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Dynamic quotes 
OFFON

RYAN SPECIALTY GROUP HOLDINGS, INC.

(RYAN)
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RYAN SPECIALTY GROUP HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

11/12/2021 | 07:06am EST
The following discussion and analysis summarizes the significant factors
affecting the consolidated operating results, financial condition, liquidity and
cash flows of our 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 our consolidated financial statements and
the related notes in the IPO Prospectus. 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 the IPO Prospectus, particularly in the sections entitled "Risk Factors" and
"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, 2021 and 2020 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 rapidly growing 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.
Our mission is to provide industry-leading innovative specialty insurance
solutions for insurance brokers, agents and carriers.

For retail insurance 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 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

Effects of the Reorganization on Our Corporate Structure


We were incorporated in March 2021 and formed for the purpose of the IPO. We are
a holding company and our sole material asset is a controlling equity interest
in New RSG Holdings, which is also a holding company and its sole material asset
is a controlling equity interest in RSG LLC. The Company will operate and
control the business and affairs, and consolidate the financial results, of RSG
LLC through New RSG Holdings and, through RSG LLC. As RSG LLC is substantively
the same as New RSG Holdings, for the purpose of this discussion, we will refer
to both New RSG Holdings and RSG LLC as RSG LLC.

RSG 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. RSG 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 subsidiary. After the IPO, RSG LLC continues to be treated as a
pass-through entity for U.S. federal and state income tax purposes. 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
RSG LLC and are taxed at the prevailing corporate tax rates. In addition to tax
expenses, we also will incur expenses related to our operations and we will be
required to make payments under the Tax Receivable Agreement. Due to the
uncertainty of various factors, we cannot estimate the likely tax benefits we
will realize as a result of LLC Common Unit exchanges, and the resulting amounts
we are likely to pay out to LLC Unitholders and Onex pursuant to the Tax
Receivable Agreement; however, we estimate that such tax benefits and the
related TRA payments may be substantial. We intend to cause RSG 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.

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Response to COVID-19


An outbreak of a novel strain of the coronavirus, COVID-19, was recognized as a
pandemic by the World Health Organization on March 11, 2020. Our leadership took
decisive, timely steps to protect the health, safety and wellbeing of our
employees, their families and trading partners by closing nearly all in-office
operations, restricting business travel and transitioning to a remote work
environment. The investments we made in our culture, trading partner
relationships, business, technology and IT team members allowed for a seamless
transition. Due to the success of our remote work operations during the
pandemic, we will be implementing remote work flexibility into our operating
model as we begin to transition back into the office.

While the pandemic has had a significant detrimental effect on numerous segments
of the global economy, it provided opportunities for many aspects of our
Wholesale Brokerage, Binding Authority and Underwriting Management Specialties.
We believe the pandemic resulted in an increased flow of submissions into the
E&S market and a further hardening of E&S insurance rates (which had already
been happening since 2019), thereby yielding higher premiums.

Highlighting the resilience of our business, the dedication of our workforce,
and the E&S market opportunities created by the pandemic, in 2020 we completed
the All Risks Acquisition (the largest in our history), made substantial
progress on our integration and the Restructuring Plan and realized 20.4%
organic revenue growth, all in the midst of the pandemic. We managed to sustain
this resilience in 2021 through the continued advancement of the integration and
Restructuring Plan and realized 52.5% revenue growth and 25.6% organic revenue
growth for the nine months ended September 30, 2021.

While we believe our business and operations have thus far performed at a high
level of efficiency and achieved historic results throughout the pandemic, there
are no comparable recent events which may provide guidance as to the ultimate
effect of the spread of COVID-19 and a global pandemic. As a result, the final
impact of the pandemic or a similar health epidemic remains uncertain,
particularly if new variants of the virus develop, vaccines are not distributed
at a suitable pace or prove less effective than anticipated, the global economy
does not recover as expected, especially in light of current inflationary trends
and/or the pandemic otherwise continues beyond current expectations. The effects
could yet have a material impact on our results of operations. See "Risk
Factors-Risks Related to Our Business and Industry" in our IPO Prospectus for a
discussion of the risks related to the COVID-19 pandemic.

2020 Restructuring Plan


During the third quarter of 2020 and in conjunction with the All Risks
Acquisition, we initiated the Restructuring Plan in an effort to reduce costs
and increase efficiencies, streamline management reporting structures, and
centralize functions across the Company to improve operating margin. The
Restructuring Plan is expected to generate annual savings of $25.0 million once
the plan is fully actioned by June 30, 2022. Initial savings began to
materialize in 2020 with the full run-rate savings expected to be realized by
June 30, 2023. Of the $25.0 million of expected annual savings, approximately
90% will relate to a reduction in workforce with the remaining 10% related to
lease and contract terminations. The Restructuring Plan is expected to incur
cumulative one-time charges of between $30.0 million and $35.0 million, funded
through operating cash flow. Restructuring costs will primarily be included in
Compensation and benefits expense with the remaining costs in General and
administrative expense. See Note 5, Restructuring of the unaudited quarterly
consolidated financial statements for further discussion.

We began recognizing costs associated with the Restructuring Plan in the third
quarter of 2020. For the three and nine months ended September 30, 2021, we
incurred restructuring costs of $3.2 million and $13.1 million, respectively,
and cumulative restructuring costs of $24.0 million since the inception of the
plan. These costs are offset by realized respective savings of approximately
$6.3 million and $16.7 million for the three and nine months ended September 30,
2021. Of the cumulative $24.0 million costs, $19.4 million was workforce-related
with the remaining being general and administrative costs. While the current
results of the Restructuring Plan are in line with expectations, changes to the
total savings estimate and timing of the Restructuring Plan may evolve as we
continue to progress through the plan and evaluate other potential restructuring
opportunities. The actual amounts and timing may vary significantly based on
various factors.

                     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 capabilities. We continuously
evaluate acquisitions and intend to further pursue targeted acquisitions that
complement our product 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 capabilities, entering natural
adjacencies and expanding our geographic footprint. Our ability to successfully
pursue strategic acquisitions is dependent upon a number of factors, including
sustained

                                       41
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execution of a disciplined and selective acquisition strategy and our ability to
effectively integrate targeted companies or assets and grow our business. We do
not have agreements or commitments for any significant acquisitions at this
time.

Deepen and Broaden our Relationships with Retail Broker Partners


We have deep engagement with our retail broker trading partners. We believe we
have the ability to transact in even greater volume with nearly all of our
existing retail brokerage trading partners. For example, in 2020, our revenue
derived from the Top 100 firms (as ranked by Business Insurance) expanded faster
than our overall growth rate of 20%. Our ability to deepen and broaden
relationships with our retail broker partners and increase sales is dependent
upon a number of factors, including client satisfaction with our distribution
reach and our product capabilities, competition, pricing, economic conditions
and spending on our product offerings.

Build our National Binding Authority Business


We believe there is substantial opportunity to continue to grow our binding
authority business, 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 business is dependent upon a number of factors,
including 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
of the insurance products.

Invest in Operation and Growth


We have heavily invested 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 offerings as well as developing
and launching new solutions to address the evolving needs of the specialty
insurance industry. Our future success is dependent on our ability to
successfully develop, market and sell existing and new products to both new and
existing trading partners.

Generate Commission Regardless of the State of the Specialty Insurance Market

We generate commissions, which are calculated as a percentage of the total insurance policy premium, and fees. A softening of the insurance market or specialty lines that are our focus, characterized by a period of declining premium rates, could negatively impact our profitability.

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 and high-hazard risks across many lines of insurance. This
trend continued in 2020 and the first three quarters of 2021, with a record 30
named storms during the 2020 Atlantic hurricane season, over 10.3 million acres
burned through wildfires in the United States, 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 who have these
capabilities. We will continue to invest in our intellectual capital to innovate
and offer custom solutions and products to better address changing market
fundamentals.

Address Costs of being a Public Company


As we are in the early stages of our operation as a public company, we will
continue to implement changes in certain aspects of our business and develop,
manage and train management level and other employees to comply with ongoing
public company requirements. We also incur new expenses as a public company,
including public reporting obligations, increased professional fees for
accounting, proxy statements, shareholder meetings, stock exchange fees,
transfer agent fees, SEC and FINRA filing fees, legal fees and offering
expenses.

                                       42

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                  Summary of Financial Performance Highlights

                              Three months ended                                       Nine months ended
                                September 30,                   Change                   September 30,                  Change
(in thousands, except
percentages)                 2021           2020            $            %            2021           2020            $            %
GAAP financial measures
Total revenue              $ 352,766      $ 236,811     $ 115,955         49.0 %   $ 1,054,236     $ 691,327     $ 362,909        52.5 %
Compensation and
benefits                     286,538        162,981       123,557         75.8         737,825       461,094       276,731        60.0
General and
administrative                38,754         31,370         7,384        

23.5 96,984 81,755 15,229 18.6 Total operating expenses 353,496 210,985 142,511 67.5 922,861 581,293 341,568 58.8 Operating income (loss) (730 ) 25,826 (26,556 ) (102.8 ) 131,375 110,034 21,341 19.4 Net income (loss)

            (32,590 )       10,796       (43,386 )     

(401.9 ) 27,016 74,001 (46,985 ) (63.5 ) Net income (loss) attributable

  to members                  (1,334 )       10,211       (11,545 )     (113.1 )        55,822        72,470       (16,648 )     (23.0 )
Compensation and
Benefits
  Expense Ratio                 81.2 %         68.8 %                                     70.0 %        66.7 %
General and
Administrative
  Expense Ratio                 11.0 %         13.2 %                                      9.2 %        11.8 %
Net Income (Loss) Margin        (9.2 )%         4.6 %                                      2.6 %        10.7 %
Earnings (Loss) per
Share                      $   (0.16 )                                             $     (0.16 )
Diluted Earnings (Loss)
per Share                  $   (0.16 )                                             $     (0.16 )
Non-GAAP financial
measures*
Organic Revenue Growth
Rate                            28.9 %         13.6 %                                     25.6 %        19.8 %
Adjusted Compensation
and Benefits
  Expense                  $ 212,590      $ 149,058     $  63,532         

42.6 % $ 625,452 $ 434,209 $ 191,243 44.0 % Adjusted Compensation and

  Benefits Expense Ratio        60.3 %         62.9 %                                     59.3 %        62.8 %

Adjusted General and

Administrative Expense $ 35,153 $ 20,393 $ 14,760 72.4 % $ 88,870 $ 65,366 $ 23,504 36.0 % Adjusted General and

  Administrative Expense
Ratio                           10.0 %          8.6 %                                      8.4 %         9.5 %
Adjusted EBITDAC           $ 105,023      $  67,360     $  37,663         

55.9 % $ 339,914 $ 191,752 $ 148,162 77.3 % Adjusted EBITDAC Margin 29.8 % 28.4 %

              32.2 %        27.7 %
Adjusted Net Income        $  62,949      $  41,664     $  21,285         51.1 %   $   209,739     $ 121,261     $  88,478        73.0 %
Adjusted Net Income
Margin                          17.8 %         17.6 %                                     19.9 %        17.5 %
Adjusted Diluted
Earnings per Share         $    0.24                                               $      0.78




* For a definition and a reconciliation of Organic Revenue Growth Rate, Adjusted
Compensation and Benefits, 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 to the most
directly comparable GAAP measure, see "Non-GAAP Financial Measures and Key
Performance Indicators."

