Reliance Global Group, Inc. (NASDAQ:RELI) Q4 2022 Earnings Call Transcript March 31, 2023

Operator: Good day, everyone, and welcome to the Reliance Global Group Fourth Quarter and 2022 Year-End Financial Results and Business Update Conference Call. It is now my pleasure to turn the floor over to your host, Ted Ayvas. Sir, the floor is yours.

Theodore Ayvas: Thanks, Matthew. Good afternoon, and thank you for joining Reliance Global Group's 2022 year-end 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 December 31, 2022. The press release is posted on the company's website, www.relianceglobalgroup.com. In addition, the company filed its annual report on with the U.S. Securities and Exchange Commission earlier 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 212-671-1021.

Before Mr. Beyman reviews the company's operating results for 2022, 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 and 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 United States 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 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 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 Beyman. Ezra?

Ezra Beyman: Thank you, Ted. Good afternoon, and thanks to everyone for joining us today. 2022 was a transformative year for the company as evidenced by the 73% increase in revenue for 2022. This growth reflects the acquisitions we've completed as well as the overall solid performance from our operating subsidiaries. Most importantly, we acquired Barra & Associates in April 2022, which became the foundation upon which we built RELI Exchange. As most of you are aware, RELI Exchange is our first-in-class business-to-business InsurTech platform and agency partner network for insurance agencies and agents and agencies providing independent agents a comprehensive suite of business development tools, enabling them to effectively complete and win against national agencies.

The RELI Exchange InsurTech platform is a game changer for the company and the industry. The fact that our platform is resonating so well is illustrated by the fact that RELI Exchange has experienced an almost 200% increase in agency partners since its launch in July of 2022. Additionally, we regularly introduce new products to our platform, further enhancing the value we provide to clients. A prime example of this is our exclusive life insurance quotation tool, added to the platform in February of 2023, which enables agents to quickly compare policy options and pricing in under a minute as well as a streamline policy binding and facilitate more productive client conversations. With this tool, consumers receive complete transparency on available coverage options and the expected cost.

Our primary goal is to assist our customers in obtaining the necessary level of insurance to safeguard their asset, while also ensuring that they receive the best possible value for their investment. Moreover, quick and accurate quotes are essential to our agency partners, enabling them to sell more policies and accelerate their business growth. The RELI Exchange platform was upgraded with an improved artificial intelligent agent -- engine, I'm sorry, in February that automatically fills out 90% of the customers' application, leading to a more efficient process for agents. Along with this, a new custom CRM system was launched, which guides agents through the entire customer engagement, sales and closing process by providing smart coaching wherever necessary.

The system will also aid sales directors and prospect tracking and agency partner support. Despite these AI-based enhancements, agents experiences are not being replaced, but instead of being elevated, allowing them to compare more growth in less time, while providing an overall enhanced customer experience. These improvements have further strengthened our position as a leader in the InsurTech industry. Furthermore, earlier this month, we unveiled RELI University, a groundbreaking communication and training platform that has been specifically developed to support our agency partners. This exclusive training tool is unlike anything else in the independent insurance industry and has provided free of charge to RELI Exchange agency partners. The platform has been designed to offer both new and experienced agents access to a wide range of products, services and tools, all available through RELI Exchange platform.

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This service also helps keep agents informed of the latest developments in the insurance industry. With RELI University, our agency partners can maximize their success and increase their productivity regardless of the level of experience. So, to wrap it up, as I mentioned earlier, RELI Exchange has experienced an almost 200% increase in agency partners since its launch in July of 2022, thanks to the exceptional efforts and unwavering commitment of our team. On that note, a special mention to Grant Barra, Michael Dobek and Moshe Fishman, who have led this effort. Our business model is both unique and highly scalable placing us at the forefront of the industry. We are excited about the platform's future growth potential as we continue to improve and expand services and capabilities.

We anticipate that RELI Exchange will act as a primary driver for organic growth going forward. Meanwhile, we are well capitalized with a strong balance sheet and our operating subsidiaries are generating positive cash flow on a consolidated basis, which has helped to offset the costs associated with building out and marketing to RELI Exchange platform. On one final note, I want to express my gratitude to all our supportive shareholders. We recognize that the stock market has been very volatile, especially within the micro-cap space and our stock has been under significant pressure. I have invested millions of my own money into the company and have consistently brought shares in the open market. I can assure that management's interests are completely aligned with shareholders and we are building the business for the long term.

I am committed to establishing Reliance as a major force within the insurance InsurTech industry. We have a highly scalable business model with tremendous earnings potential and I believe 2023 will be another exciting year as we begin to realize the benefits of the investments we've made to date, which I believe will help unlock significant value for our shareholders. I would like to now turn over the call to Joel Markovits, our Chief Financial Officer of Reliance Global, who will review the financial results for 2022. Joel?

Joel Markovits: Thank you very much, Ezra, and good afternoon, all. It's wonderful to be here today, and I'm excited to share the following financial results with you. Please note that all figures presented are approximates. The company's revenue for the year ended December 31, 2022, was $16.8 million. This represents a phenomenal 73% increase, as Ezra mentioned, from $9.7 million in 2021. This substantial increase is primarily attributable to organic growth as well as the new agencies we acquired in 2022. On the expense side, commission expense amounted to $3.4 million compared to $2.4 million in 2021. Salaries and wages totaled $8.6 million versus $4.7 million in the prior year. General and administrative expenses, they totaled $6.8 million versus $3.6 million in 2021.

Marketing and advertising totaled $2.6 million compared to $326,000 in the prior year. Increases in their full management expenses are primarily driven by our expanded operations, both organic and from our additional 2022 agency acquisitions. With regards to depreciation and amortization, we reported $2.8 million in 2022 compared to $1.6 million in 2021. Increase primarily is due to activity within our fixed assets. Property, plant and equipment increased by and intangible assets increased to $6.7 million. The growth in fixed assets stems from the company's business combinations and resulting acquired tangible and intangible assets during 2022. We reported $14.4 million goodwill impairment charge versus $0 in the previous year. This was a result of a goodwill evaluation performed by the company.

The of the P&L has no impact on cash or liquidity of the company. With regards to other income or other expense, we reported $28.2 million of net other income during the current year compared to a net loss of $18.2 million in the prior year. The fluctuation of $46.4 million primarily stems from swing in the fair value of our derivative warrant liabilities. Net income for the year ended December 31, 2022, was $6.5 million compared to a net loss of $21.1 million in the prior year. The positive swing is explained by the P&L narrative just provided on a line-by-line basis. This concludes our prepared remarks. We'll be happy to answer questions or discuss any comments you may have. Operator, kindly open the lines, please.

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