $10.4 million, respectively. For the three months, this represents a 16% increase from $2.8 million in the previous year. For the nine months, this represents a 19% increase from $8.7 million in the previous year. As mentioned by Ezra, the two primary factors driving the enhancements are organic growth and the Q2 2022 acquisition of Barrow Associates, now known as RELI Exchange. Total operating expense for the three months ended 9-30-2023 increased by only 13% of $554,000 from the same period in the prior year, notwithstanding a 16% increase in top-down revenue. After the nine months ended September 30, 2023, total operating expense increased by only 4% of $516,000 compared to the same period in the prior year, notwithstanding a 19% increase in top-line revenue. Last-form operations increased modestly by only 7% to $100,000 for the three months ended 9-30-2023 and actually decreased for the nine months ended 9-30-2023 by 21% to $1.2 million. These results continue to demonstrate the effectiveness of efficiencies Reliance has incorporated in its operations, which are clearly evident in the enhanced financial figures. Net loss for the three and nine months ended September 30, 2023, was $139,000 and $3 million, respectively. For the same periods in the prior year, there was net income, but that was due to significant unrealized non-cash gains in the fair valuation of our derivative positions, which did not reoccur in 2023. Working capital increased by $5.4 million, or 117%, as of September 30, 2023, from December 31, 2022, due in part to a capital raise earlier this year, a cash collection from a legal settlement, and of course, enhanced cash management incorporated by the company. With this, we conclude our prepared remarks. Happy to answer any questions or comments participants may have. Operator, kindly open the lines, please.

Thank you. At this time, we'll 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. And the first question today is coming from Mike Albanese from EF Hutton. Mike, your line is live. Hey, guys. How are you doing?

Okay. Good. Thanks for, uh, for taking my questions here. Just a couple of quick ones first regarding, uh, you know, the nice growth here, um, you know, attributable to both organic and then the acquisition. Can you dissect that a little bit further and maybe just, uh, provide some insight into how much of that's organic versus how much does actually do the acquisition?

Yeah, I can ask you about that real quick. Sure. So organic, I'd say the Q3 numbers, so three months ended, that's all organic growth, right? I think it was 16% growth. And then we have 19% for the nine months. That would be partially organic and due to the acquisition. If we want to get more precise, we'd have to dig a little further. But certainly for the three months, And that's all organic because we did have a bar throughout both periods, both 2022 and 2023. So any growth in these numbers would be organic growth.

Got it. That's super helpful. Okay. So 16% is organic and obviously the acquisition is held through that whole period. So that makes sense. And then just Regarding kind of expense management, any cost cutting you've done, I mean, how much room is left for you to kind of continue to do that, you know, right side your G&A and your cost structure? You know, is there more on the table where you can pull things in a little bit tighter, or how are you thinking about that?

Oh, yeah. Certainly there is more room for areas where we can trim down our costs. We continue to enhanced our one firm vision. I'm sure you've seen some of the messaging around that and there's more to come also in the future. So, you know, that really consolidates our entities and streamlines our operations. And as we, you know, move the needle forward and we bring together our carrier contracts and then start operating as a streamlined, cohesive you know, one firm company where we cross-sell and cross-use talent across our geographic locations, I think we'll see additional cost efficiencies come through.

Right. And by the way, I'll just add to that, that Joel has excellent, but it's from both ends. As we do this, you can see both ends, revenue going up because of getting better commissions and more cross-selling, which is very significant. and cutting expenses. So it's really both pulling both ends in the right direction.

Got it. Yeah. So, you know, you've been trimming expenses. You can trim a little bit further while at the same time you're gaining operating leverage. Sure. Okay, great. All right. That's really it on my end. Nice quarter, guys. You know, continuing your march towards profitability from a cash flow standpoint. So, you know, congrats on the quarter there. Thank you very much.

Thanks, Mike. Thank you. And once again, it will be star one today if you wish to ask a question. Once again, please press star one if you wish to ask a question. The next question is coming from Nick Pincus from Forest Capital. Nick, your line is live.

Hey, guys. Congratulations. Again, another strong quarter. So you've been successful in the acquisition strategy. And now that you've digested, Farah, are you looking at additional acquisitions? And if so, what are the criteria that you look at when you're evaluating those acquisitions?

Okay, thanks. I'll handle that. Yes, first of all, the answer is a resounding yes, absolutely. We're looking for acquisitions. In fact, we're actively evaluating opportunities that could be very interesting, really very interesting. And that is a way to grow. But we do look, as my experience in the private world, 30 years in business, We know when we see a good management team in place. And, you know, we don't like to reinvent the wheel. And if it ain't broke, don't fix it. But we come in with, you know, use cost efficiencies and everything else, but without killing the business. But if it makes sense to business and it's not a crazy multiple, we are definitely, we do have a reputation of coming to the table. That's extremely important to the brokers and the sellers. When we say we're going to buy a deal, if it makes sense, we buy it. So we're not just a tire kicker. So the answer to your question, definitely yes. And that's one of the things I'm very involved in, and very much so.

Great.

Thank you. Thank you.

Thank you. And there were no other questions at this time. I'd like to hand the call back over to the management team for closing remarks.

Thank you very much. On behalf of Ezra and the entire Reliance team, We appreciate your participation in this business update, and we're truly excited about the prospects of the company. Thanks again for joining us in our journey. Until next time, all the best. Thank you.

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