# Ryan Specialty Holdings, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Ryan Specialty Holdings, Inc.](/companies/ryan.md) (CIK 1849253)
- Form: 10-Q
- Filed: 2023-11-03
- Accepted by EDGAR: Nov 3, 2023, 07:00 ET
- Period: 2023-09-30
- Accession: 0000950170-23-058503
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1849253/000095017023058503/ryan-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1849253/000095017023058503/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $69.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $262.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $31.5m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $89.8m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $24.8m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $42.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$5.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $38.2m | us-gaap:NetIncomeLoss |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $250.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2023-09-30 | $1.60bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $3.59bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $6.43bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $2.98bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $5.48bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $1.95bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-09-30 | $35.6m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2023-09-30 | $543.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 88,640 characters.

*The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity, and cash flows of the Company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K for the year ended December 31, 2022 which was filed with the SEC on March 1, 2023. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and in our Annual Report on Form 10-K, particularly in the sections entitled “Risk Factors” and “Information Concerning Forward-Looking Statements.”*

*The following discussion provides commentary on the financial results derived from our unaudited financial statements for the three and nine months ended September 30, 2023 and 2022 prepared in accordance with U.S. GAAP. In addition, we regularly review the following Non-GAAP measures when assessing performance: Organic revenue growth rate, Adjusted compensation and benefits expense, Adjusted compensation and benefits expense ratio, Adjusted general and administrative expense, Adjusted general and administrative expense ratio, Adjusted EBITDAC, Adjusted EBITDAC margin, Adjusted net income, Adjusted net income margin and Adjusted diluted earnings per share. See “Non-GAAP Financial Measures and Key Performance Indicators” for further information.*

### Overview

Founded by Patrick G. Ryan in 2010, we are a service provider of specialty products and solutions for insurance brokers, agents, and carriers. We provide distribution, underwriting, product development, administration, and risk management services by acting as a wholesale broker and a managing underwriter or a program administrator with delegated authority from insurance carriers. Our mission is to provide industry-leading innovative specialty insurance solutions for insurance brokers, agents, and carriers.

For retail insurance agents and brokers, we assist in the placement of complex or otherwise hard-to-place risks. For insurance carriers, we work with retail and wholesale insurance brokers to source, onboard, underwrite, and service these same types of risks. A significant majority of the premiums we place are bound in the E&S market, which includes Lloyd’s of London. There is often significantly more flexibility in terms, conditions, and rates in the E&S market relative to the Admitted or “standard” insurance market. We believe that the additional freedom to craft bespoke terms and conditions in the E&S market allows us to best meet the needs of our trading partners, provide unique solutions, and drive innovation. We believe our success has been achieved by providing best-in-class intellectual capital, leveraging our trusted and long-standing relationships, and developing differentiated solutions at a scale unmatched by many of our competitors.

### Significant Events and Transactions

### Corporate Structure

We are a holding company and our sole material asset is a controlling equity interest in New LLC, which is also a holding company and its sole material asset is a controlling equity interest in the LLC. The Company operates and controls the business and affairs of, and consolidates the financial results of, the LLC through New LLC. We conduct our business through the LLC. As the LLC is substantively the same as New LLC, for the purpose of this discussion, we will refer to both New LLC and the LLC as the “LLC.”

The LLC is a limited liability company taxed as a partnership for income tax purposes, and its taxable income or loss is passed through to its members, including the Company. The LLC is subject to income taxes on its taxable income in certain foreign countries, in certain state and local jurisdictions that impose income taxes on partnerships, and on the taxable income of its U.S. corporate subsidiaries. As a result of our ownership of LLC Common Units, we are subject to U.S. federal, state, and local income taxes with respect to our allocable share of any taxable income of the LLC and are taxed at the prevailing corporate tax rates. We intend to cause the LLC to make distributions in an amount sufficient to allow us to pay our tax obligations and operating expenses, including distributions to fund any ordinary course payments due under the Tax Receivable Agreement. See “Liquidity and Capital Resources - Tax Receivable Agreement” for additional information about the TRA.

### ACCELERATE 2025 Program

During the first quarter of 2023 we initiated the ACCELERATE 2025 program that will enable continued growth, drive innovation, and deliver sustainable productivity improvements over the long term. The program in its expanded scope will now result in approximately $90.0 million of cumulative one-time charges through 2024, funded through operating cash flow. Restructuring costs will primarily be included in General and administrative expense, relating to third-party professional services, lease and contract terminations costs, and other expenses. The remaining costs will be incurred through Compensation and benefits expense, predominately relating to third-party contractor and other workforce-related costs. We expect the program in its expanded scope to now generate annual savings of approximately $50.0 million in 2025. See “Note 4, *Restructuring”* of the unaudited quarterly consolidated financial statements for further discussion.

We began recognizing costs associated with the restructuring plan in the first quarter of 2023. For the three months ended September 30, 2023, we incurred restructuring costs of $16.5 million. For the nine months ended September 30, 2023, we incurred restructuring costs of $36.3 million, which represent cumulative costs since the inception of the plan. Of the cumulative $36.3 million in costs, $22.9 million was general and administrative with the remaining balance being workforce-related. While the current results of the ACCELERATE 2025 program are in line with expectations, changes to the total savings estimate and timing of the ACCELERATE 2025 program may evolve as we continue to progress through the plan and evaluate other potential opportunities. The actual amounts and timing may vary significantly based on various factors.

### Acquisitions

On July 1, 2023, the Company completed the acquisitions of certain assets of ACE Benefit Partners, Inc. (“ACE”), a medical stop loss general agent headquartered in Eagle, Idaho, and Point6 Healthcare, LLC (“Point6”), a distributor of medical stop loss insurance on behalf of retail brokers and third-party administrators headquartered in Plano, Texas.

On July 3, 2023, the Company completed the acquisition of Socius Insurance Services (“Socius”), a national wholesale insurance broker headquartered in Northern California.

On October 29, 2023, the Company entered into a definitive agreement to acquire AccuRisk Holdings, LLC (“AccuRisk”), a medical stop loss MGU headquartered in Chicago, Illinois. This acquisition is expected to close during the fourth quarter of 2023.

### Key Factors Affecting Our Performance

Our historical financial performance has been, and we expect our financial performance in the future to be, driven by our ability to:

### Pursue Strategic Acquisitions

We have successfully integrated businesses complementary to our own to increase both our distribution reach and our product and service capabilities. We continuously evaluate acquisitions and intend to further pursue targeted acquisitions that complement our product and service capabilities or provide us access to new markets. We have previously made, and intend to continue to make, acquisitions with the objective of enhancing our human capital and product and service capabilities, entering natural adjacencies, and expanding our geographic presence. Our ability to successfully pursue strategic acquisitions is dependent upon a number of factors, including sustained execution of a disciplined and selective acquisition strategy which requires acquisition targets to have a cultural and strategic fit, competition for these assets, purchase price multiples that we deem appropriate, and our ability to effectively integrate targeted companies or assets and grow our business. We do not have agreements or commitments for any material acquisitions at this time.

### Deepen and Broaden our Relationships with Retail Broker Trading Partners

We have deep engagement with our retail broker trading partners, and we believe we have the ability to transact in even greater volume with nearly all of them. For example, in 2022, our revenue derived from the Top 100 firms (as ranked by Business Insurance) expanded faster than our Organic revenue growth rate of 16.4%. Our ability to deepen and broaden relationships with our retail broker trading partners and increase sales is dependent upon a number of factors, including client satisfaction with our distribution reach and our product capabilities, retail brokers continuing to require or desire our services, competition, pricing, economic conditions, and spending on our product offerings.

### Build Our National Binding Authority Specialty

We believe there is substantial opportunity to continue to grow our Binding Authority Specialty, as we believe that both M&A consolidation and panel consolidation are in nascent stages in the binding authority market. Our ability to grow our Binding Authority Specialty is dependent upon a number of factors, including a continuing ability to secure sufficient capital support from insurers, the quality of our services and product offerings, marketing and sales efforts to drive new business prospects and execution, new product offerings, the pricing and quality of our competitors’ offerings, and the growth in demand for the insurance products.

### Invest in Operation and Growth

We have invested heavily in building a durable business that is able to adapt to the continuously evolving E&S market and intend to continue to do so. We are focused on enhancing the breadth of our product and service offerings as well as developing and launching new solutions to address the evolving needs of the specialty insurance industry and markets. Our future success is dependent upon a number of factors, including our ability to successfully develop, market, and sell existing and new products and services to both new and existing trading partners.

### Generate Commission Regardless of the State of the E&S Market

We earn commissions, which are calculated as a percentage of the total insurance policy premium, and fees. Changes in the insurance market or specialty lines that are our focus, characterized by a period of increasing (or declining) premium rates, could positively (or negatively) impact our profitability.

### Managing Changing Macroeconomic Conditions

Growth in certain lines of business, such as project-based construction and M&A transactional liability insurance, is partially dependent on a variety of macroeconomic factors inasmuch as binding the underlying insurance coverage is subject to the underlying activity occurring. In periods of economic growth and liquid credit markets, this underlying activity can accelerate and provide tailwinds to our growth. In periods of economic decline and tight credit markets, this underlying activity can slow or be delayed and provide headwinds to our growth. As interest rates have rapidly risen, leading to friction in debt markets, we have observed some delays to both construction projects and M&A activity which, in turn, pauses the binding of construction and M&A transactional liability insurance policies. We believe over time these lines of business will continue to grow as the economy steadies and again grows.

