Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Patriot National, Inc. | d192649d8k.htm |
Exhibit 99.1
Patriot National Reports Record Fee Income and Adjusted EBITDA
for the First Quarter of 2016
Executed Planned Operating Efficiencies that Result in $7 Million of
Annualized Cost Savings
Reaffirms Full Year 2016 Guidance
FORT LAUDERDALE, FL., May 12, 2016 – Patriot National, Inc. (“Patriot National or “the Company”) (NYSE: PN), a leading provider of technology and outsourcing solutions, today announced its financial results for the quarter ended March 31, 2016.
Highlights:
For the quarter ended March 31, 2016:
(Comparisons to the corresponding prior-year period)
| • | Total Revenues increased 50% to $64.6 million |
| • | Total Fee Income increased 51% to $64.9 million |
| • | GAAP Net Income was $3.4 million, or $0.12 per diluted share |
| • | Adjusted Earnings was $5.8 million, or $0.21 per diluted share |
| • | Adjusted EBITDA of $15.7 million, up 45% |
| • | Operating Cash Flow of $10.3 million, up 25% |
| • | Q1 Operating efficiency initiatives result in $7 million of annualized savings; $400,000 realized during the first quarter |
| • | Patriot Technology Solutions’ PN InsuranceExpert was awarded new contracts from an existing client valued at $3.2 million, with an additional $3.0 million expected from contracts in process |
Recent Developments:
| • | On April 4, 2016, Patriot National announced the upcoming launch of PN BidExpert software, a first of its kind competitive online marketplace to connect insurance carriers, underwriters and risk managers with loss control engineers. |
| • | On March 31, 2016, the Company launched Patriot Risk Consultants, a subsidiary that offers loss and safety consulting services across a broad spectrum of industries nationwide. |
| • | On March 3, 2016, the Board approved a share repurchase program for the Company’s common stock of up to $15 million. To date, the Company has repurchased 1.4 million shares. |
| • | On February 29, 2016, the Board formed a committee of independent directors to explore strategic alternatives to enhance shareholder value. |
Management Commentary
“I am pleased to report that our first quarter 2016 fee income increased 51% to $64.9 million, up from $43.0 million in the first quarter of 2015,” said Steven M. Mariano, Chief Executive Officer of Patriot National. “Our first quarter results were ahead of our internal operating plan and we are reaffirming our full year 2016 outlook of total fee income of $270-$280 million and Adjusted EBITDA of $73-$78 million. Our guidance excludes contribution from any future acquisitions made in 2016.
Patriot National
Page 2
“We have built a comprehensive platform that we believe is a significant competitive advantage that positions us to increase revenue, margins, profitability and ultimately shareholder returns. Today, we work with 139 insurance carriers and 4,100 insurance agencies and we offer a broad menu of products and services beyond workers’ compensation.
“Since our IPO, we have successfully integrated 18 acquisitions, and we have focused our efforts on driving operating efficiencies. During the first quarter, our planned operating efficiency initiatives resulted in $7.3 million in total annualized expense savings, $400,000 of which we recognized in the first quarter. For the remainder of 2016, we will continue to seek additional expense savings through more efficient operations.
“In the first quarter, we had several big technology wins for Patriot Technology Solutions’ PN InsuranceExpert, InsurePay, and Decision UR. PN InsuranceExpert was awarded new contracts from an existing client valued at $3.2 million, with an additional $3.0 million expected from contracts in process. As of the end of the first quarter, InsurePay, our automated payroll solution, now has eight national carrier contracts up from one national carrier contact when we acquired them last June. The revenue from these contracts will accelerate throughout the year. We were also awarded a new national carrier contract for DecisionUR, which provides automated utilization review solutions for injured workers. Our technology team continues to develop new innovative solutions for the insurance industry, such as PN ClaimsAlert, a mobile application that streamlines incident reporting for companies, and PN BidExpert, a first of its kind interactive online marketplace to bring insurance carriers, underwriters and risk managers together with loss control engineers. We anticipate that our robust pipeline of standalone technology customers will continue to gain traction in 2016.
Operating Results
Three Months Ended March 31, 2016
Total revenues were $64.6 million for the first quarter of 2016, compared with $43.0 million in the first quarter of 2015. Total fee income was $64.9 million for the first quarter of 2016, an increase of 50.9% compared with $43.0 million in the first quarter of 2015. The increase in fee income during the first quarter of 2016 was primarily due to the Company’s acquisitions in the trailing twelve months ended March 31, 2016. Organic fee income of $48.4 million grew 12.5% year-over-year.
Total expenses for the first quarter of 2016 were $58.3 million, compared with $51.1 million in the first quarter of 2015. The increase was largely attributable to the acquisitions closed during the trailing twelve months ended March 31, 2015.
