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RYAN SPECIALTY HOLDINGS, INC. 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

RYAN SPECIALTY HOLDINGS, INC.

Filing date:

02/21/2025

TLDR:

Ryan Specialty Holdings, Inc. demonstrated strong revenue growth in 2024, driven by both organic growth and acquisitions. However, increased debt levels and high valuation ratios warrant monitoring.

ELI5:

Ryan Specialty made more money this year through its insurance business, both by growing its existing business and buying other companies. However, it also borrowed more money and might be priced high compared to other similar companies.

Accession #:

0001628280-25-006973

Published on

Analyst Summary

  • Revenue increased by 21.1% in 2024, driven by organic growth and acquisitions.
  • Net income margin decreased slightly from 9.36% to 9.14%.
  • ROE increased from 19.85% to 20.93%.
  • Debt-to-equity ratio increased from 6.40 to 7.79, indicating higher leverage.
  • P/E ratio decreased from 123.36 to 83.82.
  • Organic revenue growth decreased from 15.4% to 12.8%.
  • Adjusted EBITDAC margin increased from 30.1% to 32.2%.

Opportunities and Risks

  • Opportunity: E&S Market Growth: The increasing complexity and demand for specialty insurance solutions in the E&S market provide significant growth opportunities.
  • Opportunity: Strategic Acquisitions: Continued strategic acquisitions can expand product capabilities and geographic reach.
  • Opportunity: Delegated Authority Business: Building a comprehensive international delegated authority business offers substantial growth potential.
  • Opportunity: Technological Innovation: Investing in technology to improve efficiency and drive value for clients can enhance competitiveness.
  • Risk: Integration Risk: Failure to successfully integrate acquired businesses could hinder synergy realization.
  • Risk: Market Cyclicality: The cyclical nature of the insurance market and economic conditions could negatively impact revenue.
  • Risk: Competition: Intense competition in the wholesale brokerage and underwriting management businesses could erode market share.
  • Risk: Data Security: Cybersecurity breaches and data privacy violations could damage the company’s reputation and result in legal liabilities.
  • Risk: Debt Burden: High levels of indebtedness could limit financial flexibility and increase vulnerability to adverse economic conditions.
  • Risk: TRA Obligations: Payments under the Tax Receivable Agreement could be substantial and may exceed actual tax benefits realized.

Potential Implications

Company Performance

  • Continued revenue growth driven by E&S market and strategic acquisitions.
  • Potential pressure on profitability due to rising expenses and integration challenges.
  • Increased financial leverage may impact financial flexibility.
  • Success depends on effective integration of acquisitions and management of debt levels.

Stock Price

  • High valuation ratios suggest potential downside risk if growth slows.
  • Positive investor sentiment due to strong revenue growth may support stock price.
  • Increased debt levels could raise concerns among investors.
  • Overall assessment: Hold

Executive Summary

This report analyzes Ryan Specialty Holdings, Inc.’s 10-K filing for the fiscal year ended December 31, 2024. Key findings include strong revenue growth driven by both organic expansion and strategic acquisitions, particularly in the Underwriting Management Specialty. The company is navigating a dynamic insurance market, with shifts in E&S capacity impacting premium rates. While profitability metrics like net income margin remain healthy, increased operating expenses and debt levels warrant close monitoring. Overall, the company appears well-positioned for continued growth, but effective integration of acquisitions and management of financial leverage are crucial. A “Hold” rating is suggested, pending further observation of acquisition synergies and debt management strategies.

Company Overview

Ryan Specialty Holdings, Inc. (RYAN) is a specialty insurance service firm providing wholesale brokerage and underwriting management solutions. Founded in 2010, the company operates in the Excess and Surplus (E&S) lines market, offering specialized products and services to retail insurance brokers, agents, and carriers. Recent developments include several strategic acquisitions aimed at expanding product capabilities and geographic reach, as well as the implementation of the ACCELERATE 2025 program to improve operational efficiency.

Financial Statement Analysis

Revenue Analysis

Ryan Specialty demonstrated robust revenue growth in 2024.

Metric 2024 2023 Change
Net Commissions and Fees $2,455.7M $2,026.6M +21.2%
Fiduciary Investment Income $60.0M $51.0M +17.8%
Total Revenue $2,515.7M $2,077.5M +21.1%

The growth was fueled by:

  • Organic revenue growth of 12.8%
  • Contributions from recent acquisitions
  • Increased fiduciary investment income

Expense Analysis

Operating expenses also increased, impacting profitability to some extent.