### Leverage the Growth of the E&S Market

The growing relevance of the E&S market has been driven by the rapid emergence of large, complex, high-hazard, and otherwise hard-to-place risks across many lines of insurance. This trend continued in 2022, with 14 named storms – including Hurricane Ian with estimated losses of $50 to $65 billion during the 2022 Atlantic hurricane season – following 21 named storms totaling over $70 billion in estimated losses during the 2021 Atlantic hurricane season, escalating jury verdicts and social inflation, a proliferation of cyber threats, novel health risks, and the transformation of the economy to a “digital first” mode of doing business. We believe that as the complexity of the E&S market continues to escalate, wholesale brokers and managing underwriters that do not have sufficient scale, or the financial and intellectual capital to invest in the required specialty capabilities, will struggle to compete effectively. This will further the trend of market share consolidation among the wholesale firms that do have these capabilities. We will continue to invest in our intellectual capital to innovate and offer custom solutions and products to better address these evolving market fundamentals.

Although we believe this growth will continue, we recognize that the growth of the E&S market might not be linear as risks can and do shift between the E&S and non-E&S markets as market factors change and evolve. For example, we benefited from a rapid increase in both the rate and flow of public company D&O policies into the wholesale channel in 2020 and 2021. Throughout 2022 and 2023 as the public company D&O insurance markets stabilized, IPO markets have slowed, and new insurance capital that previously entered the market has impacted the public company D&O space, public company D&O rate decreases have accelerated. We believe these factors have also created opportunities for retailers to place some of that coverage directly.

### Components of Results of Operations

### Revenue

### Net Commissions and Fees

Net commissions and fees are derived primarily from our three Specialties and are paid for our role as an intermediary in facilitating the placement of coverage in the insurance distribution chain. Net commissions and policy fees are generally calculated as a percentage of the total insurance policy premium placed, although fees can often be a fixed amount irrespective of the premium, but we also receive supplemental commissions based on the volume placed or profitability of a book of business. We share a portion of these net commissions and policy fees with the retail insurance broker and recognize revenue on a net basis. Additionally, carriers may also pay us a contingent commission or volume-based commission, both of which represent forms of contingent or supplemental consideration associated with the placement of coverage and are based primarily on underwriting results, but may also contain considerations for only volume, growth, and/or retention. Although we have compensation arrangements called contingent commissions in all three Specialties that are based in whole or in part on the underwriting performance, we do not take any direct insurance risk other than through our equity method investment in Geneva Re through Ryan Investment Holdings, LLC. We also receive loss mitigation and other fees, some of which are not dependent on the placement of a risk.

In our Wholesale Brokerage and Binding Authority Specialties, we generally work with retail insurance brokers to secure insurance coverage for their clients, who are the ultimate insured party. Our Wholesale Brokerage and Binding Authority Specialties generate revenues through commissions and fees from clients, as well as through supplemental commissions, which may be contingent commissions or volume-based commissions from carriers. Commission rates and fees vary depending upon several factors, which may include the amount of premium, the type of insurance coverage provided, the particular services provided to a client or carrier, and the capacity in which we act. Payment terms are consistent with current industry practice.

In our Underwriting Management Specialty, we generally work with retail insurance brokers and often other wholesale brokers to secure insurance coverage for the ultimate insured party. Our Underwriting Management Specialty generates revenues through commissions and fees from clients and through contingent commissions from carriers. Commission rates and fees vary depending upon several factors including the premium, the type of coverage, and additional services provided to the client. Payment terms are consistent with current industry practice.

### Fiduciary Investment Income

Fiduciary investment income consists of interest earned on insurance premiums and surplus lines taxes that are held in a fiduciary capacity, in cash and cash equivalents, until disbursed.

### Expenses

### Compensation and Benefits

Compensation and benefits is our largest expense. It consists of (i) salary, incentives, and benefits to employees, and commissions to our producers and (ii) equity-based compensation associated with the grants of awards to employees, executive officers, and directors. We operate in competitive markets for human capital and we need to maintain competitive compensation levels in order to maintain and grow our talent base.

### General and Administrative

General and administrative expense includes travel and entertainment expenses, office expenses, accounting, legal, insurance and other professional fees, and other costs associated with our operations. Our occupancy-related costs and professional services expenses, in particular, generally increase or decrease in relative proportion to the number of our employees and the overall size and scale of our business operations.

### Amortization

Amortization expense consists primarily of amortization related to intangible assets we acquired in connection with our acquisitions. Intangible assets consist of customer relationships, trade names, and internally developed software.

### Interest Expense, Net

Interest expense, net consists of interest payable on indebtedness, amortization of the Company's interest rate cap, imputed interest on contingent consideration, and amortization of deferred debt issuance costs, offset by interest income on the Company's Cash and cash equivalents balances and payments received in relation to the interest rate cap.

### Other Non-Operating Loss (Income)

For the nine months ended September 30, 2023, Other non-operating loss (income) included sublease income offset by TRA contractual interest. For the nine months ended September 30, 2022, Other non-operating loss (income) included a charge related to the change in the TRA liability caused by a change in our blended state tax rates.

### Income Tax Expense

Income tax expense includes tax on the Company's allocable share of any net taxable income from the LLC, from certain state and local jurisdictions that impose taxes on partnerships, as well as earnings from our foreign subsidiaries and C-Corporations subject to entity level taxation.

### Non-Controlling Interests

Net income and Other comprehensive income (loss) are attributed to the non-controlling interests based on the weighted average LLC Common Units outstanding during the period and is presented on the Consolidated Statements of Income (Loss). Refer to “Note 8*, Stockholders' Equity”* of the unaudited quarterly consolidated financial statements for more information.

### Results of Operations

Below is a summary table of the financial results and Non-GAAP measures that we find relevant to our business operations:

*(in thousands, except percentages and per share data)*

| Revenue | Three Months Ended September 30, 2023 | 2022 | Change $% |  | Nine Months Ended September 30, 2023 | 2022 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net commissions and fees | $487,345 | $407,551 | $79,794 | 19.6% | $1,507,878 | $1,284,459 | $223,419 | 17.4% |
| Fiduciary investment income | 14,593 | 4,445 | 10,148 | NM | 36,808 | 5,719 | 31,089 | NM |
| **Total revenue** | **$501,938** | **$411,996** | **$89,942** | **21.8%** | **$1,544,686** | **$1,290,178** | **$254,508** | **19.7%** |
| **Expenses** |  |  |  |  |  |  |  |  |
| Compensation and benefits | 329,212 | 274,108 | 55,104 | 20.1 | 989,294 | 858,439 | 130,855 | 15.2 |
| General and administrative | 69,288 | 48,991 | 20,297 | 41.4 | 202,595 | 139,851 | 62,744 | 44.9 |
| Amortization | 29,572 | 25,667 | 3,905 | 15.2 | 79,125 | 78,563 | 562 | 0.7 |
| Depreciation | 2,201 | 1,463 | 738 | 50.4 | 6,570 | 3,903 | 2,667 | 68.3 |
| Change in contingent consideration | 1,848 | 423 | 1,425 | NM | 4,358 | (837) | 5,195 | NM |
| **Total operating expenses** | **$432,121** | **$350,652** | **$81,469** | **23.2%** | **$1,281,942** | **$1,079,919** | **$202,023** | **18.7%** |
| **Operating income** | **$69,817** | **$61,344** | **$8,473** | **13.8%** | **$262,744** | **$210,259** | **$52,485** | **25.0%** |
| Interest expense, net | 31,491 | 28,864 | 2,627 | 9.1 | 89,840 | 75,462 | 14,378 | 19.1 |
| Loss (income) from equity method investment in related party | (2,271) | (144) | (2,127) | NM | (5,882) | 414 | (6,296) | NM |
| Other non-operating loss (income) | 67 | (66) | 133 | NM | 37 | 6,832 | (6,795) | NM |
| **Income before income taxes** | **$40,530** | **$32,690** | **$7,840** | **24.0%** | **$178,749** | **$127,551** | **$51,198** | **40.1%** |
| Income tax expense | 24,827 | 3,411 | 21,416 | NM | 42,772 | 10,076 | 32,696 | NM |
| **Net income** | **$15,703** | **$29,279** | **$(13,576)** | **(46.4)%** | **$135,977** | **$117,475** | **$18,502** | **15.7%** |
| **GAAP financial measures** |  |  |  |  |  |  |  |  |
| Revenue | $501,938 | $411,996 | $89,942 | 21.8% | $1,544,686 | $1,290,178 | $254,508 | 19.7% |
| Compensation and benefits | 329,212 | 274,108 | 55,104 | 20.1 | 989,294 | 858,439 | 130,855 | 15.2 |
| General and administrative | 69,288 | 48,991 | 20,297 | 41.4 | 202,595 | 139,851 | 62,744 | 44.9 |
| Net income | 15,703 | 29,279 | (13,576) | (46.4) | 135,977 | 117,475 | 18,502 | 15.7 |
| Compensation and benefits expense ratio (1) | 65.6% | 66.5% |  |  | 64.0% | 66.5% |  |  |
| General and administrative expense ratio (2) | 13.8% | 11.9% |  |  | 13.1% | 10.8% |  |  |
| Net income margin (3) | 3.1% | 7.1% |  |  | 8.8% | 9.1% |  |  |
| Earnings (loss) per share (4) | $(0.04) | $0.11 |  |  | $0.34 | $0.40 |  |  |
| Diluted earnings (loss) per share (4) | $(0.04) | $0.09 |  |  | $0.34 | $0.37 |  |  |
| **Non-GAAP financial measures\*** |  |  |  |  |  |  |  |  |
| Organic revenue growth rate | 14.7% | 13.7% |  |  | 14.7% | 18.7% |  |  |
| Adjusted compensation and benefits expense | $296,400 | $247,095 | $49,305 | 20.0% | $911,925 | $769,253 | $142,672 | 18.5% |
| Adjusted compensation and benefits expense ratio | 59.1% | 60.0% |  |  | 59.0% | 59.6% |  |  |
| Adjusted general and administrative expense | $58,559 | $48,084 | $10,475 | 21.8% | $166,606 | $130,774 | $35,832 | 27.4% |
| Adjusted general and administrative expense ratio | 11.7% | 11.7% |  |  | 10.8% | 10.1% |  |  |
| Adjusted EBITDAC | $146,979 | $116,817 | $30,162 | 25.8% | $466,155 | $390,151 | $76,004 | 19.5% |
| Adjusted EBITDAC margin | 29.3% | 28.4% |  |  | 30.2% | 30.2% |  |  |
| Adjusted net income | $86,632 | $66,560 | $20,072 | 30.2% | $282,144 | $237,774 | $44,370 | 18.7% |
| Adjusted net income margin | 17.3% | 16.2% |  |  | 18.3% | 18.4% |  |  |
| Adjusted diluted earnings per share | $0.32 | $0.25 |  |  | $1.04 | $0.88 |  |  |

NM represents “Not Meaningful”.