Comparison of the Three Months Ended September 30, 2021 and 2020


?
Revenue increased $116.0 million or 49.0% period-over-period to $352.8 million.
?
Compensation and benefits expense increased $123.6 million, or 75.8%, and the
Compensation and Benefits Expense Ratio increased 12.4% from 68.8% to 81.2%
period-over-period.
?
General and administrative expense increased $7.4 million, or 23.5%, and the
General and Administrative Expense Ratio decreased 2.2% from 13.2% to 11.0%
period-over-period.
?
Total operating expenses increased $142.5 million or 67.5% period-over-period to
$353.5 million.
?
Operating income (loss) decreased $26.6 million period-over-period to a net loss
of $(0.7) million.
?
Net Income (loss) decreased by $43.4 million to period-over-period to a net loss
of $(32.6) million.
?
Net Income (Loss) Margin was (9.2)% for the quarter, compared to 4.6% in the
same quarter last year.
?
Loss per share and Diluted loss per share were $(0.16) for the three months
ended September 30, 2021.
?
Organic Revenue Growth Rate for the quarter was 28.9%, compared to 13.6% in the
same quarter last year-see "Non-GAAP Financial Measures and Key Performance
Indicators" for further information.

                                       43

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?
Adjusted Compensation and Benefits Expense increased $63.5 million, or 42.6%,
and the Adjusted Compensation and Benefits Expense Ratio decreased 2.6% from
62.9% to 60.3% period-over-period - see "Non-GAAP Financial Measures and Key
Performance Indicators" for further information.
?
Adjusted General and Administrative Expense increased $14.8 million, or 72.4%,
and the Adjusted General and Administrative Expense Ratio increased 1.4% from
8.6% to 10.0% period-over-period - see "Non-GAAP Financial Measures and Key
Performance Indicators" for further information.
?
Adjusted EBITDAC, increased 55.9% to $105.0 million-see "Non-GAAP Financial
Measures and Key Performance Indicators" for further information.
?
Adjusted EBITDAC Margin increased to 29.8% from 28.4% period-over-period-see
"Non-GAAP Financial Measures and Key Performance Indicators" for further
information.
?
Adjusted Net Income and Adjusted Net Income Margin increased to $62.9 million
and 17.8%, respectively, from $41.7 million and 17.6% period-over-period-see
"Non-GAAP Financial Measures and Key Performance Indicators" for further
information.
?
Adjusted Diluted Earnings per Share was $0.24 for the three months ended
September 30, 2021-see "Non-GAAP Financial Measures and Key Performance
Indicators" for further information.

Comparison of the Nine Months Ended September 30, 2021 and 2020


?
Revenue increased $362.9 million or 52.5% year-over-year to $1,054.2 million.
?
Compensation and benefits expense increased $276.7 million, or 60.0%, and the
Compensation and Benefits Expense Ratio increased 3.3% from 66.7% to 70.0%
period-over-period.
?
General and administrative expense increased $15.2 million, or 18.6%, and the
General and Administrative Expense Ratio decreased 2.6% from 11.8% to 9.2%
period-over-period.
?
Total operating expenses increased $341.6 million or 58.8% year-over-year to
$922.9 million.
?
Operating income increased $21.3 million period-over-period to $131.4 million.
?
Net income decreased by $47.0 million period-over-period to $27.0 million.
?
Net Income Margin was 2.6% for the nine months, compared to 10.7% for the same
period in the prior year.
?
Loss per share and Diluted loss per share were $(0.16) for the nine months ended
September 30, 2021.
?
Organic Revenue Growth Rate was 25.6% for the nine months ended September 30,
2021, compared to 19.8% for the same period in the prior year-see "Non-GAAP
Financial Measures and Key Performance Indicators" for further information.
?
Adjusted Compensation and Benefits Expense increased $191.2 million, or 44.0%
and the Adjusted Compensation and Benefits Expense Ratio decreased 3.5% from
62.8% to 59.3% period-over-period - see "Non-GAAP Financial Measures and Key
Performance Indicators" for further information.
?
Adjusted General and Administrative Expense increased $23.5 million, or 36.0%,
and the Adjusted General and Administrative Expense Ratio decreased 1.1% from
9.5% to 8.4% period-over-period - see "Non-GAAP Financial Measures and Key
Performance Indicators" for further information.
?
Adjusted EBITDAC increased 77.3% year-over-year to $339.9 million-see "Non-GAAP
Financial Measures and Key Performance Indicators" for further information.
?
Adjusted EBITDAC Margin increased to 32.2% from 27.7% year-over-year-see
"Non-GAAP Financial Measures and Key Performance Indicators" for further
information.
?
Adjusted Net Income and Adjusted Net Income Margin increased to $209.7 million
and 19.9%, respectively, from $121.3 million and 17.5% for the nine months ended
September 30, 2021 compared to the same period in 2020-see "Non-GAAP Financial
Measures and Key Performance Indicators" for further information.
?
Adjusted Diluted Earnings per Share was $0.78 for the nine months ended
September 30, 2021-see "Non-GAAP Financial Measures and Key Performance
Indicators" for further information.



                                       44

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                      Components of Results of Operations

Revenue

Net Commissions and Fees


Net commissions and fees are derived primarily by commissions from our three
Specialties, which are calculated as a percentage of the total insurance policy
premium. We are paid commissions for our role as an intermediary in facilitating
the placement of coverage in the insurance distribution chain. 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. 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 commissions and fees are
usually a percentage of the premium paid by the insured and generally depend on
the type of insurance, the carriers involved and the nature of the services we
provide in a given transaction. We share a portion of these commissions 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. We also receive loss mitigation and other fees that are
not dependent on the placement of a risk.

Fiduciary Investment Income

Fiduciary investment income consists of interest earned on insurance premiums 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 paid and payable to employees, and commissions paid and
payable to our producers; and (ii) equity-based compensation associated with the
grants of awards to employees and executives. We operate in competitive markets
for human capital and we need to maintain competitive compensation levels as we
expand geographically and create new products and services.

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


Interest expense consists of interest payable on indebtedness, imputed interest
on finance leases and contingent consideration, and amortization of deferred
debt issuance costs.

Other Non-Operating (Loss) Income


Other non-operating (loss) income includes the change in fair value of the
embedded derivatives on the Redeemable Preferred Units. This change in fair
value is due to the occurrence of a Realization Event in the third quarter of
2021, which was defined as a Qualified Public Offering or a Sale Transaction in
the Onex Purchase Agreement. It also includes the change in fair value of
interest rate swaps which were extinguished in 2020 and the expense associated
with the extinguishment of a portion of our deferred debt issuance costs on the
term debt in the first quarter of 2021.

Income Tax Expense (Benefit)

Income tax expense (benefit) includes tax on the Company's allocable share of any net taxable income from RSG LLC, as well as earnings from our foreign subsidiaries and C-Corps subject to entity level taxation.

                                       45

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Non-Controlling Interest

Our historical financial statements include the non-controlling interest related to the net income attributable to Ryan Re.

                             Results of Operations

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


                    Three months ended                                        Nine months ended
                      September 30,                   Change                    September 30,                   Change
(in thousands,
except
percentages)       2021           2020            $            %             2021           2020            $             %
Revenue
Net

commissions

and fees         $ 352,610      $ 236,683     $ 115,927         49.0 %    $ 1,053,800     $ 689,833     $ 363,967          52.8 %
Fiduciary
investment
income                 156            128            28         21.9              436         1,494        (1,058 )       (70.8 )
Total revenue    $ 352,766      $ 236,811     $ 115,955         49.0 %    $ 1,054,236     $ 691,327     $ 362,909          52.5 %
Expenses
Compensation
and benefits       286,538        162,981       123,557         75.8        

737,825 461,094 276,731 60.0 General and administrative 38,754 31,370 7,384 23.5

96,984 81,755 15,229 18.6 Amortization 26,982 15,640 11,342 72.5

82,095 34,789 47,306 136.0 Depreciation 1,179 1,029

           150         14.6            3,601         2,658           943          35.5
Change in
contingent
consideration           43            (35 )          78       (222.9 )          2,356           997         1,359         136.3
Total
operating
expenses         $ 353,496      $ 210,985     $ 142,511         67.5 %    $

922,861 $ 581,293 $ 341,568 58.8 % Operating income (loss) $ (730 ) $ 25,826 $ (26,556 ) (102.8 )% $

   131,375     $ 110,034     $  21,341          19.4 %
Interest
expense             21,193         10,859        10,334         95.2           60,224        26,295        33,929         129.0
Income from
equity method
investment in
related party          176            326          (150 )      (46.0 )            610           413           197          47.7
Other
non-operating
(loss) income      (16,211 )       (1,574 )     (14,637 )      929.9          (45,547 )      (4,066 )     (41,481 )     1,020.2
Income (loss)
before income
taxes            $ (37,958 )    $  13,719     $ (51,677 )     (376.7 )%   $    26,214     $  80,086     $ (53,872 )       (67.3 )%
Income tax
expense
(benefit)           (5,368 )        2,923        (8,291 )     (283.6 )           (802 )       6,085        (6,887 )      (113.2 )
Net income
(loss)           $ (32,590 )    $  10,796     $ (43,386 )     (401.9 )%   $    27,016     $  74,001     $ (46,985 )       (63.5 )%
GAAP financial
measures
Revenue          $ 352,766      $ 236,811     $ 115,955         49.0 %    $ 1,054,236     $ 691,327     $ 362,909          52.5 %
Compensation
and benefits       286,538        162,981       123,557         75.8       

737,825 461,094 276,731 60.0 General and administrative 38,754 31,370 7,384 23.5

96,984 81,755 15,229 18.6 Net Income (loss)

           $ (32,590 )    $  10,796     $ (43,386 )     (401.9 )%   $    27,016     $  74,001     $ (46,985 )       (63.5 )%
Compensation
and Benefits
Expense Ratio         81.2 %         68.8 %                                      70.0 %        66.7 %
General and
Administrative
Expense Ratio         11.0 %         13.2 %                                       9.2 %        11.8 %
Net Income
(loss) Margin         (9.2 )%         4.6 %                                       2.6 %        10.7 %
Earnings
(loss) per
Share            $   (0.16 )                                              $     (0.16 )
Diluted
Earnings
(loss) per
Share            $   (0.16 )                                              $     (0.16 )