Metric 2024 2023 Change
Compensation and Benefits $1,591.1M $1,321.0M +20.4%
General and Administrative $352.1M $276.2M +27.5%
Amortization $157.8M $106.8M +47.8%

Key drivers of expense increases include:

  • Higher commissions due to revenue growth
  • Acquisition-related expenses
  • Restructuring costs associated with the ACCELERATE 2025 program

Profitability Analysis

Despite rising expenses, Ryan Specialty maintained healthy profitability.

Ratio 2024 2023
Net Income Margin 9.1% 9.4%
Adjusted EBITDAC Margin 32.2% 30.1%
Adjusted Diluted EPS $1.79 $1.38

Liquidity and Capital Resources

The company’s liquidity position remains strong, although cash reserves decreased due to acquisition activity.

  • Cash and Cash Equivalents: $540.2M (2024) vs. $838.8M (2023)
  • The company has access to a $1.4B Revolving Credit Facility.

Debt Analysis

Ryan Specialty’s debt levels have increased significantly due to recent acquisitions.

Debt Instrument 2024 2023
Term Loan $1,672.5M $1,564.7M
Senior Secured Notes $1,599.9M $400.7M
Revolving Debt $1.2M $0.4M
Total Debt $3,282.9M $1,979.2M

The company is exposed to interest rate risk on its floating-rate Term Loan, but has implemented an interest rate cap to mitigate this risk.

Management’s Discussion and Analysis (MD&A) Insights

  • Management highlights the company’s ability to attract, retain, and develop human capital as a key driver of success.
  • The company emphasizes its commitment to innovation and adapting to changing market conditions.
  • Strategic acquisitions are a core component of the company’s growth strategy.
  • The company is focused on deepening relationships with retail broker trading partners and building its delegated authority business.

Risk and Opportunity Assessment

Risks

  • Integration Risk: Failure to successfully integrate acquired businesses could hinder synergy realization.
  • Market Cyclicality: The cyclical nature of the insurance market and economic conditions could negatively impact revenue.
  • Competition: Intense competition in the wholesale brokerage and underwriting management businesses could erode market share.
  • Data Security: Cybersecurity breaches and data privacy violations could damage the company’s reputation and result in legal liabilities.
  • Debt Burden: High levels of indebtedness could limit financial flexibility and increase vulnerability to adverse economic conditions.
  • TRA Obligations: Payments under the Tax Receivable Agreement could be substantial and may exceed actual tax benefits realized.

Opportunities

  • E&S Market Growth: The increasing complexity and demand for specialty insurance solutions in the E&S market provide significant growth opportunities.
  • Strategic Acquisitions: Continued strategic acquisitions can expand product capabilities and geographic reach.
  • Delegated Authority Business: Building a comprehensive international delegated authority business offers substantial growth potential.
  • Technological Innovation: Investing in technology to improve efficiency and drive value for clients can enhance competitiveness.

Conclusion and Actionable Insights

Ryan Specialty Holdings, Inc. has demonstrated strong revenue growth and maintained healthy profitability in 2024. The company’s strategic focus on the E&S market, combined with its acquisition strategy, positions it well for continued expansion. However, investors should closely monitor the company’s ability to effectively integrate acquisitions, manage its debt levels, and navigate the cyclical nature of the insurance market.

Overall Assessment: Hold

Recommendations:

  • Monitor the integration of recent acquisitions and their impact on revenue and profitability.
  • Assess the company’s debt management strategies and its ability to service its debt obligations.
  • Track the performance of the E&S market and its impact on Ryan Specialty’s revenue growth.

Financial Analysis of Ryan Specialty Holdings, Inc. (RYAN)

1. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin:

    • Ratio/Metric: Since the cost of revenue is not explicitly provided, we will use Operating Income/Total Revenue as a proxy for profitability before operating expenses.