(1) Compensation and benefits expense ratio is defined as Compensation and benefits expense divided by Total revenue.

(2) General and administrative expense ratio is defined as General and administrative expense divided by Total revenue.

(3) Net income margin is defined as Net income divided by Total revenue.

(4) See “Note 10, *Earnings (Loss) Per Share”* of the unaudited quarterly consolidated financial statements for further discussion of how these metrics are calculated.

\* These measures are Non-GAAP. Please refer to the section entitled “*Non-GAAP Financial Measures and Key Performance Indicators”* below for definitions and reconciliations to the most directly comparable GAAP measure.

### Comparison of the Three Months Ended September 30, 2023 and 2022

### Revenue

### Net Commissions and Fees

Net commissions and fees increased by $79.7 million, or 19.6%, from $407.6 million to $487.3 million for the three months ended September 30, 2023 as compared to the same period in the prior year. The following were the principal drivers of the increase:

- $60.6 million, or 14.9%, of the period-over-period change in Net commissions and fees was due to organic revenue growth. Organic revenue growth represents growth in Net commissions and fees, adjusted to eliminate revenue attributable to acquisitions which were completed within 12 months of the end of the third quarter of 2023, and other items such as the change in contingent commissions and the impact of changes in foreign exchange rates. In aggregate, our net commission rates were consistent period-over-period. Also, we grew our client relationships, in aggregate, within each of our three Specialties. The growth of these relationships is due to the combination of a growing E&S market and winning new business from competitors. The largest growth factor in the quarter was our property portfolio across our three Specialties, driven by an increase in the pricing for property insurance as well as an increase in the flow of property risks into the E&S market. We also experienced growth across the majority of our casualty lines. This growth was partially offset by a number of factors, none of which were individually significant such as (i) a decline in Net commissions and fees generated from the placement of public company D&O insurance policies, related to a slow-down in IPO activity and an associated rapid premium rate decrease and (ii) a decrease in Net commissions and fees generated from large commercial construction projects and M&A activity related to a slow-down in underlying activity during the quarter;
- $17.8 million, or 4.4%, of the period-over-period change in our Net commissions and fees was due to the acquisition of Griffin Underwriting Services (”Griffin”), Centurion Liability Insurance Services, LLC (”Centurion”), Socius, Point6, and ACE, all of which were completed within 12 months of September 30, 2023; and
- $1.4 million, or 0.3%, of the period-over-period change in Net commissions and fees was due to changes in contingent commissions and the impact of foreign exchange rates on our Net commissions and fees.

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2023 | % of total | 2022 | % of total | Change |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Wholesale Brokerage | $308,872 | 63.4% | $267,222 | 65.6% | $41,650 | 15.6% |
| Binding Authorities | 69,245 | 14.2 | 55,607 | 13.6 | 13,638 | 24.5 |
| Underwriting Management | 109,228 | 22.4 | 84,722 | 20.8 | 24,506 | 28.9 |
| **Total net commissions and fees** | **$487,345** |  | **$407,551** |  | **$79,794** | **19.6%** |

Wholesale Brokerage net commissions and fees increased by $41.7 million, or 15.6%, period-over-period, primarily due to strong organic growth within the Specialty for the quarter as well as contributions from the Griffin, Centurion, and Socius acquisitions.

Binding Authority net commissions and fees increased by $13.6 million, or 24.5%, period-over-period, primarily due to strong organic growth within the Specialty for the quarter as well as contributions from the Griffin acquisition.

Underwriting Management net commissions and fees increased by $24.5 million, or 28.9%, period-over-period, primarily due to strong organic growth within the Specialty for the quarter as well as contributions from the ACE and Point6 acquisitions.

The following table sets forth our revenue by type of commission and fees:

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2023 | % of total | 2022 | % of total | Change |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net commissions and policy fees | $470,085 | 96.4% | $394,934 | 96.9% | $75,151 | 19.0% |
| Supplemental and contingent commissions | 8,592 | 1.8 | 5,289 | 1.3 | 3,303 | 62.5 |
| Loss mitigation and other fees | 8,668 | 1.8 | 7,328 | 1.8 | 1,340 | 18.3 |
| **Total net commissions and fees** | **$487,345** |  | **$407,551** |  | **$79,794** | **19.6%** |

31

Net commissions and policy fees grew 19.0%, in line with the overall net commissions and fee revenue growth of 19.6%, for the three months ended September 30, 2023 as compared to the same period in the prior year. The main drivers of this growth continue to be the acquisition of new business and expansion of ongoing client relationships in response to the increasing demand for new, complex E&S products as well as the inflow of risks from the Admitted market into the E&S market and an increase in the premium rate for risks placed. In aggregate, we experienced stable commission rates period-over-period.

Supplemental and contingent commissions increased 62.5% period-over-period driven by the performance of risks placed on eligible business earning profit-based or volume-based commissions.

Loss mitigation and other fees increased 18.3% period-over-period primarily due to captive management and other risk management service fees from the placement of alternative risk insurance solutions as well as certain fees related to the ACE and Point6 acquisitions completed in the third quarter of 2023.

### Expenses

### Compensation and Benefits

Compensation and benefits expense increased by $55.1 million, or 20.1%, from $274.1 million to $329.2 million for the three months ended September 30, 2023 compared to the same period in 2022. The following were the principal drivers of this increase:

- Commissions increased $18.7 million, or 14.9%, period-over-period, driven by the 19.6% increase in Net commissions and fees;
- An increase of $11.5 million was driven by Restructuring and related expense associated with the ACCELERATE 2025 program.
- An increase of $34.9 million was driven by (i) the addition of 496 employees compared to the same period in the prior year, and (ii) growth in the business. Overall headcount increased to 4,294 full-time employees as of September 30, 2023 from 3,798 as of September 30, 2022;
- These increases were partially offset by a $6.8 million decrease compared to the prior year in Acquisition related long-term incentive compensation related to the payoff of the All Risks LTIP plan in 2022 and a $3.2 million decrease compared to the prior year in IPO related compensation expense, which reflects charges associated with both the revaluation of existing equity grants at the time of our IPO as well as expense related to the new awards issued in connection with the IPO. The expense associated with both the revaluation of existing awards as well as the issuance of new equity awards both relate directly to the Organizational Transactions and IPO, however, amounts related to each will continue to be expensed over future periods as the underlying awards vest.

The net impact of revenue growth and the factors above resulted in a Compensation and benefits expense ratio decrease of 0.9% from 66.5% to 65.6% period-over-period.

In general, we expect to continue experiencing a rise in commissions, salaries, incentives, and benefits expense commensurate with our expected growth in business volume, revenue, and headcount.

### General and Administrative

General and administrative expense increased by $20.3 million, or 41.4%, from $49.0 million to $69.3 million for the three months ended September 30, 2023 as compared to the same period in the prior year. The following were the principal drivers of this increase:

- $5.1 million of increased acquisition-related expense associated with recent and prospective acquisitions;
- $4.9 million of increased restructuring and related expense associated with the ACCELERATE 2025 program;
- $4.3 million of professional services mostly related to service arrangements in connection with revenue generating activities within our Ryan Re and Keystone operations;
- $4.1 million of increased travel and entertainment expense compared to the same period in 2022, which was the result of business travel returning to a normalized level;
- The remaining increase of $1.9 million was driven by growth in the business. Such expenses incurred to accommodate both organic and inorganic revenue growth include IT, occupancy, and insurance.

The net impact of revenue growth and the factors listed above resulted in a General and administrative expense ratio increase of 1.9% from 11.9% to 13.8% period-over-period.

### Amortization

Amortization expense increased by $3.9 million, or 15.2%, from $25.7 million to $29.6 million for the three months ended September 30, 2023 compared to the same period in the prior year. The main driver for the increase was the amortization of intangible assets from recent acquisitions. Our intangible assets increased by $90.6 million when comparing the balance as of September 30, 2023 to the balance as of September 30, 2022.

### Interest Expense, Net

Interest expense, net increased $2.6 million, or 9.1%, from $28.9 million to $31.5 million for the three months ended September 30, 2023 compared to the same period in the prior year. The main driver of the change in Interest expense, net for the three months ended September 30, 2023 was an increase in the floating rate applied to our Term Loan on account of the rising interest rate environment. On April 7, 2022, the Company entered into an interest rate cap agreement to manage its exposure to interest rate fluctuations related to the Company’s Term Loan for an upfront cost of $25.5 million. The interest rate cap has a $1,000.0 million notional amount, 2.75% strike, and terminates on December 31, 2025. For the twelve months ended December 31, 2023 we expect to incur approximately $7.0 million of interest expense related to the cap. For the three months ended September 30, 2023, the net reduction to Interest expense, net related to the cap was $4.6 million.