                                       46
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                    Three months ended                                    Nine months ended
                       September 30,                 Change                 September 30,                 Change
(in thousands,
except
percentages)        2021          2020           $            %          2021          2020            $            %
Non-GAAP
financial
measures*
Organic Revenue
Growth Rate            28.9 %        13.6 %                                 25.6 %        19.8 %
Adjusted
Compensation
and Benefits
Expense           $ 212,590     $ 149,058     $ 63,532        42.6 %   $ 625,452     $ 434,209     $ 191,243        44.0 %
Adjusted
Compensation
and Benefits
Expense Ratio          60.3 %        62.9 %                                 59.3 %        62.8 %
Adjusted
General and
Administrative
Expense           $  35,153     $  20,393     $ 14,760        72.4 %   $  88,870     $  65,366     $  23,504        36.0 %
Adjusted
General and
Administrative
Expense Ratio          10.0 %         8.6 %                                  8.4 %         9.5 %
Adjusted
EBITDAC           $ 105,023     $  67,360     $ 37,663        55.9 %   $ 339,914     $ 191,752     $ 148,162        77.3 %
Adjusted
EBITDAC Margin         29.8 %        28.4 %                                 32.2 %        27.7 %
Adjusted Net
Income            $  62,949     $  41,664     $ 21,285        51.1 %   $
209,739     $ 121,261     $  88,478        73.0 %
Adjusted Net
Income Margin          17.8 %        17.6 %                                 19.9 %        17.5 %
Adjusted
Diluted
Earnings per
Share             $    0.24                                            $    0.78


* 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, 2021 and 2020

Revenue

Net Commissions and Fees

Net commissions and fees increased by $115.9 million or 49.0% from $236.7 million to $352.6 million for the three months ended September 30, 2021 as compared to the same period in the prior year. The two main drivers of the revenue increase are 18.8% growth from the All Risks Acquisition and 28.9% of organic revenue growth.


                                           Three months ended September 30,
                                                    % of                    

% of (in thousands, except percentages) 2021 total 2020 total

             Change
Wholesale Brokerage                  $ 229,146       65.0 %   $ 154,484       65.3 %   $  74,662       48.3 %
Binding Authorities                     52,795       15.0        36,130       15.3        16,665       46.1
Underwriting Management                 70,669       20.0        46,069       19.4        24,600       53.4
Total Net commissions and fees       $ 352,610                $ 236,683                $ 115,927       49.0 %


Wholesale Brokerage net commissions and fees increased by $74.7 million or 48.3%
period-over-period, primarily due to strong organic growth within this specialty
for the quarter as well as contributions from the All Risks Acquisition for the
months of July and August.

Binding Authority net commissions and fees increased by $16.7 million or 46.1%
period-over-period, primarily due to strong organic growth within the specialty
for the quarter as well as contributions from the All Risks Acquisition for the
months of July and August.

Underwriting Management net commissions and fees increased by $24.6 million or 53.4% period-over-period, primarily due to strong organic growth within the specialty for the quarter as well as contributions from the All Risks Acquisition for the months of July and August.

                                       47

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

                                       Three months ended September 30,
(in thousands, except                           % of                     % of
percentages)                       2021        total        2020        total             Change
Net commissions and policy       $ 338,335       96.0 %   $ 228,111       96.4 %   $ 110,224       48.3 %
fees
Supplemental and contingent          8,313        2.3         5,026        2.1         3,287       65.4
commissions
Loss mitigation and other fees       5,962        1.7         3,546        1.5         2,416       68.1
Total Net commissions and fees   $ 352,610                $ 236,683         

$ 115,927 49.0 %



Net commissions and policy fees grew 48.3%, slightly lower than the overall net
commissions and fee revenue growth of 49.0% for the three months ended September
30, 2021 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. In aggregate, we experienced stable commission rates period
over period. Net commissions and policy fees continue to represent more than 90%
of total net commissions and fees period-over-period.

Supplemental and contingent commissions increased 65.4% period-over-period
driven by the performance of risks placed on eligible business and the addition
to the supplemental and contingent commissions contributed by the All Risks
Acquisition. Supplemental and contingent commissions continue to represent less
than 10% of total commissions and fees period-over-period.

Loss mitigation and other fees grew 68.1% period-over-period primarily due to
increased capital markets activity in 2021. These fees continue to represent
less than 2% of total net commissions and fees period-over-period.

Expenses

Compensation and Benefits


Compensation and benefits expense increased by $123.6 million or 75.8% from
$163.0 million to $286.5 million for the three months ended September 30, 2021
compared to the same period in 2020. The following were the principal drivers of
this increase:

?
A $57.6 million increase from Initial public offering related compensation
expense, which reflects charges associated with both the revaluation of existing
equity grants at the time of our IPO as well as the first quarter of 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 directly relate to the Organizational Transactions and
IPO, however amounts related to each will continue to be expensed over future
periods as the underlying awards vest;
?
Commissions increased $38.5 million or 57.1% period-over-period, driven by the
49.0% increase in total Net Commissions and Fees discussed above;
?
A $6.9 million impact from acquisition related long-term incentive compensation,
reflecting our assumption of obligations in the All Risks Acquisition. All Risks
had previously established various performance and service based long-term
incentive plans for executives, producers and key employees which provided that
upon a change of control event, the aggregate amount payable under each plan
would be calculated and fixed upon close of the change of control event. We
expect to recognize acquisition related long-term incentive compensation expense
of approximately $37.0 million for the twelve months ended 2021 and an aggregate
of approximately $20.0 million thereafter; and
?
The remaining $20.6 million period-over-period increase was driven by (i) the
addition of 840 employees through the All Risks Acquisition, which closed on
September 1, 2020 and (ii) growth in the business. Overall headcount increased
to 3,427 full-time employees as of September 30, 2021 from 3,316 as of September
30, 2020.

This expense increase was partially offset by $5.0 million of net savings
related to the Restructuring Plan representing approximately $5.9 million of
work-force related savings less one-time work-force related expense of $0.9
million for the three months ended September 30, 2021 (see "Significant Events
and Transactions-2020 Restructuring Plan" for further information).

The net impact of revenue growth and the factors above resulted in a Compensation and Benefits Expense Ratio increase of 12.4% from 68.8% to 81.2% period-over-period.

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

                                       48

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General and Administrative


General and administrative expense increased by $7.4 million or 23.5% from $31.4
million to $38.8 million for the three months ended September 30, 2021 as
compared to the same period in the prior year. A main driver of this increase
was $3.4 million of increased travel and entertainment expense as travel
restrictions associated with the pandemic began to lift compared to the same
period in 2020. The remaining increase of $4.0 million was driven by $13.7
million of expenses incurred to accommodate revenue expansion and the All Risks
Acquisition, such as IT, professional services, occupancy, and insurance,
partially offset by a $9.7 million decrease in acquisition-related expense.

The net impact of revenue growth and the factors above resulted in a General and Administrative Expense Ratio decrease of 2.2% from 13.2% to 11.0% period-over-period.

Amortization


Amortization expense increased by $11.3 million or 72.5% from $15.6 million to
$27.0 million for the three months ended September 30, 2021 compared to the same
period in the prior year. The main driver was approximately $18.5 million of
amortization from acquired intangibles from the All Risks Acquisition. Our
intangible assets decreased by $103.7 million as of September 30, 2021 as
compared to September 30, 2020.

Interest


Interest expense increased $10.3 million or 95.2% from $10.9 million to $21.2
million for the three months ended September 30, 2021 compared to the same
period in the prior year. The main driver of the change in interest expense for
the three months ended September 30, 2021 was an increase in debt, which was
undertaken in connection with the All Risks Acquisition completed in September
2020.

Other Non-Operating (Loss) Income


Other non-operating (loss) income decreased by $14.6 million to a loss of $16.2
million for the three months ended September 30, 2021 as compared to a loss of
$1.6 million in the same period in the prior year. The main driver of the loss
was the $16.3 million change in the fair value of the embedded derivatives of
our Redeemable Preferred Units. This embedded derivative is a make whole penalty
payable when the Redeemable Preferred Units were redeemed less than five years
from the anniversary of the their issuance date. The resulting loss recorded as
of September 30, 2021 represents the recognition of the remaining make whole
charge for the Redeemable Preferred Units, which were redeemed in connection
with the Organizational Transactions and IPO.

Income before Income Taxes

Due to the factors above, Income (loss) before income taxes decreased $51.7 million from a profit of $13.7 million to a loss of $(38.0) million for the three months ended September 30, 2021 compared to the same period in the prior year.


Income Tax Expense (Benefit)

Income tax expense (benefit) decreased $8.3 million from $2.9 million to $(5.4)
million for the three months ended September 30, 2021 as compared to the same
period in the prior year as a result of a loss allocated from RSG LLC to the
Company in the post-IPO period.

Net Income (Loss)


Net income (loss) decreased $43.4 million from a profit of $10.8 million to a
loss of $(32.6) million for the three months ended September 30, 2021 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, 2021 and 2020

Revenue

Net Commissions and Fees


Net commissions and fees increased by $364.0 million or 52.8% from $689.8
million to $1,053.8 million in 2021 period-over-period. The two main drivers of
the revenue increase are 26.7% growth from the All Risks Acquisition and 25.6%
of organic revenue growth.



                                       49
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                                             Nine months ended September 30,
                                                      % of                     % of
(in thousands, except percentages)      2021         total        2020        total             Change
Wholesale Brokerage                  $   676,229       64.2 %   $ 460,706       66.8 %   $ 215,523       46.8 %
Binding Authorities                      161,436       15.3       101,837       14.8        59,599       58.5
Underwriting Management                  216,135       20.5       127,290       18.4        88,845       69.8
Total Net commissions and fees       $ 1,053,800                $ 689,833                $ 363,967       52.8 %


Wholesale Brokerage net commissions and fees increased by $215.5 million or 46.8% period-over-period, primarily due to strong organic growth within this specialty as well as contributions from the All Risks Acquisition through August. All Risks contributed to organic growth for the month of September.


Binding Authority net commissions and fees increased by $59.6 million or 58.5%
period-over-period, primarily due to strong organic growth within this specialty
as well as contributions from the All Risks Acquisition through August. All
Risks contributed to organic growth for the month of September.

Underwriting Management net commissions and fees increased by $88.8 million or
69.8% in 2021 as compared to 2020, primarily due to strong organic growth within
the specialty, as well as the contributions from the All Risks Acquisition
through August. All Risks contributed to organic growth for the month of
September.

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

                                         Nine months ended September 30,
(in thousands, except                             % of                     % of
percentages)                        2021         total        2020        total             Change
Net commissions and policy       $ 1,007,192       95.6 %   $ 655,309       95.0 %   $ 351,883       53.7 %
fees
Supplemental and contingent           29,849        2.8        25,528        3.7         4,321       16.9
commissions
Loss mitigation and other fees        16,759        1.6         8,996        1.3         7,763       86.3
Total Net commissions and fees   $ 1,053,800                $ 689,833       

$ 363,967 52.8 %



Net commissions and policy fees increased 53.7% just ahead of the overall total
net commissions and fees growth of 52.8% period-over-period. This growth was
driven by increased volume from both new and existing clients in response to the
increasing demand for E&S products. Multiple classes of risk experienced
year-over-year premium rate increases, which drives commission revenue growth
that is typically calculated as a percentage of total insurance policy premium.
In aggregate, we experienced stable commission rates period over period. Net
commissions and policy fees continue to represent more than 90% of total net
commissions and fees period-over-period.