First quarter 2016 GAAP net income was $3.4 million, or $0.12 per diluted share, compared with a net loss of $4.8 million, or $0.19 per share, in the first quarter of 2015. Adjusted earnings for the first quarter of 2016 were $5.8 million, or $0.21 per diluted share, compared with Adjusted earnings of $4.4 million, or $0.17 per diluted share, in the first quarter of 2015. Patriot National defines Adjusted earnings and Adjusted earnings per share as net income (loss) adjusted for cost for debt payoff, non-cash stock compensation costs, net realized gains (losses) on investments, increase (decrease) in fair value of warrant redemption liability, acquisition costs, severance expense, public offering costs and the income tax effect related to reconciling items.
Patriot National
Page 3
Adjusted EBITDA for the first quarter of 2016 was $15.7 million, compared to Adjusted EBITDA of $10.8 million for the first quarter of 2015. Patriot National defines Adjusted EBITDA as net income (loss) adjusted for income tax, interest, depreciation and amortization, net realized gains (losses) on investments, increase (decrease) in fair value of warrant redemption liability, costs for debt payoff, non-cash stock compensation costs, acquisition costs, severance expense, public offering costs. The increase in Adjusted EBITDA for the first quarter of 2016 was largely attributable to a combination of organic growth and the Company’s acquisitions closed during the trailing twelve months ended March 31, 2016.
Operating Cash Flow for the first quarter of 2015 was $10.3 million, compared to $8.2 million for the first quarter of 2015. Patriot National defines Operating Cash Flow as Adjusted EBITDA less income tax expense, interest expense and capital expenditures.
Summary Financial Results
| Three Months Ended March 31, | ||||||||||||
| In thousands, except per share amounts |
2016 | 2015 | Change | |||||||||
| Total Revenues GAAP |
$ | 64,607 | $ | 42,993 | 50.3 | % | ||||||
| Total Fee Income |
$ | 64,867 | $ | 42,992 | 50.9 | % | ||||||
| Organic |
$ | 48,384 | $ | 42,992 | 12.5 | % | ||||||
| Acquisitions |
$ | 16,483 | $ | — | n/a | |||||||
| Net Income (Loss) GAAP |
$ | 3,401 | $ | (4,816 | ) | n/a | ||||||
| Earnings (Loss) per diluted share |
$ | 0.12 | $ | (0.19 | ) | n/a | ||||||
| Adjusted EBITDA |
$ | 15,659 | $ | 10,828 | 44.6 | % | ||||||
| Adjusted EBITDA margins |
24.1 | % | 25.2 | % | (4.2 | %) | ||||||
| Adjusted Earnings |
$ | 5,799 | $ | 4,427 | 31.0 | % | ||||||
| Adjusted Earnings Diluted EPS |
$ | 0.21 | $ | 0.17 | 23.5 | % | ||||||
| Operating Cash Flow |
$ | 10,316 | $ | 8,226 | 25.4 | % | ||||||
A Reconciliation of GAAP to Non-GAAP Financial Measures is provided in the following financial tables.
Balance Sheet and Liquidity
At March 31, 2016, the Company had liquidity of $61.8 million, comprised of $11.8 million in cash on hand and $10.1 million available under the revolving credit facility. Additionally, the Company’s credit facility provides for an incremental $40 million term loan through an accordion feature.
Patriot National
Page 4
At March 31, 2016, the Company had total debt of $136.7 million. The Company’s leverage ratio, comprised of total debt to trailing 12 months Adjusted EBITDA (including the proforma effect from acquisitions), was 2.3x.
On March 3, 2016, Patriot National’s board approved a $15 million share repurchase program for the Company’s common stock. During the first quarter of 2016, the Company repurchased 992,182 shares of common stock. Subsequent to March 31, 2016, through May 12, 2016, Patriot National has repurchased an additional 368,275 shares.
Outlook for 2016 Financial Guidance
Patriot National has reiterated the Company’s prior financial guidance for 2016. For the full year ending December 31, 2016, Patriot National currently expects the following financial results.
| (millions) | 2016 Range | |
| Total Fee Income |
$270 - $280 | |
| GAAP Net Income |
$24 - $30 | |
| Adjusted Earnings |
$28 - $34 | |
| Adjusted EBITDA |
$73 - $78 | |
| Operating Cash Flows |
$48 - $54 |
Conference Call and Webcast
A conference call and audio webcast with analysts and investors will be held on Friday, May 13, 2016 at 9 a.m. Eastern Time, to discuss the results and answer questions.
| • | Live conference call: 844-881-0136 (domestic) or 412-317-6745 (international) |
| • | Conference call replay available through June 3, 2016: 877-344-7529 (domestic) or 412-317-0088 (international) |
| • | Replay access code: 10085269 |
| • | Live and archived webcast: ir.patnat.com |
The Company is enabling investors to pre-register for the earnings conference call so that they can expedite their entry into the call and avoid the need to wait for a live operator. In order to pre-register for the call, investors can visit http://dpregister.com/10085269 and enter in their contact information. Investors will then be issued a personalized phone number and pin to dial into the live conference call. Individuals can pre-register any time prior to the start of the conference call on May 13.
