Release Date: May 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Reliance Global Group Inc (RELI, Financial) reported steady organic growth in the first quarter of 2024.
- The company is implementing a 'one firm' approach, integrating nine owned and operated agencies across the United States into a single unified entity.
- Reliance Global Group Inc (RELI) entered into a definitive agreement to acquire Spectrum, a well-established benefits and enrollment company, expected to significantly enhance market position and service offerings.
- The acquisition of Spectrum is anticipated to more than double the company's revenue, bringing in over $14 million in revenue for fiscal year 2024.
- The integration of Spectrum is expected to boost EBITDA by an additional $4 million in 2024, thanks to its high EBITDA to revenue ratio.
Negative Points
- Net loss increased to $5.3 million in Q1 2024 compared to a net loss of $1.8 million in Q1 2023.
- General and administrative expenses increased by $537,000 to $1.4 million in the first quarter of 2024, driven by acquisition costs and higher regulatory compliance costs.
- Commission expenses increased by $193,000 or 18% to $1.3 million in Q1 2024, primarily due to the growth in commission income revenues.
- Adjusted EBITDA was a nominal negative $74,000 for the quarter, indicating room for improvement.
- The acquisition of Spectrum involves a significant financial commitment, with $8 million in cash and the remainder in a promissory note, translating to roughly one times forward sales and about four times forward EBITDA.
Q & A Highlights
Q: Congrats on signing the definitive agreement to acquire Sputnik. When do you expect this deal to close, and how much of the projected $14 million in revenue and $4 million in EBITDA will be contributed this fiscal year?
A: (Ezra Beyman, CEO) We expect the deal to close in the third quarter. Given the timing, about half of the projected revenue and EBITDA should be contributed this fiscal year. The acquisition is performing as expected, and we anticipate it will hit the ground running.
Q: Is the financial guidance provided for Sputnik as a standalone entity, or does it include expected synergies?
A: (Ezra Beyman, CEO) The guidance is for Sputnik as a standalone entity. The numbers are based on its current operations without factoring in any synergies. We expect additional benefits from synergies and cross-selling opportunities post-acquisition.
Q: Can you confirm the acquisition cost and the valuation multiples?
A: (Ezra Beyman, CEO) Yes, the acquisition cost is approximately $13.7 million, with $8 million in cash and the remainder in a promissory note. This translates to roughly one times forward sales and about four times forward EBITDA.
Q: What will the balance sheet look like post-acquisition in terms of net debt and cash position?
A: (Joel Markovits, CFO) Post-acquisition, we expect an increase in assets, including significant receivables and intangibles. Cash flow will improve substantially due to the high cash nature of Sputnik's business. Liabilities will include the promissory note, but nothing significant beyond typical accounts payable.
Q: Can you provide additional context on the progress of your one-firm vision?
A: (Joel Markovits, CFO) We are consolidating our carrier contracts and agency management systems, which will streamline administrative processes and enhance reporting. We are also reducing costs by pooling vendor contracts and redesigning teams to align with revenue streams, fostering cross-collaboration and additional revenue opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