      • 2024: $427,812 / $2,515,710 = 17.01%
      • 2023: $359,081 / $2,077,549 = 17.28%
      • 2022: $289,508 / $1,725,193 = 16.78%
    • Trend: The gross profit margin decreased slightly from 17.28% in 2023 to 17.01% in 2024, a decrease of 1.56%.
    • Industry: The insurance brokerage industry typically has gross profit margins in the 20-30% range. RYAN’s proxy gross profit margin is slightly below this range.
  • Operating Profit Margin:

    • Ratio/Metric: Operating Income / Total Revenue

      • 2024: $427,812 / $2,515,710 = 17.01%
      • 2023: $359,081 / $2,077,549 = 17.28%
      • 2022: $289,508 / $1,725,193 = 16.78%
    • Trend: The operating profit margin decreased slightly from 17.28% in 2023 to 17.01% in 2024, a decrease of 1.56%.
    • Industry: The insurance brokerage industry typically has operating profit margins in the 15-25% range. RYAN’s operating profit margin is within this range.
  • Net Profit Margin:

    • Ratio/Metric: Net Income / Total Revenue

      • 2024: $229,913 / $2,515,710 = 9.14%
      • 2023: $194,480 / $2,077,549 = 9.36%
      • 2022: $163,257 / $1,725,193 = 9.46%
    • Trend: The net profit margin decreased slightly from 9.36% in 2023 to 9.14% in 2024, a decrease of 2.35%.
    • Industry: The insurance brokerage industry typically has net profit margins in the 5-15% range. RYAN’s net profit margin is within this range.
  • Return on Assets (ROA):

    • Ratio/Metric: Net Income / Total Assets

      • 2024: $229,913 / $9,649,918 = 2.38%
      • 2023: $194,480 / $7,247,209 = 2.68%
    • Trend: The ROA decreased from 2.68% in 2023 to 2.38% in 2024, a decrease of 11.19%.
    • Industry: The insurance brokerage industry typically has ROAs in the 2-5% range. RYAN’s ROA is within this range.
  • Return on Equity (ROE):

    • Ratio/Metric: Net Income / Total Stockholders’ Equity

      • 2024: $229,913 / $1,098,285 = 20.93%
      • 2023: $194,480 / $979,644 = 19.85%
    • Trend: The ROE increased from 19.85% in 2023 to 20.93% in 2024, an increase of 5.44%.
    • Industry: The insurance brokerage industry typically has ROEs in the 10-20% range. RYAN’s ROE is above this range.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Ratio/Metric:

      • Basic EPS 2024: $0.78
      • Basic EPS 2023: $0.53
      • Diluted EPS 2024: $0.71
      • Diluted EPS 2023: $0.52
    • Trend: Basic EPS increased from $0.53 to $0.78, a 47.17% increase. Diluted EPS increased from $0.52 to $0.71, a 36.54% increase.
    • Industry: EPS varies widely based on company size and profitability. It’s best compared to direct competitors.

Liquidity

  • Current Ratio:

    • Ratio/Metric: Total Current Assets / Total Current Liabilities

      • 2024: $4,788,858 / $4,549,088 = 1.05
      • 2023: $4,335,592 / $3,744,304 = 1.16
    • Trend: The current ratio decreased from 1.16 in 2023 to 1.05 in 2024, a decrease of 9.48%.
    • Industry: A current ratio of 1.0 to 2.0 is generally considered healthy. RYAN’s current ratio is within this range.
  • Quick Ratio (Acid-Test Ratio):

    • Ratio/Metric: (Total Current Assets – Inventory) / Total Current Liabilities. Since inventory is not listed, we will subtract prepaid incentives.

      • 2024: ($4,788,858 – $9,219) / $4,549,088 = 1.05
      • 2023: ($4,335,592 – $8,718) / $3,744,304 = 1.15
    • Trend: The quick ratio decreased from 1.15 in 2023 to 1.05 in 2024, a decrease of 8.70%.
    • Industry: A quick ratio of 1.0 or greater is generally considered healthy. RYAN’s quick ratio is around 1.
  • Cash Ratio:

    • Ratio/Metric: (Cash and Cash Equivalents) / Total Current Liabilities

      • 2024: $540,203 / $4,549,088 = 0.12
      • 2023: $838,790 / $3,744,304 = 0.22
    • Trend: The cash ratio decreased from 0.22 in 2023 to 0.12 in 2024, a decrease of 45.45%.
    • Industry: A cash ratio of 0.10 or greater is generally considered acceptable. RYAN’s cash ratio is around this level.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Ratio/Metric: Total Liabilities / Total Stockholders’ Equity

