Reliance Global Group (NASDAQ: RELI) has reported a positive trajectory in its financial performance for the first half of 2024, with notable revenue growth and operational improvements. In the earnings call, the company detailed consistent revenue increases in the first two quarters, with $3.2 million and $7.3 million respectively, alongside a 62% reduction in net loss from continuing operations year-over-year.
Reliance's strategic OneFirm approach, the impending acquisition of Spetner Associates, and the introduction of a new real estate division are key factors contributing to the company's optimistic outlook.
Key Takeaways
- Reliance Global Group reported revenue growth in the first half of 2024, with Q1 and Q2 revenues at $3.2 million and $7.3 million.
- Operating expenses saw a 13% improvement, and net loss from continuing operations decreased by 62% compared to the same period last year.
- The OneFirm strategy has integrated nine agencies into a single unit, enhancing commission tiers and cross-selling opportunities.
- The acquisition of Spetner Associates is expected to double annual revenues to around $28 million and significantly increase EBITDA.
- A new real estate division led by Abe Miller has been launched to acquire multifamily and commercial properties, aiming to use non-dilutive financing and diversify the portfolio.
- Simplification of capital structure through the exercise of outstanding warrants is anticipated to positively affect shareholder value.
Company Outlook
- Reliance anticipates the Spetner acquisition to complete successfully, projecting a substantial boost to annual revenues and EBITDA.
- The company expects EBITDA to improve throughout the fiscal year following the Spetner deal closure.
Bearish Highlights
- The adjusted EBITDA experienced a marginal loss of $178,000, about 6% of the quarter's revenues.
- Over a six-month period ending June 30, 2024, EBITDA loss stood at $252,000, approximately 3% of revenues.
Bullish Highlights
- Reliance's OneFirm strategy is already yielding higher commission tiers and cross-selling opportunities.
- The new real estate division is poised to take advantage of current market conditions to acquire valuable properties.
Misses
- Despite improvements, the company still reported an EBITDA loss, indicating ongoing challenges in achieving profitability.
Q&A Highlights
- Ezra Beyman discussed the new real estate division's focus on multifamily properties and the potential for value acquisitions in the current market.
- The Spetner acquisition is nearing completion with due diligence finished, and the company is excited about Spetner's growth and team.
- Ted Ayvas closed the call with a statement of optimism for Reliance Global Group's future prospects.
Reliance Global Group's first half of 2024 showcases a company on the rise, making strategic moves to strengthen its position in the market. With the integration of its OneFirm strategy, the acquisition of Spetner Associates on the horizon, and the launch of a new real estate division, Reliance is poised to capitalize on its recent successes and continue on a path of growth. The company's efforts to streamline its operations and improve its financial standing are evident in the reported figures and the management's confident outlook. As Reliance Global Group moves forward with its expansion plans and operational refinements, the market will be watching closely to see how these strategies translate into sustained profitability and shareholder value.
InvestingPro Insights
Reliance Global Group's (Ticker: RELI) recent earnings call highlighted a number of positive developments, including revenue growth and a significant reduction in net losses. As investors consider the company's progress and future prospects, InvestingPro data and tips provide additional context for evaluating the company's performance and stock potential.
InvestingPro Tips indicate that RELI's stock has experienced high price volatility and has suffered from weak gross profit margins. Additionally, the stock has underperformed over the past month and has not been profitable over the last twelve months. These insights may be particularly relevant for investors considering the company's current valuation and operational challenges.
From the InvestingPro Data metrics, we see that RELI has a market capitalization of $3.69M USD, which reflects its size in the financial market. The company's Price / Book ratio as of the last twelve months of Q1 2024 is 1.92, suggesting how the market values the company relative to its book value. Moreover, RELI's revenue for the same period was $13.88M USD, with a growth of 9.75%, indicating the company is expanding its top line.
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Full transcript - Reliance Global (RELI) Q2 2024:
Operator: Good day. And welcome to the Reliance Global Group’s Second Quarter Business Update Conference Call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions-and-comments following the presentation. It is now my pleasure to turn the floor over to your host, Ted Ayvas, Investor Relations at Reliance Global. Sir, the floor is yours.
Ted Ayvas: Thanks, Paul. Good afternoon. And thank you for joining Reliance Global Group’s 2024 second quarter financial results and business update conference call. On the call with us today are Ezra Beyman, Chairman and Chief Executive Officer of Reliance Global Group; and Joel Markovits, Chief Financial Officer of Reliance. Earlier today, the company announced its operating results for the year ended June 30, 2024. 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 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 additional information about the company, please contact Crescendo Communications at 212-671-1020. Before Mr. Beyman reviews the company’s operating results for the year ended June 30, 2024, 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 the conference call, including statements regarding our future results of operations and financial positions, 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. 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 April 4, 2024. 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 apply -- 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, levels of activity, performance or achievement. 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. Having said that, I would now like to turn the call over to Ezra Beyman, Chairman and Chief Executive Officer of Reliance Global Groups. Ezra?