### Other Non-Operating Loss (Income)

Other non-operating loss (income) decreased by $0.2 million to a loss of $0.1 million for the three months ended September 30, 2023 as compared to income of $0.1 million in the same period in the prior year. For the three months ended September 30, 2023, Other non-operating loss (income) consisted of $0.2 million of sublease income offset by $0.3 million of TRA contractual interest. For the three months ended September 30, 2022, Other non-operating income included $0.1 million of sublease income.

### Income Before Income Taxes

Income before income taxes increased $7.8 million from $32.7 million to $40.5 million for the three months ended September 30, 2023 compared to the same period in the prior year as a result of the factors described above.

### Income Tax Expense

Income tax expense increased $21.4 million from $3.4 million to $24.8 million for the three months ended September 30, 2023 compared to the same period in the prior year primarily due to $20.7 million of Deferred income tax expense recognized as a result of the Common Control Reorganization (“CCR”) subsequent to the Socius acquisition in the third quarter of 2023. This CCR was a discrete, non-cash expense incurred at Ryan Specialty Holdings, Inc. and the Company’s annual effective tax rate is unaffected.

### Net Income

Net income decreased $13.6 million from $29.3 million to $15.7 million for the three months ended September 30, 2023 compared to the same period in the prior year as a result of the factors described above.

### Comparison of the Nine Months Ended September 30, 2023 and 2022

### Revenue

### Net Commissions and Fees

Net commissions and fees increased by $223.4 million, or 17.4%, from $1,284.5 million to $1,507.9 million for the nine months ended September 30, 2023 as compared to the same period in the prior year. The following were the principal drivers of the increase:

- $189.6 million, or 14.8%, of the period-over-period change in Net commissions and fees was due to organic revenue growth. Organic revenue growth represents growth in Net commissions and fees, adjusted to eliminate revenue attributable to acquisitions which were completed within 12 months of the end of the third quarter of 2023, and other items such as the change in contingent commissions and the impact of changes in foreign exchange rates. In aggregate, our net commission rates were consistent period-over-period. Also, we grew our client relationships, in aggregate, within each of our three Specialties. The growth of these relationships is due to the combination of a growing E&S market and winning new business from competitors. The largest growth factor in the period was our property portfolio across our

three Specialties, driven by an increase in the pricing for property insurance as well as an increase in the flow of property risks into the E&S market. We also experienced growth across the majority of our casualty lines. This growth was partially offset by a number of factors, none of which were individually significant such as (i) a decline in Net commissions and fees generated from the placement of public company D&O insurance policies, related to a slow-down in IPO activity and an associated rapid premium rate decrease and (ii) a decrease in Net commissions and fees generated from large commercial construction projects and M&A activity related to a slow-down in underlying activity during the quarter;

- $29.9 million, or 2.3%, of the period-over-period change in our Net commissions and fees was due to the acquisitions of Griffin, Centurion, Socius, Point6, and ACE, all of which were completed within 12 months of September 30, 2023; and
- $3.9 million, or 0.3%, of the period-over-period change in Net commissions and fees was due to changes in contingent commissions and the impact of foreign exchange rates on our Net commissions and fees.

*(in thousands, except percentages)*

|  | Nine Months Ended September 30, 2023 | % of total | 2022 | % of total | Change |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Wholesale Brokerage | $976,338 | 64.7% | $841,273 | 65.5% | $135,065 | 16.1% |
| Binding Authorities | 208,547 | 13.8 | 178,351 | 13.9 | 30,196 | 16.9 |
| Underwriting Management | 322,993 | 21.5 | 264,835 | 20.6 | 58,158 | 22.0 |
| **Total Net commissions and fees** | **$1,507,878** |  | **$1,284,459** |  | **$223,419** | **17.4%** |

Wholesale Brokerage net commissions and fees increased by $135.1 million, or 16.1%, period-over-period, primarily due to strong organic growth within the Specialty for the quarter as well as contributions from the Griffin, Centurion, and Socius acquisitions.

Binding Authority net commissions and fees increased by $30.2 million, or 16.9%, period-over-period, primarily due to strong organic growth within the Specialty for the quarter as well as contributions from the Griffin acquisition.

Underwriting Management net commissions and fees increased by $58.2 million, or 22.0%, period-over-period, primarily due to strong organic growth within the Specialty for the quarter as well as contributions from the ACE and Point6 acquisitions.

The following table sets forth our revenue by type of commission and fees:

*(in thousands, except percentages)*

|  | Nine Months Ended September 30, 2023 | % of total | 2022 | % of total | Change |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net commissions and policy fees | $1,437,239 | 95.3% | $1,226,396 | 95.5% | $210,843 | 17.2% |
| Supplemental and contingent commissions | 46,281 | 3.1 | 39,339 | 3.1 | 6,942 | 17.6 |
| Loss mitigation and other fees | 24,358 | 1.6 | 18,723 | 1.4 | 5,635 | 30.1 |
| **Total net commissions and fees** | **$1,507,878** |  | **$1,284,459** |  | **$223,419** | **17.4%** |

Net commissions and policy fees grew 17.2%, in line with the overall net commissions and fee revenue growth of 17.4%, for the nine months ended September 30, 2023 as compared to the same period in the prior year. The main drivers of this growth continue to be the acquisition of new business and expansion of ongoing client relationships in response to the increasing demand for new, complex E&S products as well as the inflow of risks from the Admitted market into the E&S market and an increase in the premium rate for risks placed. In aggregate, we experienced stable commission rates period-over-period.

Supplemental and contingent commissions increased 17.6% period-over-period driven by the performance of risks placed on eligible business earning profit-based or volume-based commissions.

Loss mitigation and other fees grew 30.1% period-over-period primarily due to captive management and other risk management service fees from the placement of alternative risk insurance solutions as well as certain fees related to the ACE and Point6 acquisitions completed in the third quarter of 2023.

### Expenses

### Compensation and Benefits

Compensation and benefits expense increased by $130.9 million, or 15.2%, from $858.4 million to $989.3 million for the nine months ended September 30, 2023 compared to the same period in 2022. The following were the principal drivers of this increase:

- Commissions increased $65.3 million, or 16.5%, period-over-period, driven by the 17.4% increase in Net commissions and fees;
- An increase of $12.7 million was driven by Restructuring and related expense associated with the ACCELERATE 2025 program.
- An increase of $85.4 million was driven by (i) the addition of 496 employees compared to the same period in the prior year, and (ii) growth in the business. Overall headcount increased to 4,294 full-time employees as of September 30, 2023 from 3,798 as of September 30, 2022;
- These increases were partially offset by a $20.5 million decrease compared to the prior year in Acquisition related long-term incentive compensation related to the payoff of the All Risks LTIP plan in 2022 and an $12.0 million decrease compared to the prior year in IPO related compensation expense, which reflects charges associated with both the revaluation of existing equity grants at the time of our IPO as well as expense related to the new awards issued in connection with the IPO. The expense associated with both the revaluation of existing awards as well as the issuance of new equity awards both relate directly to the Organizational Transactions and IPO, however, amounts related to each will continue to be expensed over future periods as the underlying awards vest.

The net impact of revenue growth and the factors above resulted in a Compensation and benefits expense ratio decrease of 2.5% from 66.5% to 64.0% period-over-period.

In general, we expect to continue experiencing a rise in commissions, salaries, incentives, and benefits expense commensurate with our expected growth in business volume, revenue, and headcount.

### General and Administrative

General and administrative expense increased by $62.7 million, or 44.9%, from $139.9 million to $202.6 million for the nine months ended September 30, 2023 as compared to the same period in the prior year. The following were the principal drivers of this increase:

- $18.8 million of increased restructuring and related expense associated with the ACCELERATE 2025 program;
- $12.2 million of increased travel and entertainment expense compared to the same period in 2022 which was the result of business travel returning to a normalized level;
- $12.2 million of professional services mostly related to service arrangements in connection with revenue generating activities within our Ryan Re and Keystone operations;
- $9.4 million of increased acquisition-related expense associated with recent and prospective acquisitions;
- The remaining increase of $10.1 million was driven by growth in the business. Such expenses incurred to accommodate both organic and inorganic revenue growth include IT, occupancy, and insurance.

The net impact of revenue growth and the factors listed above resulted in a General and administrative expense ratio increase of 2.3% from 10.8% to 13.1% period-over-period.

### Amortization

Amortization expense increased by $0.5 million, or 0.7%, from $78.6 million to $79.1 million for the nine months ended September 30, 2023 compared to the same period in the prior year. The main driver for the increase was the amortization of intangible assets from recent acquisitions. Our intangible assets increased by $90.6 million when comparing the balance as of September 30, 2023 to the balance as of September 30, 2022.

### Interest Expense, Net

Interest expense, net increased $14.3 million, or 19.1%, from $75.5 million to $89.8 million for the nine months ended September 30, 2023 compared to the same period in the prior year. The main drivers of the change in Interest expense, net for the nine months ended September 30, 2023 were the issuance of $400.0 million of Senior Secured Notes on February 3, 2022 and an increase in the floating rate applied to our Term Loan on account of the rising interest rate environment. On April 7, 2022, the Company entered into an interest rate cap agreement to manage its exposure to interest rate fluctuations related to the Company’s Term Loan for an upfront cost of $25.5 million. The interest rate cap has a $1,000.0 million notional amount, 2.75% strike, and terminates on December 31, 2025. For the twelve months ended December 31, 2023 we expect to incur approximately $7.0 million of interest expense related to the cap. For the nine months ended September 30, 2023, the net reduction to Interest expense, net related to the cap was $11.2 million.