      • 2024: $8,551,633 / $1,098,285 = 7.79
      • 2023: $6,267,565 / $979,644 = 6.40
    • Trend: The debt-to-equity ratio increased from 6.40 in 2023 to 7.79 in 2024, an increase of 21.72%.
    • Industry: The insurance brokerage industry typically has debt-to-equity ratios between 1 and 5. RYAN’s ratio is significantly higher, indicating higher leverage.
  • Debt-to-Assets Ratio:

    • Ratio/Metric: Total Liabilities / Total Assets

      • 2024: $8,551,633 / $9,649,918 = 0.89
      • 2023: $6,267,565 / $7,247,209 = 0.86
    • Trend: The debt-to-assets ratio increased from 0.86 in 2023 to 0.89 in 2024, an increase of 3.49%.
    • Industry: The insurance brokerage industry typically has debt-to-assets ratios between 0.4 and 0.7. RYAN’s ratio is higher, indicating higher leverage.
  • Interest Coverage Ratio (Times Interest Earned):

    • Ratio/Metric: EBIT / Interest Expense, net. EBIT = Net Income + Income Tax Expense + Interest Expense, net

      • 2024: ($229,913 + $42,641 + $158,448) / $158,448 = 2.72
      • 2023: ($194,480 + $43,445 + $119,507) / $119,507 = 2.99
      • 2022: ($163,257 + $15,935 + $104,829) / $104,829 = 2.71
    • Trend: The interest coverage ratio decreased from 2.99 in 2023 to 2.72 in 2024, a decrease of 9.03%.
    • Industry: An interest coverage ratio of 2.0 or greater is generally considered healthy. RYAN’s ratio is above this level.

Activity/Efficiency

  • Asset Turnover:

    • Ratio/Metric: Total Revenue / Total Assets

      • 2024: $2,515,710 / $9,649,918 = 0.26
      • 2023: $2,077,549 / $7,247,209 = 0.29
    • Trend: The asset turnover decreased from 0.29 in 2023 to 0.26 in 2024, a decrease of 10.34%.
    • Industry: The insurance brokerage industry typically has asset turnover ratios between 0.2 and 0.5. RYAN’s ratio is within this range.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Ratio/Metric: Stock Price / EPS (Basic)

      • 2024: $65.38 / $0.78 = 83.82
      • 2023: $65.38 / $0.53 = 123.36
    • Trend: The P/E ratio decreased from 123.36 in 2023 to 83.82 in 2024, a decrease of 31.9%.
    • Industry: The insurance brokerage industry typically has P/E ratios between 15 and 30. RYAN’s P/E ratio is significantly higher, suggesting it may be overvalued or that investors expect high growth.
  • Price-to-Book Ratio (P/B):

    • Ratio/Metric: Market Cap / Total Stockholders’ Equity. Market Cap = Shares Outstanding * Stock Price. Shares outstanding is roughly 125,411,089

      • 2024: (125,411,089 * $65.38) / $1,098,285,000 = 7.47
      • 2023: (118,593,062 * $65.38) / $979,644,000 = 7.92
    • Trend: The P/B ratio decreased from 7.92 in 2023 to 7.47 in 2024, a decrease of 5.68%.
    • Industry: The insurance brokerage industry typically has P/B ratios between 2 and 5. RYAN’s P/B ratio is higher, suggesting it may be overvalued.
  • Price-to-Sales Ratio (P/S):

    • Ratio/Metric: Market Cap / Total Revenue

      • 2024: (125,411,089 * $65.38) / $2,515,710,000 = 3.26
      • 2023: (118,593,062 * $65.38) / $2,077,549,000 = 3.73
    • Trend: The P/S ratio decreased from 3.73 in 2023 to 3.26 in 2024, a decrease of 12.6%.
    • Industry: The insurance brokerage industry typically has P/S ratios between 1 and 3. RYAN’s P/S ratio is slightly above this range.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Ratio/Metric: (Market Cap + Total Debt – Cash) / (Net Income + Interest Expense + Income Tax Expense + Depreciation + Amortization)

      • 2024: ((125,411,089 * $65.38) + $3,282,860,000 – $540,203,000) / ($229,913,000 + $158,448,000 + $42,641,000 + $9,785,000 + $157,845,000) = 18.98
      • 2023: ((118,593,062 * $65.38) + $1,979,212,000 – $838,790,000) / ($194,480,000 + $119,507,000 + $43,445,000 + $9,038,000 + $106,799,000) = 17.98
    • Trend: The EV/EBITDA ratio increased from 17.98 in 2023 to 18.98 in 2024, an increase of 5.56%.
    • Industry: The insurance brokerage industry typically has EV/EBITDA ratios between 10 and 15. RYAN’s EV/EBITDA ratio is higher, suggesting it may be overvalued.

