Business Overview and History
Reliance Global Group, Inc. (RELI) is an innovative InsurTech company aiming to transform the insurance agency/brokerage industry through the strategic use of artificial intelligence (AI) and cloud-based technologies. The company has embarked on an ambitious journey to build a multi-billion-dollar, highly profitable insurance enterprise that delivers substantial and sustainable returns to its shareholders.
Reliance Global Group was incorporated in Florida on August 2, 2013, originally under the name Ethos Media Network, Inc. The company’s focus has evolved significantly over the years, transitioning from a media-centric business to a diversified insurance-focused enterprise.
In 2018, Reliance began its focus on acquiring and managing insurance agencies throughout the U.S., marking the beginning of its aggressive acquisition-driven growth strategy in the insurance sector. To date, the company has acquired nine insurance agencies, including U.S. Benefits Alliance, LLC, Employee Benefits Solutions, LLC, Commercial Coverage Solutions LLC, Southwestern Montana Insurance Center, LLC, Fortman Insurance Solutions, LLC, Altruis Benefits Corporation, UIS Agency, LLC, Kush Benefit Solutions, LLC, and Barra Associates, LLC. These acquisitions have established a foothold in various insurance markets, including health insurance, employee benefits, and commercial insurance.
Reliance’s management team brings over 100 years of combined experience in acquiring and managing insurance portfolios across several states, as well as developing specialized programs targeting niche markets. This expertise has been instrumental in the company’s growth and expansion strategy.
In 2021, Reliance launched its 5MinuteInsure.com InsurTech platform, expanding the company’s national footprint. This high-tech proprietary tool enables consumers to instantly compare quotes from multiple carriers and purchase their car and home insurance in a time-efficient manner. The platform currently operates in 46 states, offering coverage with up to 30 highly rated insurance carriers.
During 2022 and 2023, Reliance faced challenges related to the COVID-19 pandemic, which impacted its operations and financial performance. The company reported net losses in these years due to various charges and impairments. However, Reliance was able to raise capital through stock offerings and debt financing to support its operations and growth initiatives during this period.
Financial Overview
Reliance Global Group’s financial performance has shown both progress and challenges in recent years. For the fiscal year ended December 31, 2023, the company reported total revenue of $13.73 million, a significant increase from the $11.76 million reported in 2022. However, the company suffered net losses of $12.01 million in 2023, compared to net income of $6.47 million in 2022. The company’s operating cash flow (OCF) for 2023 was -$4.60 million, while free cash flow (FCF) stood at -$1.04 million.
The company’s quarterly financial results have been more volatile, with revenue growing from $3.28 million in the third quarter of 2023 to $3.44 million in the third quarter of 2024, representing a 5% increase. This growth was driven by sustained organic expansion within the company’s operations. During this period, the company’s net loss improved from $1.82 million in the third quarter of 2023 to $837,314 in the third quarter of 2024, a 54% reduction. This improvement was primarily due to reduced operating expenses, reflecting the efficiencies gained from the company’s “OneFirm” strategy.
For the third quarter of 2024, operating cash flow (OCF) was -$758,287, while free cash flow (FCF) was -$780,543. Commission expense increased by 13% due to higher first-year commissions, while salaries and wages, general and administrative, and marketing and advertising costs decreased by 5%, 23%, and 15% respectively.
One of the key financial metrics that Reliance Global Group closely monitors is Adjusted EBITDA (AEBITDA), a non-GAAP measure that the company believes provides important supplemental information about the quality of its operational, cash-impacted, and recurring earnings. For the third quarter of 2024, the company reported positive AEBITDA of $42,000, compared to -$200,600 in the prior-year period, representing a 121% improvement.
For the nine months ended September 30, 2024, Reliance reported total revenue of $10.76 million, up 3% compared to the same period in 2023. Commission income, the company’s primary revenue source, increased by 3% year-over-year to $10.76 million. However, the company reported a net loss of $7.67 million for this nine-month period, primarily due to higher operating expenses, including a $3.92 million asset impairment charge. Adjusted EBITDA for this period was $209,110, down 55% from the same period in 2023.
Liquidity
The company’s balance sheet as of September 30, 2024, showed total assets of $17.42 million and total liabilities of $14.60 million, resulting in a net debt position of $12.44 million. Reliance’s working capital stood at $431,000, with a current ratio of 1.13 and a quick ratio of 1.13. The company’s debt-to-equity ratio was 4.45.