### Other Non-Operating Loss (Income)

Other non-operating loss (income) decreased by $6.8 million to a de minimis loss for the nine months ended September 30, 2023 as compared to a loss of $6.8 million in the same period in the prior year. For the nine months ended September 30, 2023, Other non-operating loss (income) included $0.4 million of sublease income offset by $0.5 million of TRA contractual interest. For the nine months ended September 30, 2022, Other non-operating loss (income) included a $7.2 million charge related to the change in the TRA liability caused by a change in our blended state tax rates.

### Income Before Income Taxes

Due to the factors above, Income before income taxes increased $51.1 million from $127.6 million to $178.7 million for the nine months ended September 30, 2023 compared to the same period in the prior year.

### Income Tax Expense

Income tax expense increased $32.7 million from $10.1 million to $42.8 million for the nine months ended September 30, 2023 compared to the same period in the prior year primarily due to $20.7 million of Deferred income tax expense recognized as a result of the Common Control Reorganization (“CCR”) subsequent to the Socius acquisition in the third quarter of 2023. This CCR was a discrete, non-cash expense incurred at Ryan Specialty Holdings, Inc. and the Company’s annual effective tax rate is unaffected.

### Net Income

Net income increased $18.5 million from $117.5 million to $136.0 million for the nine months ended September 30, 2023 compared to the same period in the prior year as a result of the factors described above.

### Non-GAAP Financial Measures and Key Performance Indicators

In assessing the performance of our business, we use non-GAAP financial measures that are derived from our consolidated financial information, but which are not presented in our consolidated financial statements prepared in accordance with GAAP. We consider these non-GAAP financial measures to be useful metrics for management and investors to facilitate operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures, tax positions, depreciation, amortization, and certain other items that we believe are not representative of our core business. We use the following non-GAAP measures for business planning purposes, in measuring our performance relative to that of our competitors, to help investors to understand the nature of our growth, and to enable investors to evaluate the run-rate performance of the Company. Non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the consolidated financial statements prepared and presented in accordance with GAAP. The footnotes to the reconciliation tables below should be read in conjunction with the unaudited consolidated quarterly financial statements. Industry peers may provide similar supplemental information but may not define similarly-named metrics in the same way we do and may not make identical adjustments.

### Organic Revenue Growth Rate

Organic revenue growth rate represents the percentage change in Total revenue, as compared to the same period for the year prior, adjusted for revenue attributable to recent acquisitions during the first 12 months of Ryan Specialty’s ownership, and other adjustments such as contingent commissions, fiduciary investment income, and the impact of changes in foreign exchange rates.

A reconciliation of Organic revenue growth rate to Total revenue growth rate, the most directly comparable GAAP measure, for each of the periods indicated is as follows (in percentages):

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| **Total revenue growth rate (GAAP) (1)** | **21.8%** | **16.8%** | **19.7%** | **22.4%** |
| Less: Mergers and acquisitions (2) | (4.3) | (2.8) | (2.3) | (3.0) |
| Change in other (3) | (2.8) | (0.3) | (2.7) | (0.7) |
| **Organic revenue growth rate (Non-GAAP)** | **14.7%** | **13.7%** | **14.7%** | **18.7%** |

(1) For the three months ended September 30, 2023, September 30, 2023 revenue of $501.9 million less September 30, 2022 revenue of $412.0 million is a $89.9 million period-over-period change. The change, $89.9 million, divided by the September 30, 2022 revenue of $412.0 million, is a total revenue change of 21.8%. For the three months ended September 30, 2022, September 30, 2022 revenue of $412.0 million less September 30, 2021 revenue of $352.8 million is a $59.2 million period-over-period change. The change, $59.2 million, divided by the September 30, 2021 revenue of $352.8 million, is a total revenue change of 16.8%. For the nine months ended September 30, 2023, September 30, 2023 revenue of $1,544.7 million less September 30, 2022 revenue of $1,290.2 million is a $254.5 million period-over-period change. The change, $254.5 million, divided by the September 30, 2022 revenue of $1,290.2 million, is a total revenue change of 19.7%. For the nine months ended September 30, 2022, September 30, 2022 revenue of $1,290.2 million less September 30, 2021 revenue of $1,054.2 million is a $236.0 million period-over-period change. The change, $236.0 million, divided by the September 30, 2021 revenue of $1,054.2 million, is a total revenue change of 22.4%. See “*Comparison of the Three Months Ended September 30, 2023 and 2022”* and “*Comparison of the Nine Months Ended September 30, 2023 and 2022”* for further details.

(2) The acquisitions adjustment excludes net commission and fees revenue generated during the first 12 months following an acquisition. The total adjustment for the three months ended September 30, 2023 and 2022 was $17.8 million and $9.9 million, respectively. The total adjustment for the nine months ended September 30, 2023 and 2022 was $29.9 million and $31.5 million, respectively.

(3) The other adjustments exclude the period-over-period change in contingent commissions, fiduciary investment income, and foreign exchange rates. The total adjustment for the three months ended September 30, 2023 and 2022 was $11.6 million and $0.9 million, respectively. The total adjustment for the nine months ended September 30, 2023 and 2022 was $35.0 million and $7.0 million, respectively.

### Adjusted Compensation and Benefits Expense and Adjusted Compensation and Benefits Expense Ratio

We define Adjusted compensation and benefits expense as Compensation and benefits expense adjusted to reflect items such as (i) equity-based compensation, (ii) acquisition and restructuring related compensation expense, and (iii) other exceptional or non-recurring items, as applicable. The most comparable GAAP financial metric is Compensation and benefits expense. Adjusted compensation and benefits expense ratio is defined as Adjusted compensation and benefits expense as a percentage of Total revenue. The most comparable GAAP financial metric is Compensation and benefits expense ratio.

A reconciliation of Adjusted compensation and benefits expense and Adjusted compensation and benefits expense ratio to Compensation and benefits expense and Compensation and benefits expense ratio, the most directly comparable GAAP measures, for each of the periods indicated, is as follows:

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| **Total revenue** | **$501,938** | **$411,996** | **$1,544,686** | **$1,290,178** |
| **Compensation and benefits expense** | **$329,212** | **$274,108** | **$989,294** | **$858,439** |
| Acquisition-related expense | (1,546) | (21) | (3,331) | (122) |
| Acquisition related long-term incentive compensation | (550) | (7,383) | (1,702) | (22,181) |
| Restructuring and related expense | (11,538) | (19) | (13,407) | (724) |
| Amortization and expense related to discontinued prepaid incentives | (1,570) | (1,533) | (4,793) | (5,075) |
| Equity-based compensation | (8,281) | (5,530) | (23,107) | (18,009) |
| Initial public offering related expense | (9,327) | (12,527) | (31,029) | (43,075) |
| **Adjusted compensation and benefits expense (1)** | **$296,400** | **$247,095** | **$911,925** | **$769,253** |
| **Compensation and benefits expense ratio** | **65.6%** | **66.5%** | **64.0%** | **66.5%** |
| **Adjusted compensation and benefits expense ratio** | **59.1%** | **60.0%** | **59.0%** | **59.6%** |

(1) Adjustments to Compensation and benefits expense are described in the definition of Adjusted EBITDAC to Net income in “*Adjusted EBITDAC and Adjusted EBITDAC Margin.”*

### Adjusted General and Administrative Expense and Adjusted General and Administrative Expense Ratio

We define Adjusted general and administrative expense as General and administrative expense adjusted to reflect items such as (i) acquisition and restructuring general and administrative related expense, and (ii) other exceptional or non-recurring items, as applicable. The most comparable GAAP financial metric is General and administrative expense. Adjusted general and administrative expense ratio is defined as Adjusted general and administrative expense as a percentage of Total revenue. The most comparable GAAP financial metric is General and administrative expense ratio.

A reconciliation of Adjusted general and administrative expense and Adjusted general and administrative expense ratio to General and administrative expense and General and administrative expense ratio, the most directly comparable GAAP measures, for each of the periods indicated is as follows:

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| **Total revenue** | **$501,938** | **$411,996** | **$1,544,686** | **$1,290,178** |
| **General and administrative expense** | **$69,288** | **$48,991** | **$202,595** | **$139,851** |
| Acquisition-related expense | (5,790) | (716) | (12,196) | (2,767) |
| Restructuring and related expense | (4,939) | — | (23,793) | (4,993) |
| Initial public offering related expense | — | (191) | — | (1,317) |
| **Adjusted general and administrative expense (1)** | **$58,559** | **$48,084** | **$166,606** | **$130,774** |
| **General and administrative expense ratio** | **13.8%** | **11.9%** | **13.1%** | **10.8%** |
| **Adjusted general and administrative expense ratio** | **11.7%** | **11.7%** | **10.8%** | **10.1%** |

(1) Adjustments to General and administrative expense are described in the definition of Adjusted EBITDAC to Net income in “*Adjusted EBITDAC and Adjusted EBITDAC Margin.”*

### Adjusted EBITDAC and Adjusted EBITDAC Margin

We define Adjusted EBITDAC as Net income before Interest expense, net, Income tax expense (benefit), Depreciation, Amortization, and Change in contingent consideration, adjusted to reflect items such as (i) equity-based compensation, (ii) acquisition and restructuring related expenses, and (iii) other exceptional or non-recurring items, as applicable.

