Ryan Specialty Holdings, Inc. Q3 FY2025 earnings call

• Strong third quarter with 25% total revenue growth, 15% organic growth, and 23.8% adjusted EBITDAC growth. - Promoted Steve Keogh and Brendan Mulshine to Co-Presidents, with Steve focusing on operational excellence and technology innovation, Brendan leading across 3 specialties. - Successfully onboarded key talent across Ryan Re and alternative risk, launched flagship collateralized sidecar RAC Re. - Continued focus on talent recruitment as a key accretive investment, with significant number of experienced professionals added to the team. - Strategic investments in talent, de novo formations, innovative products, M&A, and technology to drive long-term growth and value creation.

Total revenue grew 25% for the quarter, driven by 15% organic revenue growth and M&A contributing nearly 10 percentage points. Adjusted EBITDAC grew 23.8% to $236 million, with an adjusted EBITDAC margin of 31.2% (compared to 31.5% prior year). By specialty: Wholesale brokerage specialty had growth in property (returned to growth with new business and high renewal retention, though facing property pricing decline in Q3) and casualty was strong with excellent new business and high renewal retention, including growth in Construction (aided by data center build-outs) and other lines like transportation, habitational risks, etc. Delegated authority specialties: Binding authority specialty performed well with top-tier talent and expanding product set for small, tough-to-place commercial P&C risks. Underwriting management specialty had great quarter, driven by excellent results in transactional liability, reinsurance, and contributions from recent acquisitions, with growth of 66% due to annualization of M&A and sustained organic growth.

• Confident in delivering double-digit organic growth for full year 2025 and sustaining similar levels into 2026, with expectation of industry-leading organic growth annually. - Adjusted EBITDAC margin for full year 2025 is guided to be flat to modestly down compared to prior year, reflecting recent investments in talent and growth opportunities. - Deferred the 2027 timeline for the 35% adjusted EBITDAC margin target, prioritizing long-term value creation over short-term benchmarks. - Anticipates modest margin expansion in most years while maintaining flexibility to prioritize strategic investments in talent, de novo formations, etc.

• Property pricing decline in Q3 and expected continued deterioration in Q4 due to benign hurricane season. - Market cycles and economic/social inflation influencing carrier rates and appetites, affecting the specialty and E&S market dynamics. - Talent investment timing leading to near- to medium-term margin pressures as new hires take time to become accretive (2-3 years). - Macroeconomic uncertainties impacting construction and other business segments, including borrowing costs, labor shortages, and inflationary costs.

Q: Could you break down the 15% organic growth into submissions, rates, new initiatives?

A: Janice Hamilton mentioned significant growth in casualty across specialties, property growth driven by new business, high renewal retention, and flow into E&S channel; Tim Turner added casualty growth was from new business and high renewal retention, property growth from new business and E&S flow.

Q: How do market conditions influence talent investment decisions?

A: Timothy Turner said market conditions influence decisions, e.g., backed off ultrasoft areas like public D&O and cyber, but accelerated in professional liability in healthcare and social services.

Q: When might the 35% adjusted EBITDAC margin target be achieved?

A: Janice Hamilton stated the target is achievable but will be slower due to current investment focus on talent and growth opportunities, with modest margin expansion anticipated going forward