Supplemental and contingent commissions increased 16.9% period-over-period
driven by the performance of risks placed on eligible business and the
additional supplemental and contingent commissions contributed by the All Risks
Acquisition. Supplemental and contingent commissions continue to represent less
than 10% of total commissions and fees period-over-period.

Loss mitigation and other fees grew 86.3% period-over-period primarily due to
increased capital markets activity in 2021. These fees continue to represent
less than 2% of total net commissions and fees period-over-period.

Expenses

Compensation and Benefits


Compensation and benefits expense increased by $276.7 million or 60.0% from
$461.1 million to $737.8 million for the nine months ended September 30, 2021 as
compared to the same period in 2020. The following were the principal drivers of
this increase:

?
Commissions increased $117.3 million or 58.6% between periods, driven by the
52.8% increase in total net commissions and fees discussed above;
?
A $57.6 million increase from Initial public offering related compensation
expense, which reflects charges associated with both the revaluation of existing
equity grants at the time of our IPO as well as the first quarter of expense
related to the new awards issued in connection with the IPO. The expense
associated with both the revaluation of existing awards

                                       50

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as well as the issuance of new equity awards both directly relate to the
Organizational Transactions and IPO, however amounts related to each will
continue to be expensed over future periods as the underlying awards vest;
?
A $24.4 million impact from acquisition related long-term incentive
compensation, reflecting our assumption of obligations in the All Risks
Acquisition. All Risks had previously established various performance and
service based long-term incentive plans for executives, producers and key
employees which provided that upon a change of control event, the aggregate
amount payable under each plan would be calculated and fixed upon close of the
change of control event. We expect to recognize acquisition related long-term
incentive compensation expense of approximately $37.0 million in 2021, of which
$27.4 million has been recognized for the nine months ended September 30, 2021,
with approximately $20.0 million to be recognized thereafter; and
?
The remaining $77.4 million period-over-period increase was driven by (i) the
addition of 840 employees through the All Risks Acquisition, which closed on
September 1, 2020, and (ii) growth in the business. Overall headcount increased
to 3,427 full-time employees as of September 30, 2021 from 3,316 as of September
30, 2020.

This expense increase was partially offset by a $6.8 million of net savings
related to the Restructuring Plan representing approximately $16.0 million of
work-force related savings less one-time work-force related expense of $9.2
million for the nine months ended September 30, 2021 (see "Significant Events
and Transactions-2020 Restructuring Plan" for further information).

The net impact of revenue growth and the factors above resulted in a
Compensation and Benefits Expense Ratio increase of 3.3% from 66.7% to 70.0%
period-over-period. We expect to continue to experience a general 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 $15.2 million or 18.6%
period-over-period from $81.8 million to $97.0 million as a result of revenue
expansion and the All Risks Acquisition. Such expenses incurred to accommodate
both organic and inorganic revenue growth include IT, occupancy, insurance and
professional services.

Travel and entertainment expense increased $1.3 million period-over-period but the current period expense was limited due to travel restrictions from the COVID-19 pandemic. As travel restrictions are lifted we expect travel and entertainment expense to increase.

The net impact of revenue growth and the factors above resulted in a General and Administrative Expense Ratio improvement of 2.6% from 11.8% to 9.2% period-over-period.

Amortization


Amortization expense increased by $47.3 million or 136.0% from $34.8 million to
$82.1 million for the nine months ended September 30, 2021 as compared to the
same period in 2020. The main driver was approximately $50.5 million of
amortization from acquired intangibles from the All Risks Acquisition. Our
intangible assets decreased by $103.7 million as of September 30, 2021 as
compared to as of September 30, 2020.

Interest Expense


Interest expense increased $33.9 million or 129.0% from $26.3 million to $60.2
million period-over-period. The main driver of the change in interest expense
for the nine months ended September 30, 2021 was an increase in debt, which was
undertaken in connection with the All Risks Acquisition completed in September
2020.

Other Non-Operating (Loss) Income


Other non-operating (loss) income decreased by $41.5 million from a loss of $4.1
million to a loss of $45.5 million for the nine months ended September 30, 2021.
The main driver of the loss was a $36.9 million change in the fair value of the
embedded derivatives of our Redeemable Preferred Units. This embedded derivative
is a make whole penalty payable when the Redeemable Preferred Units were
redeemed less than five years from the anniversary of their issuance date. The
resulting loss recorded as of September 30, 2021 represents the recognition of
the remaining make whole charge for the Redeemable Preferred Units, which were
redeemed in connection with the Organizational Transactions and IPO. The second
driver of this increase was $8.6 million of debt issuance costs written off due
to the extinguishment of a portion of the term debt due to the repricing in the
first quarter of 2021 which is partially offset by a loss on the interest rates
swaps for the nine months ended September 30, 2020, which were settled during
2020.

                                       51
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Income before Income Taxes


Due to the factors above, Income before income taxes decreased $53.9 million or
67.3% from $80.1 million to $26.2 million for the nine months ended September
30, 2021 as compared to the same period in 2020.

Income Tax Expense (Benefit)


Income tax expense (benefit) decreased $6.9 million from $6.1 million to $(0.8)
million period-over-period as a result of a loss allocated from RSG LLC to the
Company in the post-IPO period.

Net Income

Net income decreased $47.0 million from $74.0 million to $27.0 million period-over-period as a result of the factors described above.

           Non-GAAP Financial Measures and Key Performance Indicators

We consider a variety of financial measures in assessing the performance of our
business. 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. Our use of Non-GAAP
financial measures may vary from the use of similar terms by other companies in
our industry and accordingly may not be comparable to similarly titled measures
used by other companies. As a result, 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 quarterly consolidated financial statements.

Organic Revenue Growth Rate


Organic Revenue Growth Rate is a Non-GAAP measure that we use to help management
and investors understand and evaluate the growth of our business without the
impacts of acquisitions, which affects the comparability of results from period
to period. The Organic Revenue Growth Rate represents the percentage change in
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 foreign exchange rates.

This supplemental information related to the Organic Revenue Growth Rate
represents a measure not in accordance with U.S. GAAP and should be viewed in
addition to, not instead of, the consolidated financial statements. Industry
peers provide similar supplemental information about their revenue performance,
although they may not make identical adjustments.

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,
                                            2021           2020
Total Revenue Growth Rate (GAAP) (1)           49.0 %       22.4 %
Less: Mergers and Acquisitions (2)            (18.8 )       (9.8 )
Change in Other (3)                            (1.3 )        1.0

Organic Revenue Growth Rate (Non-GAAP) 28.9 % 13.6 %

(1)

September 30, 2021 revenue of $352.8 million less September 30, 2020 revenue of
$236.8 million is a $116.0 million period-over-period change. The change, $116.0
million, divided by the September 30, 2020 revenue of $236.8 million is a total
revenue change of 49.0%. September 30, 2020 revenue of $236.8 million less
September 30, 2019 revenue of $193.5 million is a $43.3 million
period-over-period change. The change, $43.3 million, divided by the September
30, 2019 revenue of $193.5 million is a total revenue change of 22.4%. Refer to
"Results of Operations" for further details.
(2)
The mergers and 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, 2021 and three months ended
September 30, 2020 was $44.4 million and $19.0 million, respectively.

                                       52

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(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, 2021 and three months ended
September 30, 2020 was $2.9 million and $1.9 million, respectively.
                                           Nine months ended
                                             September 30,
                                            2021          2020
Total Revenue Growth Rate (GAAP) (1)           52.5 %      26.8 %
Less: Mergers and Acquisitions (2)            (26.7 )      (7.5 )
Change in Other (3)                            (0.2 )       0.5

Organic Revenue Growth Rate (Non-GAAP) 25.6 % 19.8 %

(1)

September 30, 2021 revenue of $1,054.2 million less September 30, 2020 revenue
of $691.3 million is a $362.9 million year-over-year change. The change, $362.9
million, divided by the September 30, 2020 revenue of $691.3 million is a total
revenue change of 52.5%. September 30, 2020 revenue of $691.3 million less
September 30, 2019 revenue of $545.3 million is a $146.1 million year-over-year
change. The change, $146.1 million, divided by the September 30, 2019 revenue of
$545.3 million is a total revenue change of 26.8%. Refer to "Results of
Operations" for further details.
(2)
The mergers and acquisitions adjustment excludes net commission and fees revenue
generated during the first 12 months following an acquisition. The total
adjustment for the nine months ended September 30, 2021 and nine months ended
September 30, 2020 was $184.4 million and $40.6 million, respectively.
(3)
The other adjustments exclude the year-over-year change in contingent
commissions, fiduciary investment income, and foreign exchange rates. The total
adjustment for the nine months ended September 30, 2021 and 2020 was $1.2
million and $3.2 million, respectively.



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


We believe Adjusted Compensation and Benefits Expense and Adjusted Compensation
and Benefits Expense Ratio provide relevant and useful information, which is
widely used by analysts, investors and competitors in our industry as well as by
management because it provides a clear representation of our core compensation
and benefits and general and administrative expenses as well as improves
comparability between periods, and eliminates the impact of the items that do
not relate to the ongoing operations of the business.

We define Adjusted Compensation and Benefits Expense as Compensation and benefits 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.