Acquisition-related expense includes one-time diligence, transaction-related, and integration costs. Acquisition-related long-term incentive compensation arises from long-term incentive plans associated with acquisitions. In 2023, Restructuring and related expense consists of compensation and benefits, occupancy, contractors, professional services, and license fees related to the ACCELERATE 2025 program. The compensation and benefits expense included severance as well as employment costs related to services rendered between the notification and termination dates. See “Note 4*, Restructuring”* of the unaudited quarterly consolidated financial statements for further discussion of ACCELERATE 2025. The remaining costs that preceded the restructuring plan were associated with professional services costs related to program design and licensing costs. In 2022, Restructuring and related expense represented costs associated with the 2020 restructuring plan. Amortization and expense consists of charges related to discontinued prepaid incentive programs. For the three months ended September 30, 2023, Other non-operating loss (income) consisted of $0.2 million of sublease income offset by $0.3 million of TRA contractual interest. For the three months ended September 30, 2022, Other non-operating loss (income) included $0.1 million of sublease income. For the nine months ended September 30, 2023, Other non-operating loss (income) included $0.4 million of sublease income offset by $0.5 million of TRA contractual interest. For the nine months ended September 30, 2022, Other non-operating loss (income) included a $7.2 million charge related to the change in the TRA liability caused by a change in our blended state tax rates. Equity-based compensation reflects non-cash equity-based expense. IPO related expenses include general and administrative expense associated with the preparations for Sarbanes-Oxley compliance, tax, and accounting advisory services and compensation-related expense primarily related to the revaluation of existing equity awards at IPO as well as expense for new awards issued at IPO.

Total revenue less Adjusted compensation and benefits expense and Adjusted general and administrative expense is equivalent to Adjusted EBITDAC. For a breakout of compensation and general and administrative costs for each addback, refer to the Adjusted compensation and benefits expense and Adjusted general and administrative expense tables above. The most directly comparable GAAP financial metric to Adjusted EBITDAC is Net income. Adjusted EBITDAC margin is defined as Adjusted EBITDAC as a percentage of Total revenue. The most comparable GAAP financial metric is Net income margin.

A reconciliation of Adjusted EBITDAC and Adjusted EBITDAC margin to Net income and Net income margin, the most directly comparable GAAP measures, for each of the periods indicated is as follows:

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| **Total revenue** | **$501,938** | **$411,996** | **$1,544,686** | **$1,290,178** |
| **Net income** | **$15,703** | **$29,279** | **$135,977** | **$117,475** |
| Interest expense, net | 31,491 | 28,864 | 89,840 | 75,462 |
| Income tax expense | 24,827 | 3,411 | 42,772 | 10,076 |
| Depreciation | 2,201 | 1,463 | 6,570 | 3,903 |
| Amortization | 29,572 | 25,667 | 79,125 | 78,563 |
| Change in contingent consideration | 1,848 | 423 | 4,358 | (837) |
| **EBITDAC** | **$105,642** | **$89,107** | **$358,642** | **$284,642** |
| Acquisition-related expense | 7,336 | 737 | 15,527 | 2,889 |
| Acquisition related long-term incentive compensation | 550 | 7,383 | 1,702 | 22,181 |
| Restructuring and related expense | 16,477 | 19 | 37,200 | 5,717 |
| Amortization and expense related to discontinued prepaid incentives | 1,570 | 1,533 | 4,793 | 5,075 |
| Other non-operating loss (income) | 67 | (66) | 37 | 6,832 |
| Equity-based compensation | 8,281 | 5,530 | 23,107 | 18,009 |
| IPO related expenses | 9,327 | 12,718 | 31,029 | 44,392 |
| (Income) / loss from equity method investments in related party | (2,271) | (144) | (5,882) | 414 |
| **Adjusted EBITDAC** | **$146,979** | **$116,817** | **$466,155** | **$390,151** |
| **Net income margin** | **3.1%** | **7.1%** | **8.8%** | **9.1%** |
| **Adjusted EBITDAC margin** | **29.3%** | **28.4%** | **30.2%** | **30.2%** |

### Adjusted Net Income and Adjusted Net Income Margin

We define Adjusted net income as tax-effected earnings before amortization and certain items of income and expense, gains and losses, equity-based compensation, acquisition related long-term incentive compensation, acquisition-related expenses, costs associated with the IPO, and certain exceptional or non-recurring items. The most comparable GAAP financial metric is Net income.

Adjusted net income margin is calculated as Adjusted net income as a percentage of Total revenue. The most comparable GAAP financial metric is Net income margin.

Following the IPO, the Company is subject to United States federal income taxes, in addition to state, local, and foreign taxes, with respect to our allocable share of any net taxable income of the LLC. For comparability purposes, this calculation incorporates the impact of federal and state statutory tax rates on 100% of our adjusted pre-tax income as if the Company owned 100% of the LLC.

A reconciliation of Adjusted net income and Adjusted net income margin to Net income and Net income margin, the most directly comparable GAAP measures, for each of the periods indicated is as follows:

*(in thousands, except percentages)*

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| **Total revenue** | **$501,938** | **$411,996** | **$1,544,686** | **$1,290,178** |
| **Net income** | **$15,703** | **$29,279** | **$135,977** | **$117,475** |
| Income tax expense | 24,827 | 3,411 | 42,772 | 10,076 |
| Amortization | 29,572 | 25,667 | 79,125 | 78,563 |
| Amortization of deferred debt issuance costs (1) | 3,045 | 3,033 | 9,125 | 9,017 |
| Change in contingent consideration | 1,848 | 423 | 4,358 | (837) |
| Acquisition-related expense | 7,336 | 737 | 15,527 | 2,889 |
| Acquisition related long-term incentive compensation | 550 | 7,383 | 1,702 | 22,181 |
| Restructuring and related expense | 16,477 | 19 | 37,200 | 5,717 |
| Amortization and expense related to discontinued prepaid incentives | 1,570 | 1,533 | 4,793 | 5,075 |
| Other non-operating loss (income) | 67 | (66) | 37 | 6,832 |
| Equity-based compensation | 8,281 | 5,530 | 23,107 | 18,009 |
| IPO related expenses | 9,327 | 12,718 | 31,029 | 44,392 |
| (Income) / loss from equity method investments in related party | (2,271) | (144) | (5,882) | 414 |
| **Adjusted income before income taxes (2)** | **$116,332** | **$89,523** | **$378,870** | **$319,803** |
| Adjusted tax expense (3) | (29,700) | (22,963) | (96,726) | (82,029) |
| **Adjusted net income** | **$86,632** | **$66,560** | **$282,144** | **$237,774** |
| **Net income margin** | **3.1%** | **7.1%** | **8.8%** | **9.1%** |
| **Adjusted net income margin** | **17.3%** | **16.2%** | **18.3%** | **18.4%** |

(1) Interest expense, net includes amortization of deferred debt issuance costs.

(2) Adjustments to Net income are described in the definition of Adjusted EBITDAC to Net income in “*Adjusted EBITDAC and Adjusted EBITDAC Margin.”*

(3) The Company is subject to United States federal income taxes, in addition to state, local, and foreign taxes, with respect to our allocable share of any net taxable income of the LLC. For the three and nine months ended September 30, 2023, this calculation of adjusted tax expense is based on a federal statutory rate of 21% and a combined state income tax rate net of federal benefits of 4.53% on 100% of our adjusted income before income taxes as if the Company owned 100% of the LLC. For the three and nine months ended September 30, 2022, this calculation of adjusted tax expense is based on a federal statutory rate of 21% and a combined state income tax rate net of federal benefits of 4.65% on 100% of our adjusted income before income taxes as if the Company owned 100% of the LLC.

### Adjusted Diluted Earnings Per Share

We define Adjusted diluted earnings per share as Adjusted net income divided by diluted shares outstanding after adjusting for the effect if 100% of the outstanding LLC Common Units (together with the shares of Class B common stock) were exchanged into shares of Class A common stock and the effect of unvested equity awards. The most directly comparable GAAP financial metric is Diluted earnings (loss) per share.

A reconciliation of Adjusted diluted earnings per share to Diluted earnings (loss) per share, the most directly comparable GAAP measure, for each of the periods indicated is as follows:

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| **Earnings (loss) per share of Class A common stock – diluted** | **$(0.04)** | **$0.09** | **$0.34** | **$0.37** |
| Less: Net income attributed to dilutive shares and substantively vested RSUs (1) | — | (0.05) | (0.03) | (0.21) |
| Plus: Impact of all LLC Common Units Exchanged for Class A shares (2) | 0.10 | 0.07 | 0.20 | 0.28 |
| Plus: Adjustments to Adjusted net income (3) | 0.28 | 0.14 | 0.54 | 0.46 |
| Plus: Dilutive impact of unvested equity awards (4) | (0.02) | — | (0.01) | (0.02) |
| **Adjusted diluted earnings per share** | **$0.32** | **$0.25** | **$1.04** | **$0.88** |
| (Share count in '000) |  |  |  |  |
| Weighted-average shares of Class A common stock outstanding – diluted | 115,872 | 266,352 | 124,884 | 265,071 |
| Plus: Impact of all LLC Common Units Exchanged for Class A shares (2) | 141,690 | — | 142,974 | — |
| Plus: Dilutive impact of unvested equity awards (4) | 15,115 | 4,153 | 4,390 | 5,011 |
| **Adjusted diluted earnings per share diluted share count** | **272,677** | **270,505** | **272,248** | **270,082** |

(1) Adjustment removes the impact of Net income attributed to dilutive awards and substantively vested RSUs to arrive at Net income (loss) attributable to Ryan Specialty Holdings, Inc. For the three months ended September 30, 2023 and 2022, this removes $0.1 million and $13.1 million of Net income, respectively, on 115.9 million and 266.4 million Weighted-average shares of Class A common stock outstanding - diluted, respectively. For the nine months ended September 30, 2023 and 2022, this removes $3.8 million and $55.4 million of Net income, respectively, on 124.9 million and 265.1 million Weighted-average shares of Class A common stock outstanding - diluted, respectively. See “Note 10*, Earnings (Loss) Per Share”* of the unaudited quarterly consolidated financial statements.