Reliance’s cash and restricted cash balance as of September 30, 2024, was $2.35 million. The company has continued to raise capital through an at-the-market (ATM) equity offering program, with net proceeds of $2.82 million during the nine-month period ending September 30, 2024. As of the filing date, the ATM program had a remaining capacity of $902,000.
Operational Highlights and Strategic Initiatives
Reliance Global Group’s focus on building a unified “OneFirm” strategy has been a key driver of its operational and financial performance. This approach brings together the company’s owned and geographically dispersed insurance agencies to operate as a cohesive unit, enabling efficient cross-selling, collaboration, and optimized use of human capital. The benefits of this strategy are reflected in the company’s improved revenue growth, reduced operating costs, and positive shifts in net results.
In addition to the transformative Spetner Associates acquisition, Reliance has also launched several other strategic initiatives to drive growth and innovation. The company’s RELI Exchange platform, a business-to-business (B2B) InsurTech platform and agency partner network, builds on the technology backbone of the 5MinuteInsure.com platform. RELI Exchange provides agency partners with a white-labeled, AI-powered InsurTech solution that enables them to offer their clients real-time quotes and bind policies in an efficient and streamlined manner.
In the third quarter of 2024, Reliance launched the beta version of its advanced AI-powered Quote & Bind InsurTech solution for commercial policies on the RELI Exchange platform, ahead of its originally scheduled Q4 2024 release. This cutting-edge technology empowers agents to generate real-time quotes and bind commercial insurance policies instantly, enhancing client satisfaction and unlocking new revenue streams for RELI Exchange agency partners.
Risks and Challenges
Reliance Global Group operates in a highly competitive insurance intermediary market, facing challenges from both traditional insurance agencies and the growing presence of technology companies in the space. The company’s ability to differentiate its offerings, maintain strong relationships with insurance carriers, and effectively leverage its technological capabilities will be crucial to its long-term success.
The company’s aggressive acquisition strategy also carries inherent risks, including the successful integration of acquired entities, the realization of expected synergies, and the management of integration-related costs. Reliance’s ability to effectively integrate its acquisitions and drive sustainable growth will be a key determinant of its future performance.
Additionally, Reliance’s reliance on a limited number of large customers could expose the company to potential risks if these customers were to reduce or cease their business with Reliance. The company’s ongoing efforts to diversify its customer base and revenue streams will be essential to mitigate this risk.
Outlook and Conclusion
Reliance Global Group’s focused expansion strategy, commitment to technological innovation, and transformative Spetner Associates acquisition position the company for significant growth and value creation in the coming years. The company’s shift towards a more unified “OneFirm” approach, coupled with the launch of its advanced AI-powered solutions, is expected to drive improved operational efficiency, enhanced customer experiences, and increased commission revenue for its agency partners.
With the Spetner acquisition projected to more than double Reliance’s annual revenue to approximately $28 million and contribute meaningful EBITDA growth, the company is well on its way to achieving its goal of building a highly profitable, multi-billion-dollar insurance enterprise that consistently delivers exceptional returns for its shareholders. As Reliance continues to execute on its strategic initiatives and navigate the evolving insurance landscape, the company’s future prospects remain promising.
The company’s recent performance demonstrates progress in its strategic initiatives. For the quarter ended September 30, 2024, Reliance reported a 5% revenue growth to $3.4 million, a 16% decline in total operating expenses to $3.9 million, resulting in a 64% improvement in loss from operations. The net loss for the quarter was approximately $837,000, an improvement of 54% over the prior year’s third quarter. Adjusted EBITDA came in at a positive $42,000, representing a 121% increase from the same period in the prior year.
For the year-to-date period ending September 30, 2024, revenues increased by 3% or $350,000. Excluding a $3.2 million intangible asset impairment charge, total operating expenses decreased by 8% compared to the same period in the prior year. Loss from operations improved by 35% or $1.5 million, and Adjusted EBITDA improved by around 55% compared to the prior year.
As Reliance Global Group continues to execute its growth strategy and leverage its technological innovations, the company is poised to capitalize on the evolving trends in the insurance industry, including the increasing adoption of online insurance shopping and InsurTech solutions. The successful integration of its acquisitions, coupled with the expansion of its digital platforms, will be crucial in driving long-term value for shareholders and establishing Reliance as a leader in the insurance brokerage market.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.