                                       53

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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:


                                                           Three months 

ended

                                                              September 30,
(in thousands, except percentages)                        2021            

2020

Total Revenue                                          $   352,766     $   

236,811

Compensation and Benefits Expense                      $   286,538     $   

162,981

Acquisition-related expense                                      -          (2,811 )
Acquisition related long-term incentive compensation       (10,333 )        (3,419 )
Restructuring and related expense                             (895 )        (3,301 )
Amortization and expense related to discontinued            (1,759 )        (1,974 )
prepaid incentives
Equity-based compensation                                   (3,371 )        (2,422 )
Discontinued programs expense                                    -               4
Initial public offering related expense                    (57,590 )        

-

Adjusted Compensation and Benefits Expense (1) $ 212,590 $ 149,058 Compensation and Benefits Expense Ratio (2)

                   81.2 %          68.8 %
Adjusted Compensation and Benefits Expense Ratio (3)          60.3 %        

62.9 %

(1)

Adjustments to Compensation and Benefits Expense are described in the footnotes
of the reconciliation of Adjusted EBITDAC to Net Income in "Adjusted EBITDAC and
Adjusted EBITDAC Margin".
(2)
Compensation and Benefits Expense Ratio is Compensation and Benefits Expense as
a percentage of total revenue.
(3)
Adjusted Compensation and Benefits Expense Ratio is Adjusted Compensation and
Benefits Expense as a percentage of total revenue.
                                                           Nine months 

ended

                                                             September 30,
(in thousands, except percentages)                       2021              

2020

Total Revenue                                        $  1,054,236      $    

691,327

Compensation and Benefits Expense                    $    737,825      $    

461,094

Acquisition-related expense                                     -            (4,423 )
Acquisition related long-term incentive                   (28,837 )          (4,483 )
compensation
Restructuring and related expense                          (9,246 )          (3,301 )
Amortization and expense related to discontinued           (5,441 )          (7,037 )
prepaid incentives
Equity-based compensation                                 (11,259 )          (7,153 )
Discontinued programs expense                                   -              (488 )
Initial public offering related expense                   (57,590 )         

-

Adjusted Compensation and Benefits Expense (1) $ 625,452 $ 434,209 Compensation and Benefits Expense Ratio (2)

                  70.0 %            66.7 %
Adjusted Compensation and Benefits Expense Ratio             59.3 %            62.8 %
(3)


(1)
Adjustments to Compensation and Benefits Expense are described in the footnotes
of the reconciliation of Adjusted EBITDAC to Net Income in "Adjusted EBITDAC and
Adjusted EBITDAC Margin".
(2)
Compensation and Benefits Expense Ratio is Compensation and Benefits Expense as
a percentage of total revenue.
(3)
Adjusted Compensation and Benefits Expense Ratio is Adjusted Compensation and
Benefits Expense as a percentage of total revenue.



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


We believe Adjusted General and Administrative Expense and Adjusted General and
Administrative Expense Ratio provide relevant and useful information, which is
widely used by analysts, investors and competitors in our industry as well as by
management because

                                       54
--------------------------------------------------------------------------------

it provides a clear representation of our core general and administrative expenses as well as improves comparability between periods, and eliminates the impact of the items that do not relate to the ongoing operations of the business.

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:

                                                          Three months 

ended

                                                             September 30,
(in thousands, except percentages)                        2021          

2020

Total Revenue                                           $ 352,766     $ 

236,811

General and Administrative Expense                      $  38,754     $  

31,370

Acquisition-related expense                                  (106 )      (9,792 )
Restructuring and related expense                          (2,465 )        (397 )
Discontinued programs expense                                   -          (698 )
Other non-recurring expense                                     -           (90 )
Initial public offering related expense                    (1,030 )         

-

Adjusted General and Administrative Expense (1) $ 35,153 $ 20,393 General and Administrative Expense Ratio (2)

                 11.0 %        

13.2 % Adjusted General and Administrative Expense Ratio (3) 10.0 % 8.6 %

(1)

Adjustments to General and Administrative Expense are described in the footnotes
of the reconciliation of Adjusted EBITDAC to Net Income in "Adjusted EBITDAC and
Adjusted EBITDAC Margin".
(2)
General and Administrative Expense Ratio is General and Administrative Expense
as a percentage of total revenue.
(3)
Adjusted General and Administrative Expense Ratio is Adjusted General and
Administrative Expense as a percentage of total revenue.
                                                            Nine months 

ended

                                                              September 30,
(in thousands, except percentages)                         2021           

2020

Total Revenue                                           $ 1,054,236     $ 

691,327

General and Administrative Expense                      $    96,984     $  

81,755

Acquisition-related expense                                  (2,128 )     (13,783 )
Restructuring and related expense                            (4,286 )      (1,822 )
Discontinued programs expense                                     -          (601 )
Other non-recurring expense                                    (354 )        (183 )
Initial public offering related expense                      (1,346 )       

-

Adjusted General and Administrative Expense (1) $ 88,870 $ 65,366 General and Administrative Expense Ratio (2)

                    9.2 %        11.8 %
Adjusted General and Administrative Expense Ratio (3)           8.4 %       

9.5 %

(1)

Adjustments to General and Administrative Expense are described in the footnotes
of the reconciliation of Adjusted EBITDAC to Net Income in "Adjusted EBITDAC and
Adjusted EBITDAC Margin".
(2)
General and Administrative Expense Ratio is General and Administrative Expense
as a percentage of total revenue.
(3)
Adjusted General and Administrative Expense Ratio is Adjusted General and
Administrative Expense as a percentage of total revenue.

                                       55

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Adjusted EBITDAC and Adjusted EBITDAC Margin


We believe that Adjusted EBITDAC and Adjusted EBITDAC Margin provide relevant
and useful information, which is widely used by analysts, investors and
competitors in our industry as well as by management because it provides a clear
representation of our operating performance and the profitability of our
business on a run-rate basis, improves comparability between periods, and
eliminates the impact of the items that do not relate to the ongoing operating
performance of the business.

We define Adjusted EBITDAC as Net Income before interest expense, 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. Total revenue less Adjusted Compensation
and Benefits Expense and Adjusted General and Administrative Expense is
equivalent to Adjusted EBITDAC. The most directly comparable GAAP financial
metric 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. These measures do not deduct earnings related to the
non-controlling interest in Ryan Re for the period of time prior to March 31,
2021 when we did not own 100% of the business.

Adjusted EBITDAC and Adjusted EBITDAC Margin may be useful to an investor in
evaluating our operating performance and efficiency because these measures are
widely used by investors to measure a company's operating performance without
regard to items excluded from the calculation of such measure, which can vary
substantially from company to company depending upon acquisition activity and
capital structure, These measures also eliminate the impact of expenses that do
not relate to core business performance, among other factors. Further, these
measures are used by our leadership and Board of Directors for assessing
financial performance, strategic planning, and forecasting.

Adjusted EBITDAC and Adjusted EBITDAC Margin have limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP.


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:

                                                          Three months 

ended

                                                            September 30,
(in thousands, except percentages)                      2021              2020
Total Revenue                                       $    352,766      $    236,811
Net Income (loss)                                   $    (32,590 )    $     10,796
Interest expense                                          21,193            10,859
Income tax expense (benefit)                              (5,368 )           2,923
Depreciation                                               1,179             1,029
Amortization                                              26,982            15,640
Change in contingent consideration                            43               (35 )
EBITDAC                                             $     11,439      $     

41,212

Acquisition-related expense (1)                              106            

12,603

Acquisition related long-term incentive                   10,333            

3,419

compensation (2)
Restructuring and related expense (3)                      3,360            

3,698

Amortization and expense related to discontinued           1,759            

1,974

prepaid incentives (4)
Other non-operating loss (income) (5)                     16,211            

1,574

Equity-based compensation (6)                              3,371            

2,422

Discontinued programs expense (7)                              -            

694

Other non-recurring expense (8)                                -            

90

IPO related expenses (9)                                  58,620            

-

(Income) from equity method investments in                  (176 )            (326 )
related party
Adjusted EBITDAC (10)                               $    105,023      $     67,360
Net Income (loss) Margin (11)                               (9.2 )%            4.6 %
Adjusted EBITDAC Margin (12)                                29.8 %            28.4 %


(1)
Acquisition-related expense includes diligence, transaction-related, and
integration costs. Compensation and benefits expenses were $2.8 million for the
three months ended September 30, 2020, while General and administrative expenses
contributed to

                                       56
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$0.1 million and $9.8 million of the acquisition-related expense for the three
months ended September 30, 2021 and 2020, respectively.
(2)
Acquisition related long-term incentive compensation arises from long-term
incentive plans associated with acquisitions.
(3)
Restructuring and related expense consists of compensation and benefits of $0.9
million and $3.3 million for the three months ended September 30, 2021 and 2020,
respectively, and General and administrative costs including occupancy and
professional services fees of $2.5 million and $0.4 million for the three months
ended September 30, 2021 and 2020, respectively, related to the Restructuring
Plan. The compensation and benefits expense includes severance as well as
employment costs related to services rendered between the notification and
termination dates. See Note 5, Restructuring of the unaudited quarterly
consolidated financial statements for further discussion. The remaining costs
that preceded the Restructuring Plan were associated with organizational design,
other severance, and non-recurring lease costs.
(4)
Amortization and expense related to discontinued prepaid incentive programs -
see Note 15. Employee Benefit Plans, Prepaid and Long-Term Incentives of the
unaudited quarterly consolidated financial statements for further discussion.
(5)
Other non-operating loss (income) includes the change in fair value of the
embedded derivatives on the Redeemable Preferred Units. This change in fair
value of $16.2 million is due to the occurrence of a Realization Event in the
third quarter, which is defined as a Qualified Public Offering or a Sale
Transaction in the Onex Purchase Agreement. See Note 11, Redeemable Preferred
Units of the unaudited quarterly consolidated financial statements for further
discussion. For the three months ended September 30, 2020, non-operating loss
(income) includes the change in fair value of interest rate swaps which were
discontinued in 2020.
(6)
Equity-based compensation reflects non-cash equity-based expense.
(7)
Discontinued programs expense includes $0.1 million of General and
administrative expense for the three months ended September 30, 2020.
Compensation and benefits expense was $0.0 million for the three months ended
September 30, 2020. These costs were associated with concluding specific
programs that are no longer core to our business. This adjustment also includes
$0.6 million related to additional cancellation activity associated with these
programs in the three months ended September 30, 2020.
(8)
Other non-recurring items include one-time professional services costs
associated with term debt repricing, and one-time non-income tax charges and tax
and accounting consultancy costs associated with potential structure changes.
(9)
Initial public offering related expenses includes $1.0 million of General and
Administrative expense associated with the preparations for Sarbanes-Oxley
compliance, tax and accounting advisory services on IPO-related structure
changes, and Compensation-related expense of $57.6 million for the three months
ended September 30, 2021 related to the revaluation of existing equity awards at
IPO as well as initial period expense for new awards issued at IPO.
(10)
Consolidated Adjusted EBITDAC does not reflect a deduction for the Adjusted
EBITDAC associated with the non-controlling interest in Ryan Re.
(11)
Net Income Margin is Net Income as a percentage of total revenue.
(12)
Adjusted EBITDAC margin is Adjusted EBITDAC as a percentage of total revenue.