Ezra Beyman: Thanks, Ted. Good afternoon and thank you to everyone for joining us today. We are pleased to report that we attained consistent and sustained revenue levels for the first three months and six months of 2024, with revenues of $3.2 million and $7.3 million, respectively, which represents 1% and 3% growth from the same period in the prior year, respectively. Additionally, we have successfully reduced our operating expenses, achieving a 13% efficiency improvement in the second quarter of 2024, compared to the same period in 2023. Our net loss from continual operations for the second quarter has also improved by 62% from the same period last year. Our key non-GAAP metric EBITDA showed a nominal loss of $178,000, well, just under 6% of revenues in the second quarter of 2024. Building on our strong performance in the first quarter, we sustained the momentum of organic growth into the second quarter. We continue to emphasize our foundational OneFirm strategy, integrating our nine owned and operated agencies nationwide into one cohesive business unit. This strategy has granted us access to higher commission tiers and created extensive cross-selling opportunities, driving significant revenue growth. A key initiative of the OneFirm strategy is cross-collaboration. This approach maximizes the utilization of our exceptional talent across the organization, enhanced data access and sharing, and segments specialized support services. Additionally, this has allowed the company to consolidate vendor relationships and contracts, reducing overall operating expenses, as demonstrated in our second quarter financial results. We also believe that the OneFirm unified approach will position us to scale rapidly as we continue to seek out and integrate accretive acquisitions, such as the Spetner Associates acquisition, which we believe will further broaden Reliance Global Group’s industry and market reach. As OneFirm continues to gain momentum, we anticipate significant improvements in both our revenue and profitability. Turning to the Spetner acquisition, its anticipated impact is far exceeding our initial expectations. Since announcing our plans, Spetner’s BenManage voluntary benefit insurance segment has experienced significant growth, now covering more than 85,000 employees, a substantial jump from the 45,000 covered employees when we initially announced the plan transaction. Integrating Spetner’s expertise and extensive client base into our operations is expected to significantly enhance our market position, expand our service offerings and accelerate our growth. By aligning Spetner’s innovative benefit solutions with our strategic goals, we aim to create more value for our stakeholders and strengthen our competitive edge in the industry. This acquisition is not just about growth, it’s about setting a new standard in our industry and bringing enhanced services to a broader audience. We believe that Spetner’s unique voluntary benefits program and extensive market search -- market reach will provide considerable synergistic opportunities once the transaction is completed, particularly in expanding our personal insurance lines through the RELI Exchange platform. This acquisition, which will be one of the largest in our company’s history to-date, will be transformational and marks a pivotal time for Reliance. According to our projections, acquiring Spetner will double our annual revenues to approximately $28 million, as well as significantly boost our EBITDA. This acquisition is progressing smoothly and we anticipate the closing of the transaction by the end of 2024. Our mission remains to build a multi-billion dollar highly profitable business enterprise that delivers substantial and sustainable returns to our shareholders. We are confident that this game changing acquisition will create significant opportunities that align perfectly with our OneFirm go-to-market strategy. We are committed to establishing Reliance as a powerful, technology-driven enterprise that prioritizes sustainable profitability and increased shareholder value. We believe the acquisition of Spetner Associates will significantly accelerate Reliance’s growth trajectory. In early July, we announced we were launching a significant initiative, a new division with Reliance dedicated to the acquisition of multifamily and commercial real estate properties. This is an area where I personally have had great success in the past, building the third largest mortgage brokerage in the nation and accumulating a multi-billion-dollar portfolio of multifamily properties. Abe Miller, a successful real estate investor and M&A executive, will be joining the company to head this new division and will provide strategic guidance on our future real estate endeavors. His remarkable track record, including the successful creation of a $3 billion real estate portfolio through strategic acquisition, not only showcases his ability to enhance asset value, but also his skill in navigating complex market dynamics to generate substantial investment returns. Having worked with Abe in my prior real estate business, I have personally witnessed the immense value his insights bring to an organization. With Abe’s extensive experience and strategic vision, we are confident this initiative will accelerate our progress toward achieving our objectives. Abe will not receive a fixed salary for his services. Instead, he’ll be compensated entirely on a success-based model. We believe this new real estate division set to launch following the closing of the Spetner acquisition aligns perfectly with our ongoing strategy focused on accretive and cash flow positive acquisitions, a strategy where we have a proven track record of successful integration, particularly in the insurance brokerage sector. Furthermore, the new division will broaden our company’s portfolio by diversifying into multiple businesses lines and asset categories. Through this expansion into real estate, Reliance will be to leverage non-dilutive financing sources supported by both the intrinsic value of the assets and our operational cash flows. Finally, as previously announced, Reliance has significantly simplified its capital structure pursuant to exercises all outstanding Series B and Series G warrants, which remove the Series B derivative instrument from our balance sheet and eliminated the potentially perceived significant warrant overhang which we believe may have also adversely impacted our publicly traded share price. We are confident that our enhanced capital table will resonate well both with our current shareholders, as well as future investors as we continue to advance our key initiatives through 2024 and beyond. I would now like to turn the call over to Joel Markovits, Chief Financial Officer of Reliance Global, who will review the financial results for the quarter ended June 30, 2024. Joel?