(2) For comparability purposes, this calculation incorporates the Net income that would be outstanding if all LLC Common Units (together with shares of Class B common stock) were exchanged for shares of Class A common stock. For the three months ended September 30, 2023 and 2022, this includes $20.8 million and $17.5 million of Net income, respectively, on 257.6 million and 266.4 million Weighted-average shares of Class A common stock outstanding - diluted, respectively. For the nine months ended September 30, 2023 and 2022, this includes $97.8 million and $74.3 million of Net income, respectively, on 267.9 million and 265.1 million Weighted-average shares of Class A common stock outstanding - diluted, respectively. For the three months ended September 30, 2022, 144.1 million weighted average outstanding LLC Common Units were considered dilutive and included in the 266.4 million Weighted-average shares of Class A common stock outstanding - diluted within Diluted EPS. For the nine months ended September 30, 2022, 144.0 million weighted average outstanding LLC Common Units were considered dilutive and included in the 265.1 million Weighted-average shares of Class A common stock outstanding - diluted within Diluted EPS. See “Note 10*, Earnings (Loss) Per Share”* of the unaudited quarterly consolidated financial statements.

(3) Adjustments to Adjusted net income are described in the footnotes of the reconciliation of Adjusted net income to Net income (loss) in “*Adjusted Net Income and Adjusted Net Income Margin”* on 257.6 million and 266.4 million Weighted-average shares of Class A common stock outstanding - diluted for the three months ended September 30, 2023 and 2022, respectively, and on 267.9 million and 265.1 million shares of Weighted-average shares of Class A common stock outstanding - diluted for the nine months ended September 30, 2023 and 2022, respectively.

(4) For comparability purposes and to be consistent with the treatment of the adjustments to arrive at Adjusted net income, the dilutive effect of unvested equity awards is calculated using the treasury stock method as if the weighted average unrecognized cost associated with the awards was $0 over the period, less any unvested equity awards determined to be dilutive within the Diluted EPS calculation disclosed in “Note 10*, Earnings (Loss) Per Share”* of the unaudited quarterly consolidated financial statements. For the three months ended September 30, 2023 and 2022, 15.1 million and 4.2 million shares were added to the calculation, respectively, and for the nine months ended September 30, 2023 and 2022, 4.4 million and 5.0 million shares were added to the calculation, respectively.

### Liquidity and Capital Resources

Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations. We believe that the balance sheet and strong cash flow profile of our business provides adequate liquidity. The primary sources of liquidity are Cash and cash equivalents on the Consolidated Balance Sheets, cash flows provided by operations, and debt capacity available under our Revolving Credit Facility, Term Loan, and Senior Secured Notes. The primary uses of liquidity are operating expenses, seasonal working capital needs, business combinations, capital expenditures, obligations under the TRA, taxes, and distributions to LLC Unitholders. We believe that Cash and cash equivalents, cash flows from operations, and amounts available under our Revolving Credit Facility will be sufficient to meet liquidity needs, including principal and interest payments on debt obligations, capital expenditures, and anticipated working capital requirements, for the next 12 months and beyond. Our future capital requirements will depend on many factors including continuance of historical working capital levels and capital expenditure needs, investment in de novo offerings, and the flow of deals in our merger and acquisition program.

We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations, this could reduce our ability to compete successfully and harm the results of our operations.

Cash and cash equivalents on the Consolidated Balance Sheets include funds available for general corporate purposes. Fiduciary cash and receivables cannot be used for general corporate purposes. Insurance premiums, claims funds, and surplus lines taxes are held in a fiduciary capacity and the obligation to remit these funds are recorded as Fiduciary liabilities on the Consolidated Balance Sheets. We recognize fiduciary amounts due to others as Fiduciary liabilities and fiduciary amounts collectible and held on behalf of others, including insurance carriers, other insurance intermediaries, surplus lines taxing authorities, clients, and insurance policy holders, as Fiduciary cash and receivables on the Consolidated Balance Sheets.

In our capacity as an insurance broker or agent, we collect premiums from insureds and, after deducting our commission, remit the premiums to the respective insurance markets and carriers. We also collect claims prefunding or refunds from carriers on behalf of insureds, which are then returned to the insureds, and surplus lines taxes, which are then remitted to surplus lines taxing authorities. Insurance premiums, claim funds, and surplus lines taxes are held in a fiduciary capacity. The levels of Fiduciary cash and receivables and Fiduciary liabilities can fluctuate significantly depending on when we collect the premiums, claims prefunding, and refunds, make payments to markets, carriers, surplus lines taxing authorities, and insureds, and collect funds from clients and make payments on their behalf, and upon the impact of foreign currency movements. Fiduciary cash, because of its nature, is generally invested in very liquid securities with a focus on preservation of principal. To minimize investment risk, we maintain cash holdings pursuant to an investment policy which contemplates all relevant rules established by states with regard to fiduciary cash and is approved by our Board of Directors. The policy requires broad diversification of holdings across a variety of counterparties utilizing limits set by our Board of Directors, primarily based on credit rating and type of investment. Fiduciary cash and receivables included cash of $848.6 million and $704.9 million as of September 30, 2023 and 2022, respectively, and fiduciary receivables of $1,672.4 million and $1,442.0 million as of September 30, 2023 and 2022, respectively. While we may earn interest income on fiduciary cash held in cash and investments, the fiduciary cash may not be used for general corporate purposes. Of the $754.4 million of Cash and cash equivalents on the Consolidated Balance Sheet as of September 30, 2023, $88.0 million was held in fiduciary accounts representing collected revenue and was available to be transferred to operating accounts and used for general corporate purposes.

### Credit Facilities

We expect to have sufficient financial resources to meet our business requirements for the next 12 months. Although cash from operations is expected to be sufficient to service our activities, including servicing our debt and contractual obligations, and financing capital expenditures, we have the ability to borrow under our Revolving Credit Facility to accommodate any timing differences in cash flows. Additionally, under current market conditions, we believe that we could access capital markets to obtain debt financing for longer-term funding, if needed.

On September 1, 2020, we entered into the Credit Agreement with leading institutions, including JPMorgan Chase Bank, N.A., the Administrative Agent, for Term Loan borrowings totaling $1,650.0 million and a Revolving Credit Facility totaling $300.0 million, in connection with financing the All Risks Acquisition. Borrowings under our Revolving Credit Facility are permitted to be drawn for our working capital and other general corporate financing purposes and those of certain of our subsidiaries. Borrowings under our Credit Agreement are unconditionally guaranteed by various subsidiaries and are secured by a lien and security interest in substantially all of our assets.

On July 26, 2021, we entered into an amendment to our Credit Agreement, which provided for an increase in the size of our Revolving Credit Facility from $300.0 million to $600.0 million. Interest on the upsized Revolving Credit Facility bore interest at the Eurocurrency Rate (LIBOR) plus a margin that ranged from 2.50% to 3.00%, based on the first lien net leverage ratio defined in our Credit Agreement. No other significant terms under our agreement governing the Revolving Credit Facility were changed in connection with such amendment.

On February 3, 2022, the LLC issued $400.0 million of Senior Secured Notes. The notes have a 4.375% interest rate and will mature on February 1, 2030.

On April 29, 2022, the Company entered into the Fourth Amendment to the Credit Agreement on its Term Loan and Revolving Credit Facility to transition its LIBOR rate to a Benchmark Replacement of Adjusted Term SOFR plus a Credit Spread Adjustment of 10 basis points, 15 basis points, or 25 basis points for the one-month, three-month, or six-month borrowing periods, respectively.

As of September 30, 2023, the interest rate on the Term Loan was 3.00% plus Adjusted Term SOFR, subject to a 75 basis point floor.

As of September 30, 2023, we were in compliance with all of the covenants under our Credit Agreement and there were no events of default for the nine months ended September 30, 2023.

### Tax Receivable Agreement

The Company is party to a TRA with current and certain former LLC Unitholders. The TRA provides for the payment by the Company, to current and certain former LLC Unitholders, of 85% of the net cash savings, if any, in U.S. federal, state, and local income taxes that the Company realizes (or is deemed to realize in certain circumstances) as a result of (i) certain increases in the tax basis of the assets of the LLC resulting from purchases or exchanges of LLC Common Units (“Exchange Tax Attributes”), (ii) certain tax attributes of the LLC that existed prior to the IPO (“Pre-IPO M&A Tax Attributes”), (iii) certain favorable “remedial” partnership tax allocations to which the Company becomes entitled to (if any), and (iv) certain other tax benefits related to the Company entering into the TRA, including tax benefits attributable to payments that the Company makes under the TRA (“TRA Payment Tax Attributes”). The Company recognizes a liability on the Consolidated Balance Sheets based on the undiscounted estimated future payments under the TRA.