                                       57

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                                                           Nine months 

ended

                                                             September 30,
(in thousands, except percentages)                       2021              2020
Total Revenue                                        $  1,054,236      $    691,327
Net Income                                           $     27,016      $     74,001
Interest expense                                           60,224            26,295
Income tax expense (benefit)                                 (802 )           6,085
Depreciation                                                3,601             2,658
Amortization                                               82,095            34,789
Change in contingent consideration                          2,356           

997

EBITDAC                                              $    174,490      $    

144,825

Acquisition-related expense (1)                             2,128           

18,206

Acquisition related long-term incentive                    28,837           

4,483

compensation (2)
Restructuring and related expense (3)                      13,532           

5,123

Amortization and expense related to discontinued            5,441           

7,037

prepaid incentives (4)
Other non-operating loss (income) (5)                      45,547           

4,066

Equity-based compensation (6)                              11,259           

7,153

Discontinued programs expense (7)                               -           

1,089

Other non-recurring expense (8)                               354           

183

IPO related expenses (9)                                   58,936           

-

(Income) from equity method investments in related           (610 )            (413 )
party
Adjusted EBITDAC (10)                                $    339,914      $    191,752
Net Income Margin (11)                                        2.6 %            10.7 %
Adjusted EBITDAC Margin (12)                                 32.2 %            27.7 %


(1)
Acquisition-related expense includes diligence, transaction-related, and
integration costs. Compensation and benefits expenses were $4.4 million for the
nine months ended September 30, 2020, while General and administrative expenses
contributed to $2.1 million and $13.8 million of the acquisition-related expense
for the nine months ended September 30, 2021 and 2020, respectively.
(2)
Acquisition related long-term incentive compensation arises from long-term
incentive plans associated with acquisitions.
(3)
Restructuring and related expense consists of compensation and benefits of $9.2
million and $3.3 million for the nine months ended September 30, 2021 and 2020,
respectively, and General and administrative costs including occupancy and
professional services fees of $4.3 million and $1.8 million for the nine months
ended September 30, 2021 and 2020, respectively, related to the Restructuring
Plan. The compensation and benefits expense includes severance as well as
employment costs related to services rendered between the notification and
termination dates. See Note 5, Restructuring of the unaudited quarterly
consolidated financial statements for further discussion. The remaining costs
that preceded the Restructuring Plan were associated with organizational design,
other severance, and non-recurring lease costs.
(4)
Amortization and expense related to discontinued prepaid incentive programs -
See Note 15, Employee Benefit Plans, Prepaid and Long-Term Incentives of the
unaudited quarterly consolidated financial statements for further discussion.
(5)
Other non-operating loss (income) includes the change in fair value of the
embedded derivatives on the Redeemable Preferred Units. This change in fair
value of $36.9 million is due to the occurrence of a Realization Event in the
third quarter, which is defined as a Qualified Public Offering or a Sale
Transaction in the Onex Purchase Agreement. See Note 11, Redeemable Preferred
Units of the unaudited quarterly consolidated financial statements for further
discussion. For the nine months ended September 30, 2021, non-operating loss
(income) includes costs associated with the extinguishment of a portion of our
deferred debt issuance costs on the term debt. For the nine months ended
September 30, 2020, non-operating loss (income) includes the change in fair
value of interest rate swaps which were discontinued in 2020.
(6)
Equity-based compensation reflects non-cash equity-based expense.
(7)
Discontinued programs expense includes $0.3 million of General and
administrative expense for the nine months ended September 30, 2020.
Compensation and benefits expense was $0.5 million for the nine months ended
September 30, 2020. These costs were associated with concluding specific
programs that are no longer core to our business. This adjustment also includes
$0.3 million related to additional cancellation activity associated with these
programs in the nine months ended September 30, 2020

                                       58

--------------------------------------------------------------------------------

(8)

Other non-recurring items include one-time professional services costs
associated with term debt repricing, and one-time non-income tax charges and tax
and accounting consultancy costs associated with potential structure changes.
(9)
Initial public offering related expenses include $1.3 million of General and
Administrative expense associated with the preparations for Sarbanes-Oxley
compliance, tax and accounting advisory services on IPO-related structure
changes, and Compensation-related expense of $57.6 million for the three months
ended September 30, 2021 related to the revaluation of existing equity awards at
IPO as well as initial period expense for new awards issued at IPO.
(10)
Consolidated Adjusted EBITDAC does not reflect a deduction for the Adjusted
EBITDAC associated with the non-controlling interest in Ryan Re.
(11)
Net Income Margin is Net Income as a percentage of total revenue.
(12)
Adjusted EBITDAC margin is Adjusted EBITDAC as a percentage of total revenue.

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. These measures do not deduct earnings related to the
non-controlling interest in Ryan Re for the period of time prior to March 31,
2021 when we did not own 100% of the business.

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 RSG 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 RSG LLC.

Adjusted Net Income and Adjusted Net Income Margin, together with related
margins may be useful to an investor in evaluating our operating performance,
efficiency and liquidity because these measures are widely used by investors to
measure a company's operating performance without regard to items excluded from
the calculation of such measure, which can vary substantially from company to
company depending upon acquisition activity and capital structure. These
measures also eliminate the impact of expenses that do not relate to core
business performance, among other factors. Further, these measures are used by
our leadership and Board of Directors for assessing financial performance,
strategic planning, and forecasting.

These Non-GAAP measures have limitations as analytical tools and should not be
considered in isolation or as a substitute for an analysis of our results as
reported under GAAP.

                                       59
--------------------------------------------------------------------------------


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:

                                                          Three months 

ended

                                                            September 30,
(in thousands, except percentages)                      2021              2020
Total Revenue                                       $    352,766      $    236,811
Net Income (loss)                                   $    (32,590 )    $     10,796
Income tax expense (benefit)                              (5,368 )           2,923
Amortization                                              26,982            15,640
Amortization of deferred issuance costs (1)                2,777            

1,070

Change in contingent consideration                            43               (35 )
Acquisition-related expense (2)                              106            

12,603

Acquisition related long-term incentive                   10,333            

3,419

compensation (3)
Restructuring expense (4)                                  3,360            

3,698

Amortization and expense related to discontinued           1,759            

1,974

prepaid incentives (5)
Other non-operating loss (income) (6)                     16,211            

1,574

Equity-based compensation (7)                              3,371            

2,422

Discontinued programs expense (8)                              -            

694

Other non-recurring expense (9)                                -            

90

IPO related expenses (10)                                 58,620            

-

(Income) / loss from equity method investments in           (176 )            (326 )
related party
Adjusted Income before Income Taxes                 $     85,428      $     56,542
Adjusted tax expense (11)                                (22,479 )         (14,878 )
Adjusted Net Income (12)                            $     62,949      $     41,664
Net Income (loss) Margin (13)                               (9.2 )%            4.6 %
Adjusted Net Income Margin (14)                             17.8 %          

17.6 %

(1)

Interest Expense includes amortization of deferred issuance costs.
(2)
Acquisition-related expense includes diligence, transaction-related, and
integration costs. Compensation and benefits expenses were $2.8 million for the
three months ended September 30, 2020, while General and administrative expenses
contributed to $0.1 million and $9.8 million of the acquisition-related expense
for the three months ended September 30, 2021 and 2020, respectively.
(3)
Acquisition related long-term incentive compensation arises from long-term
incentive plans associated with acquisitions.
(4)
Restructuring and related expense consists of compensation and benefits of $0.9
million and $3.3 million for the three months ended September 30, 2021 and 2020,
respectively, and General and administrative costs including occupancy and
professional services fees of $2.5 million and $0.4 million for the three months
ended September 30, 2021 and 2020, respectively, related to the Restructuring
Plan. The compensation and benefits expense includes severance as well as
employment costs related to services rendered between the notification and
termination dates. See Note 5, Restructuring of the unaudited quarterly
consolidated financial statements for further discussion. The remaining costs
that preceded the Restructuring Plan were associated with organizational design,
other severance, and non-recurring lease costs.
(5)
Amortization and expense related to discontinued prepaid incentive programs -
see Note 15. Employee Benefit Plans, Prepaid and Long-Term Incentives of the
unaudited quarterly consolidated financial statements for further discussion.
(6)
Other non-operating loss (income) includes the change in fair value of the
embedded derivatives on the Redeemable Preferred Units. This change in fair
value of $16.2 million is due to the occurrence of a Realization Event in the
third quarter, which is defined as a Qualified Public Offering or a Sale
Transaction in the Onex Purchase Agreement. See Note 11, Redeemable Preferred
Units of the unaudited quarterly consolidated financial statements for further
discussion. For the three months ended September 30, 2020, non-operating loss
(income) includes the change in fair value of interest rate swaps which were
discontinued in 2020.
(7)
Equity-based compensation reflects non-cash equity-based expense.
(8)
Discontinued programs expense includes $0.1 million of General and
administrative expense for the three months ended September 30, 2020.
Compensation and benefits expense was $0.0 million for the three months ended
September 30, 2020.

                                       60
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These costs were associated with concluding specific programs that are no longer
core to our business. This adjustment also includes $0.6 million related to
additional cancellation activity associated with these programs in the three
months ended September 30, 2020.
(9)
Other non-recurring items include one-time professional services costs
associated with term debt repricing, and one-time non-income tax charges and tax
and accounting consultancy costs associated with potential structure changes.
(10)
Initial public offering related expenses includes $1.0 million of General and
Administrative expense associated with the preparations for Sarbanes-Oxley
compliance, tax and accounting advisory services on IPO-related structure
changes, and Compensation-related expense of $57.6 million for the three months
ended September 30, 2021 related to the revaluation of existing equity awards at
IPO as well as initial period expense for new awards issued at IPO.
(11)
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 Ryan Specialty Group, LLC. For comparability purposes, this
calculation of adjusted tax expense 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 Ryan Specialty Group, LLC.
(12)
Consolidated Adjusted Net Income does not reflect a deduction for the Adjusted
Net Income associated with the non-controlling interest in Ryan Re.
(13)
Net Income Margin is Net Income as a percentage of total revenue.
(14)
Adjusted Net Income Margin is Adjusted Net Income as a percentage of total
revenue.
                                                           Nine months 

ended

                                                             September 30,
(in thousands, except percentages)                       2021              2020
Total Revenue                                        $  1,054,236      $    691,327
Net Income                                           $     27,016      $     74,001
Income tax expense (benefit)                                 (802 )           6,085
Amortization                                               82,095            34,789
Amortization of deferred issuance costs (1)                 8,546           

1,763

Change in contingent consideration                          2,356           

997

Acquisition-related expense (2)                             2,128           

18,206

Acquisition related long-term incentive                    28,837           

4,483

compensation (3)
Restructuring expense (4)                                  13,532           

5,123

Amortization and expense related to discontinued            5,441           

7,037

prepaid incentives (5)
Other non-operating loss (income) (6)                      45,547           

4,066

Equity-based compensation (7)                              11,259           

7,153

Discontinued programs expense (8)                               -           

1,089

Other non-recurring items (9)                                 354           

183

IPO related expenses (10)                                  58,936           

-

(Income) / loss from equity method investments in            (610 )            (413 )
related party
Adjusted Income before Income Taxes                  $    284,635      $    164,562
Adjusted tax expense (11)                                 (74,896 )         (43,301 )
Adjusted Net Income (12)                             $    209,739      $    121,261
Net Income Margin (13)                                        2.6 %            10.7 %
Adjusted Net Income Margin (14)                              19.9 %         

17.5 %

(1)