Growth Rates

  • Revenue Growth:

    • Ratio/Metric: (Current Year Revenue – Previous Year Revenue) / Previous Year Revenue

      • 2024: ($2,515,710 – $2,077,549) / $2,077,549 = 21.1%
      • 2023: ($2,077,549 – $1,725,193) / $1,725,193 = 20.4%
    • Trend: Revenue growth increased from 20.4% in 2023 to 21.1% in 2024, an increase of 3.43%.
    • Industry: The insurance brokerage industry typically has revenue growth rates between 5% and 15%. RYAN’s revenue growth is significantly higher, indicating strong performance.
  • Net Income Growth:

    • Ratio/Metric: (Current Year Net Income – Previous Year Net Income) / Previous Year Net Income

      • 2024: ($229,913 – $194,480) / $194,480 = 18.22%
      • 2023: ($194,480 – $163,257) / $163,257 = 19.13%
    • Trend: Net income growth decreased from 19.13% in 2023 to 18.22% in 2024, a decrease of 4.76%.
    • Industry: The insurance brokerage industry typically has net income growth rates between 5% and 15%. RYAN’s net income growth is above this range.
  • EPS Growth:

    • Ratio/Metric: (Current Year EPS – Previous Year EPS) / Previous Year EPS

      • 2024: ($0.78 – $0.53) / $0.53 = 47.17%
      • 2023: ($0.53 – $0.57) / $0.57 = -7.02%
    • Trend: EPS growth increased from -7.02% in 2023 to 47.17% in 2024.
    • Industry: EPS growth varies widely based on company size and profitability. It’s best compared to direct competitors.

Other Relevant Metrics

  • Organic Revenue Growth Rate (Non-GAAP):

    • Metric: Provided directly in the financial statements.

      • 2024: 12.8%
      • 2023: 15.4%
      • 2022: 16.8%
    • Trend: Organic revenue growth decreased from 15.4% in 2023 to 12.8% in 2024, a decrease of 16.88%.
    • Significance: This metric excludes the impact of mergers and acquisitions and foreign exchange rates, providing a clearer picture of the company’s underlying growth.
  • Adjusted EBITDAC Margin (Non-GAAP):

    • Metric: Adjusted EBITDAC / Total Revenue

      • 2024: $811,223 / $2,515,710 = 32.2%
      • 2023: $624,740 / $2,077,549 = 30.1%
      • 2022: $517,414 / $1,725,193 = 30.0%
    • Trend: Adjusted EBITDAC margin increased from 30.1% in 2023 to 32.2% in 2024, an increase of 6.98%.
    • Significance: This metric adjusts for acquisition-related expenses, restructuring expenses, and other non-recurring items, providing a clearer picture of the company’s core profitability.
  • Adjusted Net Income Margin (Non-GAAP):

    • Metric: Adjusted Net Income / Total Revenue

      • 2024: $493,521 / $2,515,710 = 19.6%
      • 2023: $375,582 / $2,077,549 = 18.1%
      • 2022: $311,991 / $1,725,193 = 18.1%
    • Trend: Adjusted net income margin increased from 18.1% in 2023 to 19.6% in 2024, an increase of 8.29%.
    • Significance: This metric adjusts for acquisition-related expenses, restructuring expenses, and other non-recurring items, providing a clearer picture of the company’s core profitability.

2. Commentary

Ryan Specialty Holdings demonstrated strong revenue growth in 2024, driven by both organic growth and acquisitions. While profitability metrics like gross profit margin and net profit margin experienced slight declines, ROE improved. The company’s leverage increased, as indicated by the higher debt-to-equity and debt-to-assets ratios. Valuation ratios suggest that the company may be overvalued compared to industry averages, but this could be justified by its high growth rate and strong market position.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️