Due to the uncertainty of various factors, we cannot precisely quantify the likely tax benefits we will realize as a result of the LLC Common Unit exchanges and the resulting amounts we are likely to pay out to current and certain former LLC Unitholders pursuant to the TRA; however, we estimate that such tax benefits and the related TRA payments may be substantial. As set forth in the table below, and assuming no changes in the relevant tax law and that we earn sufficient taxable income to realize all cash tax savings that are subject to the TRA, we expect future payments under the TRA as a result of transactions as of September 30, 2023 will be $359.1 million in aggregate. Future payments in respect to subsequent exchanges would be in addition to these amounts and are expected to be substantial. The foregoing amounts are merely estimates and the actual payments could differ materially. In the highly unlikely event of an early termination of the TRA (e.g., a default by the Company or a Change of Control) the Company is required to pay to each holder of the TRA an early termination payment equal to the discounted present value of all unpaid TRA payments. The Company has not made, and is not likely to make, an election for an early termination. We expect to fund future TRA payments with tax distributions from the LLC that come from cash on hand and cash generated from operations.

*(in thousands)*

|  | Exchange Tax Attributes | Pre-IPO M&A Tax Attributes | TRA Payment Tax Attributes | TRA Liabilities |
| --- | ---: | ---: | ---: | ---: |
| **Balance at December 31, 2022** | **$150,311** | **$85,016** | **$60,020** | **$295,347** |
| Exchange of LLC Common Units | 43,443 | 6,002 | 13,804 | 63,249 |
| Accrued interest | — | — | 478 | 478 |
| **Balance at September 30, 2023** | **$193,754** | **$91,018** | **$74,302** | **$359,074** |

Total expected estimated tax savings from each of the tax attributes associated with the TRA as of September 30, 2023 were $422.4 million consisting of (i) Exchange Tax Attributes of $227.9 million, (ii) Pre-IPO M&A Tax Attributes of $107.1 million, and (iii) TRA Payment Tax Attributes of $87.4 million. The Company will retain the benefit of 15% of these cash savings.

### Comparison of Cash Flows for the Nine Months Ended September 30, 2023 and 2022

Cash and cash equivalents decreased $78.7 million from $833.1 million at September 30, 2022 to $754.4 million at September 30, 2023. A summary of the Company’s cash flows provided by and used for continuing operations from operating, investing, and financing activities is as follows:

### Cash Flows From Operating Activities

Cash flows from operating activities for the nine months ended September 30, 2023 were $250.3 million, an increase of $99.4 million compared to the nine months ended September 30, 2022. This increase was driven by an increase in Net income of $18.5 million and the change in Other current assets and accrued liabilities together with Other non-current assets and accrued liabilities increase of $113.5 million. The change in Other current assets and accrued liabilities together with Other non-current assets and accrued liabilities was primarily driven by the final All Risks LTIP payments made in 2022. This increase in cash flows from operating activities was offset by the change in Commissions and fees receivable of $20.5 million. The increased change to Commissions and fees receivable was generated by revenue growth.

### Cash Flows From Investing Activities

Cash flows used for investing activities during the nine months ended September 30, 2023 were $381.9 million, an increase of $370.2 million compared to the $11.7 million of cash flows used for investing activities during the nine months ended September 30, 2022. The main driver of the cash flows used for investing activities in the nine months ended September 30, 2023 was $366.1 million for Business combinations - net of cash acquired and cash held in a fiduciary capacity related to the Griffin, Socius, ACE, and Point6 acquisitions and $16.0 million of Capital expenditures, compared to $12.0 million of Capital expenditures for the nine months ended September 30, 2022.

### Cash Flows From Financing Activities

Cash flows used for financing activities during the nine months ended September 30, 2023 were $32.0 million, a decrease of $292.3 million compared to cash flows provided by financing activities of $260.3 million during the nine months ended September 30, 2022. The main drivers of cash flows used for financing activities during the nine months ended September 30, 2023 were Tax distributions to LLC Unitholders of $52.6 million, Repayment of term debt of $12.4 million, and Payment of contingent consideration of $4.5 million offset by Net change in fiduciary liabilities of $36.8 million. The main drivers of cash flows provided by financing activities during the nine months ended September 30, 2022 were the Bond issuance of $394.0 million offset by Net change in fiduciary liabilities of $54.8 million, Tax distributions to LLC Unitholders of $32.7 million, Payment of interest rate cap premium of $25.5 million, Repayment of term debt of $12.4 million, Payment of contingent consideration of $6.2 million, and Debt issuance costs paid of $2.4 million.

### Contractual Obligations and Commitments

Our principal commitments consist of contractual obligations in connection with investing and operating activities. These obligations are described within “Note 7*, Debt”* in the notes to our unaudited consolidated financial statements and provide further description on provisions that create, increase, or accelerate obligations, or other pertinent data to the extent necessary for an understanding of the timing and amount of the specified contractual obligations.

Within Current accrued compensation and Non-current accrued compensation we have various long-term incentive compensation agreements accrued for. These agreements are typically associated with an acquisition. Below we have outlined the liabilities accrued as of September 30, 2023, the projected future expense, and the projected timing of future cash outflows associated with these arrangements.

*(in thousands)*

| Long-term Incentive Compensation Agreements | September 30, 2023 |
| --- | ---: |
| Current accrued compensation | $— |
| Non-current accrued compensation | 1,785 |
| **Total liability** | **$1,785** |
| Projected future expense | 5,144 |
| **Total projected future cash outflows** | **$6,928** |
| **Projected Future Cash Outflows** |  |
| (in thousands) |  |
| 2023 | $— |
| 2024 | — |
| 2025 | — |
| 2026 | 6,666 |
| Thereafter | $263 |

Within “Note 3*, Mergers and Acquisitions”* in the notes to our unaudited consolidated financial statements we discuss various contingent consideration arrangements and their impact. Below we have outlined the liabilities accrued as of September 30, 2023, the projected future expense, and the projected timing of future cash outflows associated with these contingent consideration agreements.

*(in thousands)*

| Contingent Consideration | September 30, 2023 |
| --- | ---: |
| Current accounts payable and accrued liabilities | $— |
| Other non-current liabilities | 36,018 |
| **Total liability** | **$36,018** |
| Projected future expense | 5,432 |
| **Total projected future cash outflows** | **$41,450** |
| **Projected Future Cash Outflows** |  |
| (in thousands) |  |
| 2023 | $— |
| 2024 | — |
| 2025 | 38,537 |
| 2026 | 2,913 |
| Thereafter | $— |

### Critical Accounting Policies and Estimates

The methods, assumptions, and estimates that we use in applying the accounting policies may require us to apply judgments regarding matters that are inherently uncertain. We consider an accounting policy to be a critical estimate if (i) the Company must make assumptions that were uncertain when the judgment was made, and (ii) changes in the estimate assumptions, or selection of a different estimate methodology, could have a significant impact on our financial position and the results that we will report in the consolidated financial statements. While we believe that the estimates, assumptions, and judgments are reasonable, they are based on information available when the estimate was made. The accounting policies that we believe reflect our more significant estimates, judgments, and assumptions that are most critical to understanding and evaluating our reported financial results are: revenue recognition, business combinations, goodwill and intangibles, income taxes, and tax receivable agreement liabilities.

Our critical accounting policies are described under the heading “*Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies”* in the Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023. Additionally, the changes, if any, to our critical accounting policies and estimates disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022 are included in “Note 1*, Basis of Presentation,”* to our unaudited consolidated financial statements.

### Recent Accounting Pronouncements

For a description of recently adopted accounting pronouncements and recently issued accounting standards not yet adopted (if any), see “Note 1, *Basis of Presentation”* in the notes to our unaudited consolidated financial statements.

## Market risk

As filed, 1,994 characters.

We are exposed to various market risks in the day-to-day operations. Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest and foreign currency exchange rates.

### Foreign Currency Risk

For the nine months ended September 30, 2023, approximately 2% of revenues were generated from activities in the United Kingdom, Europe, and Canada. We are exposed to currency risk from the potential changes between the exchange rates of the US Dollar, Canadian Dollar, British Pound, Euro, Swedish Krona, Danish Krone, and other European currencies. The exposure to foreign currency risk from the potential changes between the exchange rates between the USD and other currencies is immaterial.

### Interest Rate Risk

Fiduciary investment income is affected by changes in international and domestic short-term interest rates.

As of September 30, 2023, we had $1,600.5 million of outstanding principal on our Term Loan borrowings, which bears interest on a floating rate, subject to a 0.75% floor. We are subject to Adjusted Term SOFR interest rate changes, and exposure in excess of the floor. The fair value of the Term Loan approximates the carrying amount as of September 30, 2023 and December 31, 2022, as determined based upon information available.

On April 7, 2022, the Company entered into an interest rate cap agreement to manage its exposure to interest rate fluctuations related to the Company's Term Loan for an upfront cost of $25.5 million. The interest rate cap has a $1,000.0 million notional amount, 2.75% strike, and terminates on December 31, 2025.

Other financial instruments consist of Cash and cash equivalents, Commissions and fees receivable – net, Other current assets, and Accounts payable and accrued liabilities. The carrying amounts of Cash and cash equivalents, Commissions and fees receivable – net, and Accounts payable and accrued liabilities approximate fair value because of the short-term nature of the instruments.

## Controls and procedures

As filed, 2,178 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rule 13a–15(e) and Rule 15d–15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to provide reasonable assurance that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of September 30, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

### Changes in Internal Control

There have been no changes in internal control over financial reporting during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Inherent Limitations of Internal Control Over Financial Reporting

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all errors and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within our company have been detected.

## Risk factors

As filed, 258 characters.

There have been no material changes to the risk factors disclosed under the heading “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2022 and in our Form 10-Q for the quarter ended March 31, 2023 which were filed with the SEC.

Filed Nov 3, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-058503. Last ingested by Listed: Oct 31, 2026, 02:57 ET. No prices; not investment advice.