Interest Expense includes amortization of deferred issuance costs.
(2)
Acquisition-related expense includes diligence, transaction-related, and
integration costs. Compensation and benefits expenses were $4.4 million for the
nine months ended September 30, 2020, while General and administrative expenses
contributed to $2.1 million and $13.8 million of the acquisition-related expense
for the nine months ended September 30, 2021 and 2020, respectively.
(3)
Acquisition related long-term incentive compensation arises from long-term
incentive plans associated with acquisitions.
(4)
Restructuring and related expense consists of compensation and benefits of $9.2
million and $3.3 million for the nine months ended September 30, 2021 and 2020,
respectively, and General and administrative costs including occupancy and
professional

                                       61

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services fees of $4.3 million and $1.8 million for the nine months ended
September 30, 2021 and 2020, respectively, related to the Restructuring Plan.
The compensation and benefits expense includes severance as well as employment
costs related to services rendered between the notification and termination
dates. See Note 5, Restructuring of the unaudited quarterly consolidated
financial statements for further discussion. The remaining costs that preceded
the Restructuring Plan were associated with organizational design, other
severance, and non-recurring lease costs.
(5)
Amortization and expense related to discontinued prepaid incentive programs -
See Note 15, Employee Benefit Plans, Prepaid and Long-Term Incentives of the
unaudited quarterly consolidated financial statements for further discussion.
(6)
Other non-operating loss (income) includes the change in fair value of the
embedded derivatives on the Redeemable Preferred Units. This change in fair
value of $36.9 million is due to the occurrence of a Realization Event in the
third quarter, which is defined as a Qualified Public Offering or a Sale
Transaction in the Onex Purchase Agreement. See Note 11, Redeemable Preferred
Units of the unaudited quarterly consolidated financial statements for further
discussion. For the nine months ended September 30, 2021, non-operating loss
(income) includes costs associated with the extinguishment of a portion of our
deferred debt issuance costs on the term debt. For the nine months ended
September 30, 2020, non-operating loss (income) includes the change in fair
value of interest rate swaps which were discontinued in 2020.
(7)
Equity-based compensation reflects non-cash equity-based expense.
(8)
Discontinued programs expense includes $0.3 million of General and
administrative expense for the nine months ended September 30, 2020.
Compensation and benefits expense was $0.5 million for the nine months ended
September 30, 2020. These costs were associated with concluding specific
programs that are no longer core to our business. This adjustment also includes
$0.3 million related to additional cancellation activity associated with these
programs in the nine months ended September 30, 2020
(9)
Other non-recurring items include one-time professional services costs
associated with term debt repricing, and one-time non-income tax charges and tax
and accounting consultancy costs associated with potential structure changes.
(10)
Initial public offering related expenses include $1.3 million of General and
Administrative expense associated with the preparations for Sarbanes-Oxley
compliance, tax and accounting advisory services on IPO-related structure
changes, and Compensation-related expense of $57.6 million for the three months
ended September 30, 2021 related to the revaluation of existing equity awards at
IPO as well as initial period expense for new awards issued at IPO.
(11)
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 Ryan Specialty Group, LLC. For comparability purposes, this
calculation of adjusted tax expense 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 Ryan Specialty Group, LLC.
(12)
Consolidated Adjusted Net Income does not reflect a deduction for the Adjusted
Net Income associated with the non-controlling interest in Ryan Re.
(13)
Net Income Margin is Net Income as a percentage of total revenue.
(14)
Adjusted Net Income Margin is Adjusted Net Income as a percentage of total
revenue.

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 of the exchange of
100% of the outstanding LLC Common Units (together with the shares of Class B
common stock) into shares of Class A common stock and the effect of unvested
equity awards. This measure does not deduct earnings related to the
non-controlling interest in Ryan Re for the period of time prior to March 31,
2021 when we did not own 100% of the business. The most directly comparable GAAP
financial metric is diluted earnings per share.

Adjusted Diluted Earnings per Share may be useful to an investor in evaluating
our operating performance and efficiency because this measure is widely used by
investors to measure a company's operating performance without regard to items
excluded from the calculation of such measure, which can vary substantially from
company to company depending upon acquisition activity and capital structure.
This measure also eliminates the impact of expenses that do not relate to core
business performance, among other factors. Further, this measure is used by our
leadership and Board of Directors for assessing financial performance, strategic
planning, and forecasting.

This Non-GAAP measure has limitations as an analytical tool and should not be
considered in isolation or as a substitute for an analysis of our results as
reported under GAAP.

                                       62
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A reconciliation of Adjusted Diluted Earnings per Share to Diluted Earnings per
Share, the most directly comparable GAAP measure, for each of the periods
indicated is as follows:

                                                          Three months ended September 30, 2021
                                                                      Adjustments
                                         Plus: Net         Plus: Impact
                                       income (loss)       of all LLC
                                      attributable to     Common Units            Plus:            Plus: Dilutive
                                      RSG LLC before      exchanged for      Adjustments to          impact of            Adjusted
(in thousands,                              the              Class A        

Adjusted Net unvested equity Diluted except per share

                      Organizational         shares              Income                awards          Earnings per
data)                  U.S. GAAP       Transactions            (1)                 (2)                  (3)                Share
Numerator:
Net income (loss)
attributable
to Class A common
shareholders-
diluted              $    (17,115 )   $        15,781     $     (31,256 )   $          95,539     $              -     $      62,949
Denominator:
Weighted-average
shares
of Class A common
stock
outstanding-
diluted                   105,309                   -           142,727                     -               19,684           267,721
Net income (loss)
per
share of Class A
common stock-
diluted              $      (0.16 )   $          0.15     $       (0.12 )   $            0.39     $          (0.02 )   $        0.24


(1)
For comparability purposes, this calculation incorporates the net income (loss)
and weighted average shares of Class A common stock 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.
(2)
Adjustments to Adjusted Net Income are described in the footnotes of the
reconciliation of Adjusted Net Income to Net Income in "Adjusted Net Income and
Adjusted Net Income Margin".
(3)
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
Loss Per Share calculation disclosed in Note 13, Loss Per Share of the unaudited
quarterly consolidated financial statements.
                                                         Nine months ended September 30, 2021
                                                                     Adjustments
                                        Plus: Net         Plus: Impact
                                      income (loss)       of all LLC
                                     attributable to     Common Units            Plus:            Plus: Dilutive
                                     RSG LLC before      exchanged for      Adjustments to          impact of            Adjusted
(in thousands,                             the              Class A          Adjusted Net        unvested equity         Diluted
except per share                     Organizational         shares              Income                awards          Earnings per
data)                 U.S. GAAP       Transactions            (1)                 (2)                  (3)                Share
Numerator:
Net income (loss)
attributable
to Class A common
shareholders-
diluted             $    (17,115 )   $        75,387     $     (31,256 )   $         182,723     $              -     $     209,739
Denominator:
Weighted-average
shares
of Class A common
stock
outstanding-
diluted                  105,309                   -           142,727                     -               19,684           267,721
Net income (loss)
per
share of Class A
common stock-
diluted             $      (0.16 )   $          0.72     $       (0.44 )   $            0.74     $          (0.06 )   $        0.78




(1)
For comparability purposes, this calculation incorporates the net income (loss)
and weighted average shares of Class A common stock 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.
(2)
Adjustments to Adjusted Net Income are described in the footnotes of the
reconciliation of Adjusted Net Income to Net Income in "Adjusted Net Income and
Adjusted Net Income Margin".
(3)
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

                                       63

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Diluted Loss Per Share calculation disclosed in Note 13, Loss Per Share of the unaudited quarterly consolidated financial statements.

                        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 the business provides adequate
liquidity. The primary sources of liquidity are cash and cash equivalents on the
balance sheet, cash flows provided by operations and debt capacity available
under our credit facilities. The primary uses of liquidity are operating
expenses, seasonal working capital needs, business combinations, and
distributions to members. We believe that cash flows from operations and
available credit facilities will be sufficient to meet the liquidity needs,
including principal and interest payments on debt obligations, capital
expenditures, and anticipated working capital requirements, for the next 12
months and beyond.

Cash on the balance sheet includes funds available for general corporate
purposes. We will recognize fiduciary amounts due to others as fiduciary
liabilities and fiduciary amounts collectible and held on behalf of others,
including insurance policyholders, clients, other insurance intermediaries, and
insurance carriers, as fiduciary assets in the Consolidated Balance Sheets.
Fiduciary assets cannot be used for general corporate purposes. Insurance
premiums and claims are held in a fiduciary capacity and the obligation to remit
these funds is recorded as Fiduciary liabilities in 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. Insurance premiums and claim funds are held in a fiduciary capacity.
The levels of fiduciary assets and liabilities can fluctuate significantly
depending on when we collect the premiums, claims prefunding, and refunds, make
payments to markets, carriers, and insureds, and collect funds from clients and
make payments on their behalf, and upon the impact of foreign currency
movements. Fiduciary assets, because of their nature, are generally invested in
very liquid securities with a focus on preservation of principal. To minimize
investment risk, we and our subsidiaries maintain cash holdings pursuant to an
investment policy 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 assets included cash of $635.6 million and $583.1 million
at September 30, 2021 and December 31, 2020, respectively, and fiduciary
receivables of $1,281.0 million and $1,395.1 million at September 30, 2021 and
December 31, 2020, respectively. While we earn investment income on fiduciary
assets held in cash and investments, the fiduciary assets may not be used for
general corporate purposes. Of the $413.7 million of Cash and cash equivalents
on the Consolidated Balance Sheets as of September 30, 2021, $134.4 million is
held in fiduciary accounts representing collected revenue and is available to be
transferred to operating accounts and used for general corporate purposes.

Comparison of Cash Flows for the Nine Months Ended September 30, 2021 and 2020

Cash and cash equivalents increased $200.9 million from $212.8 million at September 30, 2020 to $413.7 million at September 30, 2021. A summary of our cash flows provided by and used for continuing operations from operating, investing, and financing activities is as follows:

Cash Flows from Operating Activities


Net cash provided by operating activities during the nine months ended September
30, 2021 increased $152.1 million from the nine months ended September 30, 2020
to $154.3 million. This amount represents net income reported, as adjusted for
amortization and depreciation, prepaid and deferred equity compensation expense,
as well as the change in commission and fees receivable, accrued compensation
and other current and noncurrent assets and liabilities. Strong organic revenue
growth and the All Risks Acquisition drove operating cash flow performance
period-over-period. While Net income decreased $47.0 million during the nine
months ended September 30, 2021, the increase in the non-cash adjustments for
the amortization of intangibles and debt issuance costs, non-cash Equity
compensation expense, and the timing of payments for long-term incentive plans
associated with the All Risks Acquisition which, increased operating cash flows.