Joel Markovits: Thank you very much, Ezra, and a very good afternoon to you all. It’s my pleasure to share with you some of our financial results for the second quarter of 2024. All figures presented are approximate. As mentioned by Ezra, revenues for the three-month and six-month period ended June 30, 2024 increased by 1% and 3%, respectively, from the same period in 2023, resulting in revenues of $3.2 million for the quarter and $7.3 million for the year-to-date period. Our solid sustained and expanded revenue levels are primarily attributed to organic growth. Our operating expenses for the second quarter of 2024 decreased by 13% or $654,000 from $5 million in the second quarter of 2023 to $4.4 million in 2024. Some key drivers include a decrease of 12% in our general and administrative costs, a decrease of 30% in our marketing costs and considering we’ve come to terms and/or paid all announced [ph] agreements, there were no related fair value adjustments that would have affected our operating results. These expense efficiencies are offset by increases in commission and employee compensation, costs driven primarily by the company’s continued expansion and inflationary impacts. The sustained revenues and decreased operating costs this quarter resulted in a vastly improved net result from continuing operations. Compared to the same three-month period ended June 30, 2023, loss from continuing operations decreased by 62% from $3.9 million to $1.5 million. EBITDA, our adjusted EBITDA metric, which is a non-GAAP measure but a key company performance indicator, came in essentially flat for this quarter versus prior at a marginal loss of $178,000 or just under 6% of the quarter’s revenues. The six-month period ended June 30, 2024. EBITDA loss was $252,000 or just around a nominal 3% of six-month revenues. We do expect EBITDA to continuously improve as we progress through the fiscal year and especially post-close and post-onboarding of the Spetner entity, pursuant to the acquisitions discussed earlier by Ezra. With this, we conclude our prepared remarks. We’ll be happy to answer any questions or comments participants may have. With that, Operator, kindly open the lines.
Operator: Thank you. [Operator Instructions] And the first question today is coming from Nick Pincus from Forest Capital. Nick, your line is live.
Nick Pincus: Well, congratulations on the continued progress that you guys are making with the business. The first question was I was wondering if you could provide some more color on the new real estate division that you’re launching?
Ezra Beyman: Okay. Yeah. That’s something that we’re excited about. As many people know, the last several years in real estate have been with the ups and the rates being up and some people buying property and maybe at higher levels they would have wanted to. We feel and based on our probably close to three decades of experience prior to that, that the opportunity is ripe to really pick up some good value, primarily in multifamily, which we feel that’s where we have the experience and it’s also the safest. Everyone needs a place to put their head down at night as opposed to other types of real estate and we’re excited. And Abe Miller is, I like to say, my crackerjack of the industry. He’s known closing deals, big, small, giant and getting them at the right deal and we’re really excited. So, of course, we look forward to finding the deals and then working on them. But as we mentioned, we want to first take care of the Spetner acquisition, which is, we’re very involved and very important, but we are looking forward to some excitement as well in a positive way in the real estate sector.
Nick Pincus: Well, that actually touches on my second question. The Spetner acquisition, which seems pretty exciting and sounds like it’s moving forward. I was wondering if there are any additional details that you could share on both the progress, the status of the acquisition, as well as any other developments as it may relate to Spetner?
Ezra Beyman: So, as far as the progress we’re getting, Thank God, that’s we’re in due diligence behind us and a lot of the other requirements and the contracts and everything, that’s really behind us. We’re now focusing on getting it closed. And we’re getting closer and closer, actually. And as far as the business itself, we’re really floored and excited because it’s literally growing by the day. As we mentioned, it went from servicing 85,000 employees to 85,000 employees from less than half of that or about half of that, when we started this transaction. And it’s growing and growing. It’s a very strong fourth-generational business, actually. They’re a very strong team and we’re really watching it and excited. They’re excited. We’re excited. So, we’re gearing up for that. That’s a biggie. No question about it.
Nick Pincus: That’s great. Well, congrats again on the progress and good luck.
Ezra Beyman: Thank you very much.
Operator: Thank you. [Operator Instructions] And there were no other questions from the line. So, I will now turn the call back to the management team for closing remarks.
Ted Ayvas: Thank you very much. On behalf of Ezra and the entire Reliance team, thank you for your participation in this business update. We’re supercharged and excited about the prospects of Reliance Global Group. I’m very happy to be sharing and traveling on this onward journey with you, our valued shareholders and other interested parties. Until next time, we wish you a very good evening and all the very best.
Operator: Thank you. 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.
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