Cash Flows from Investing Activities


Cash flows used for investing activities during the nine months ended September
30, 2021 were $345.5 million, an decrease of $508.6 million compared to the
$854.1 million of cash flows used for investing activities during the nine
months ended September 30, 2020. The main driver of the cash flows used for
investing activities in the nine months ended September 30, 2021 was the
acquisition of the Preferred Blocker Entity from Onex - See Note 4, Merger and
Acquisition Activity in the unaudited quarterly consolidated financial
statements. The main driver of the cash flows used for investing activities in
the nine months ended September 30, 2020 were the All Risks Acquisition and the
final remaining capital commitment on the equity method investment in a Bermuda
based reinsurance

                                       64
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company, Geneva Re, a joint venture between Nationwide Mutual Insurance Company
and Ryan Investment Holdings, LLC an entity under common control - See Note 19,
Related Parties in the unaudited quarterly consolidated financial statements, in
addition to other smaller acquisitions and funding of prepaid incentives of $6.2
million as compared to the repayment of prepaid incentives in the nine months
ended September 30, 2021 of $4.1 million.

Cash Flows from Financing Activities


Cash flows provided by financing activities during the nine months ended
September 30, 2021 were $293.7 million, a decrease of $720.0 million compared to
cash flows provided by financing activities of $1,013.7 million during the nine
months ended September 30, 2020. The main drivers of cash flows provided by
financing activities during the nine months ended September 30, 2021 was the
issuance of Class A common stock in the IPO of $1,455.2 million, offset by the
repurchase of pre-IPO LLC units and Alternative TRA payments of $780.4 million,
the repurchase of Class A common stock in the IPO of $183.6 million, the
repurchase of Redeemable Preferred Units from the Founder Group for $78.3
million, $48.4 million in cash paid for the remaining 53% non-controlling common
equity interest in Ryan Re, $47.0 million of cash distributions paid to pre-IPO
unitholders, and $12.4 million repayment of term debt. The main drivers of cash
flows provided by financing activities during the nine months ended September
30, 2020 were $1,509.4 million of term loan borrowings net of repayments and a
$118.9 million contribution of members' equity and preferred equity, offset by
repayments net of borrowings of $428.7 million on the revolving credit facility,
$70.5 million of debt issuance costs paid, $25.0 million repayment of
subordinated notes, $45.0 million of equity repurchases, and $45.7 million of
cash distributions to members for the nine months ended September 30, 2020.

Other Liquidity Matters

General


On July 1, 2021, in connection with but prior to the IPO, the Company
repurchased 74,990,000 of Redeemable Preferred Units from the Founder Group for
$78.3 million, which reflects the par value of $75.0 million plus unpaid accrued
preferred dividends.

On July 26, 2021, we closed our IPO through which we issued and sold 65,456,020
shares of Class A common stock at a price per share of $23.50. We received
approximately $1,449.7 million in net proceeds after deducting underwriting
discounts and commissions of $76.9 million and offering expenses of $11.6
million. Upon closing of the IPO, we paid (i) $119.9 million to acquire
5,887,570 newly issued LLC Units in RSG LLC, (ii) $343.5 million to acquire the
equity of an entity through which Onex held its preferred unit interest in RSG
LLC (with the 260,000,000 Redeemable Preferred Units of RSG LLC owned by the
entity converted through a series of transactions to 15,387,026 LLC Units
immediately thereafter), (iii) $795.7 million to acquire 35,641,682 outstanding
LLC Units from certain existing holders of LLC Units at a purchase price per LLC
Unit equal to $23.50, the IPO price per share of Class A common stock in our
IPO, (iv) $76.2 million to purchase an additional 3,415,097 newly issued LLC
Units in RSG LLC, and (v) $114.4 million to repurchase and retire 5,122,645
shares of Class A common stock held by Onex. In turn, RSG LLC applied the
balance of the net proceeds it received on account of the newly issued LLC Units
to pay $72.9 million of TRA Alternative Payments arising from the Organizational
Transactions. The remaining $123.2 million of net proceeds are reserved for
general corporate purposes.

On August 10, 2021, the Board of the Company elected to terminate the All Risks
long-term incentive plans. The decision to terminate the plans will not change
the value of, or entitlements to, any benefits thereunder. The benefits accruing
under these plans are required to be paid within twelve months of the
termination date (i.e., by August 10, 2022). These awards remain subject to the
achievement of service conditions. We expect to make payments related to these
long-term incentive plans of $67.3 million in Q4 2021 and $113.0 million in
2022.

We believe our cash and cash equivalents (which includes proceeds from the IPO),
our Credit Facilities and cash from operations will be sufficient to meet our
working capital and capital expenditure needs for at least the next 12 months.
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 our results of
operations.

Credit Facilities

We expect to have sufficient financial resources to meet our business
requirements in 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 finance capital expenditures, we have the ability
to borrow under our credit facilities to accommodate any timing differences in
cash flows.

                                       65
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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 certain of our subsidiaries and are secured by a
lien and security interest in all of our assets. See Note 9, Debt in the notes
to our unaudited quarterly consolidated financial statements for further
information regarding our debt arrangements.

As of December 31, 2020 the interest rate on our term loan was LIBOR, subject to a 75 basis point floor, plus 3.25%.

As of December 31, 2020, we were in compliance with all of the covenants under our credit agreement and there were no events of default for the year ended December 31, 2020.


In March 2021, we completed a repricing of our outstanding term loan borrowings.
As of March 31, 2021, the interest rate on the term loan was LIBOR, plus 3.00%,
subject to a 75 basis point floor. All other terms remain substantially
unchanged.

As of September 30, 2021, 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, 2021.

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 bears interest at LIBOR plus a margin that ranges 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 credit agreement governing the revolving
credit facility were changed in connection with such amendment.

Tax Receivable Agreement


In connection with the Organizational Transactions and IPO, the Company entered
into a TRA with certain pre-IPO LLC Unitholders whereby the Company agreed to
pay to such LLC Unitholders 85% of the benefits that they Company realizes from
increases in the tax basis of the assets of RSG LLC resulting from purchases or
exchanges of LLC Common Units, tax amortization deductions attributable to asset
acquisitions that closed prior to the IPO, and certain tax benefits attributable
to payments that the Company is required to make under the TRA. The Company will
retain the benefit of the remaining 15% of these cash savings.

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 LLC Unitholders and Onex
pursuant to the Tax Receivable Agreement; however, we estimate that such tax
benefits and the related TRA payments may be substantial. 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 Tax Receivable Agreement, we expect
future payments under the Tax Receivable Agreement relating to the purchase by
the Company of LLC Common Units in connection with the IPO will be $282.5
million, in aggregate. Future payments in respect to subsequent exchanges or
financings 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. We expect to fund these payments using cash on hand and
cash generated from operations.

                    Contractual Obligations and Commitments

Our principal commitments consist of contractual obligations in connection with
investing and operating activities. In "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" included in our IPO Prospectus,
we disclosed our total contractual obligations as of December 31, 2020. These
obligations are further described within Note 8, Leases and Note 9, Debt in the
notes to our unaudited consolidated financial statements. See notes to our
unaudited consolidated financial statements for 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 Note 15, Employee Benefit Plans, Prepaid and Long-Term Incentives in the
notes to our unaudited consolidated financial statements we discuss various
Long-Term Incentive Compensation Agreements and their impact. Below we have
outlined the liabilities accrued as of September 30, 2021, the projected future
expense, and the projected timing of future cash outflows associated with these
arrangements.

                                       66
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       Long-term Incentive Compensation Agreements
(in thousands)                         September 30, 2021
Current accrued compensation           $             4,958
Non-current liability                                    -
Total Liability                        $             4,958
Projected future expense                               856
Total Projected Future Cash Outflows   $             5,814

              Projected Future Cash Outflows
2021                                   $                 -
2022                                                 5,373
2023                                                     -
2024                                                     -
Thereafter                                             440


Within Note 15, Employee Benefit Plans, Prepaid and Long-Term Incentives in the
notes to our unaudited consolidated financial statements we discuss the All
Risks Long-Term Incentive Plans and their impact. Below we have outlined the
liabilities accrued as of September 30, 2021, the projected future expense, and
the projected timing of future cash outflows associated with these arrangements.

            All Risks Long-Term Incentive Plan
(in thousands)                          September 30, 2021
Current accrued compensation           $            150,551
Non-current liability                                     -
Total Liability                        $            150,551
Projected future expense                             29,742
Total Projected Future Cash Outflows   $            180,293

              Projected Future Cash Outflows
2021                                   $             67,288
2022                                                113,005
2023                                                      -
2024                                                      -
Thereafter                                                -


Within Note 4, Merger and Acquisition Activity 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, 2021, the projected future expense, and the projected timing of
future cash outflows associated with these contingent consideration agreements.

                                       67

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                       Contingent Consideration
(in thousands)                                      September 30, 2021
Current accounts payable and accrued liabilities   $             14,120
Other non-current liabilities                                     5,263
Total Liability                                    $             19,383
Projected future expense                                            460
Total Projected Future Cash Outflows               $             19,843

                    Projected Future Cash Outflows
2021                                               $                  -
2022                                                             14,359
2023                                                              5,484
2024                                                                  -
Thereafter                                                            -


Outside of the above and routine transactions made in the ordinary course of
business, there have been no material changes to the contractual obligations as
disclosed in our IPO Prospectus.



                         Off-Balance Sheet Arrangements

As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

                   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 our 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, fair value, and
goodwill and intangibles.

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 our IPO Prospectus. Additionally,
the changes to our critical accounting policies and estimates disclosed in our
IPO Prospectus are included in Note 2, Summary of Select Significant Accounting
Policies, to our unaudited consolidated financial statements.

                        Recent Accounting Pronouncements

For a description of our recently adopted accounting pronouncements and recently issued accounting standards not yet adopted, see Note 2, Summary of Select Significant Accounting Policies in the notes to our unaudited consolidated financial statements.

                            Emerging Growth Company

We qualify as an "emerging growth company" pursuant to the provisions of the
Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). For as long as we
are an "emerging growth company," we may take advantage of certain exemptions
from various reporting requirements that are applicable to other public
companies that are not "emerging growth companies," including, but not limited
to, not being required to comply with the auditor attestation requirements of
Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements,
exemptions from the requirements of holding advisory "say-on-pay" votes on
executive compensation and shareholder advisory votes on golden parachute
compensation.

The JOBS Act also permits an emerging growth company like us to take advantage
of an extended transition period to comply with new or revised accounting
standards applicable to public companies. We have elected to "opt out" of this
provision and, as a result, we will comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for public

                                       68
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companies that are not emerging growth companies. The decision to opt out of the extended transition period under the JOBS Act is irrevocable.


We will remain an emerging growth company until the earlier of (i) the last day
of the fiscal year following the fifth anniversary of the completion of our IPO,
(ii) the last day of the fiscal year in which we have total annual gross revenue
of at least $1.07 billion, (iii) the date on which we are deemed to be a large
accelerated filer (this means the market value of common stock that is held by
non-affiliates exceeds $700.0 million as of the end of the second quarter of
that fiscal year), or (iv) the date on which we have issued more than $1.0
billion in non-convertible debt securities during the prior three-year period.
We expect to cease to qualify as an "emerging growth company" after the
completion of our 2021 fiscal year.

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