Patriot National
Page 5
About Non-GAAP Financial Measures
In addition to reporting financial results in accordance with GAAP, this press release provides information regarding Adjusted earnings and earnings per share (non-GAAP adjusted), Operating Cash Flow and Adjusted EBITDA.
A reconciliation of GAAP net income (loss) to both Adjusted earnings and Adjusted EBITDA can be found in the accompanying table. Adjusted earnings and earnings per share, Operating Cash Flow and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. Patriot National compensates for these limitations by relying primarily on its GAAP results and using Adjusted earnings and earnings per share, Operating Cash Flow and Adjusted EBITDA only as a supplement.
We have presented Adjusted earnings and earnings per share, Operating Cash Flow and Adjusted EBITDA in this release because they are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operational plans. In particular, we believe that the exclusion of the amounts eliminated in calculating Adjusted earnings and earnings per share, Operating Cash Flow and Adjusted EBITDA can provide useful measures for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted earnings and earnings per share, Operating Cash Flow and Adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
Adjusted earnings and earnings per share, Operating Cash Flow and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are as follows:
| • | Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future; |
| • | Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs or tax payments that may represent a reduction in cash available to us; |
| • | Operating Cash Flow does not reflect changes in working capital that may represent a reduction in cash available to us; and |
| • | Other companies, including companies in our industry, may calculate Adjusted Earnings or Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure. |
About Patriot National
Patriot National, Inc. is a national provider of comprehensive technology and outsourcing solutions that help insurance companies and employers mitigate risk, comply with complex regulations and save time and money. Patriot National provides general agency services, technology outsourcing, software solutions, specialty underwriting and policyholder services, claims administration services, self-funded health plans and employment pre-screening services to its insurance carrier clients, employers and other clients. Patriot National is headquartered in Fort Lauderdale, Florida. For more information about Patriot National, please visit www.patnat.com.
Patriot National
Page 6
Forward Looking Statements
This press release may include statements that may be deemed to be forward-looking statements. Words such as “may,” “will,” “should,” “likely,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” “positioned,” “outlook,” “Guidance,” and similar expressions are used to identify these forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties, and there are important factors that could cause actual results to differ materially from those indicated in these statements, including the potential that revenue, net income or Adjusted EBITDA could finally be determined to be below the range discussed in this press release. For example, we may not be able to place insurance policies for our clients, our expenses may be higher than we expect, we may have difficulty integrating new acquisitions, new acquisitions may not perform as anticipated, as well as those matters contained in our filings with the Securities and Exchange Commission. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance or events and that results may differ materially from statements made in or suggested by the forward-looking statements contained in this press release. Any forward-looking statement that we may make in this press release speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments.
Media and Investor Contacts:
Cindy Campbell
Director of Investor Relations
Patriot National, Inc.
(954) 670-2907
CCampbell@patnat.com
Julie MacMedan (310) 622-8242
Financial Profiles, Inc.
PatriotNational@finprofiles.com
# # #
FINANCIAL TABLES TO FOLLOW
Patriot National
Page 7
Patriot National, Inc.
Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| In thousands, except per share amounts |
2016 | 2015 | ||||||
| Revenues |
||||||||
| Total Fee Income |
$ | 64,867 | $ | 42,992 | ||||
| Net investment income |
35 | 1 | ||||||
| Net losses on investments |
(295 | ) | — | |||||
|
|
|
|
|
|||||
| Total Revenues |
64,607 | 42,993 | ||||||
|
|
|
|
|
|||||
| Expenses |
||||||||
| Salaries and related expenses |
23,640 | 14,468 | ||||||
| Commission expense |
13,136 | 8,889 | ||||||
| Outsourced services |
3,570 | 2,462 | ||||||
| Other operating expenses |
9,797 | 6,331 | ||||||
| Acquisition costs |
614 | 604 | ||||||
| Interest expense, including $152 and $85 of deferred loan fees |
1,412 | 1,258 | ||||||
| Depreciation and amortization |
4,717 | 2,303 | ||||||
| Stock compensation expense |
1,424 | 2,535 | ||||||
| Costs related to extinguishment of debt |
— | 13,681 | ||||||
| Decrease in fair value of warrant redemption liability |
— | (1,385 | ) | |||||
|
|
|
|
|
|||||
| Total Expenses |
58,310 | 51,146 | ||||||
|
|
|
|
|
|||||
| Net income (loss) before income tax expense |
6,297 | (8,153 | ) | |||||
| Income tax expense (benefit) |
2,859 | (3,352 | ) | |||||
|
|
|
|
|
|||||
| Net Income (Loss) Including Non-Controlling Interest in Subsidiary |
3,438 | (4,801 | ) | |||||
| Net income attributable to non-controlling interest in subsidiary |
37 | 15 | ||||||
|
|
|
|
|
|||||
| Net Income (Loss) |
$ | 3,401 | $ | (4,816 | ) | |||
|
|
|
|
|
|||||
| Earnings (Loss) Per Common Share |
||||||||
| Basic |
$ | 0.12 | $ | (0.19 | ) | |||
| Diluted |
0.12 | (0.19 | ) | |||||
|
|
|
|
|
|||||
| Weighted Average Common Shares |
||||||||
| Basic |
27,407 | 25,163 | ||||||
| Diluted |
28,037 | 25,163 | ||||||
Patriot National
Page 8
Consolidated Balance Sheets
(In thousands)
(Unaudited)
| In thousands |
March 31, 2016 |
December 31, 2015 |
||||||
| Assets |
||||||||
| Current Assets |
||||||||
| Cash |
$ | 11,774 | $ | 8,372 | ||||
| Short term investments |
— | 3,173 | ||||||
|
|
|
|
|
|||||
| Total cash and investments |
11,774 | 11,545 | ||||||
| Restricted cash |
19,786 | 16,055 | ||||||
| Fee income receivable |
9,877 | 8,159 | ||||||
| Fee income receivable from related party |
20,618 | 27,036 | ||||||
| Net receivable from related parties |
414 | 499 | ||||||
| Other current assets |
2,761 | 2,046 | ||||||
|
|
|
|
|
|||||
| Total current assets |
65,230 | 65,340 | ||||||
| Fixed assets, net |
5,224 | 5,092 | ||||||
| Goodwill |
122,465 | 118,141 | ||||||
| Intangible assets |
82,374 | 75,681 | ||||||
| Forward purchase asset |
48,826 | 28,120 | ||||||
| Advance on facilitation agreement |
2,000 | 2,000 | ||||||
| Other long term assets |
11,329 | 11,428 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 337,448 | $ | 305,802 | ||||
|
|
|
|
|
|||||
| Liabilities and Stockholders’ Equity (Deficit) |
||||||||
| Liabilities |
||||||||
| Deferred claims administration services income |
$ | 9,608 | $ | 10,639 | ||||
| Net advanced claims reimbursements |
3,014 | 1,835 | ||||||
| Income taxes payable |
2,323 | 2,996 | ||||||
| Current earn-out payable |
8,082 | 10,556 | ||||||
| Accounts payable, accrued expenses and other liabilities |
36,961 | 32,809 | ||||||
| Deferred purchase consideration |
1,672 | 6,128 | ||||||
| Revolver borrowings outstanding |
29,932 | 18,032 | ||||||
| Current portion of notes payable |
5,500 | 5,500 | ||||||
| Current portion of capital lease obligation |
1,632 | 2,232 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
98,724 | 90,727 | ||||||
| Earn-out payable |
6,837 | 1,827 | ||||||
| Notes payable, net of deferred loan fees of $2,255 and $2,352 |
97,370 | 98,648 | ||||||
| Warrant redemption liability |
48,826 | 28,120 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
251,757 | 219,322 | ||||||
|
|
|
|
|
|||||
| Stockholders’ Equity (Deficit) |
||||||||
| Total Patriot National, Inc. Stockholders’ Equity (Deficit) |
85,889 | 86,715 | ||||||
| Less non-controlling interest |
(198 | ) | (235 | ) | ||||
|
|
|
|
|
|||||
| Total Stockholders’ Equity (Deficit) |
85,691 | 86,480 | ||||||
|
|
|
|
|
|||||
| Total Liabilities and Stockholders’ Equity (Deficit) |
$ | 337,448 | $ | 305,802 | ||||
|
|
|
|
|
|||||
Patriot National
Page 9
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| In thousands |
2016 | 2015 | ||||||
| Reconciliation from Net Income (Loss) to Adjusted EBITDA: |
||||||||
| Net Income (Loss) |
$ | 3,401 | $ | (4,816 | ) | |||
| Income tax (benefit) expense |
2,859 | (3,352 | ) | |||||
| Interest expense |
1,412 | 1,258 | ||||||
| Depreciation and amortization |
4,717 | 2,303 | ||||||
|
|
|
|
|
|||||
| EBITDA |
12,389 | (4,607 | ) | |||||
| Decrease in fair value of warrant redemption liability |
— | (1,385 | ) | |||||
| Costs related to extinguishment of debt |
— | 13,681 | ||||||
| Net losses on investments |
295 | — | ||||||
| Stock compensation expense |
1,424 | 2,535 | ||||||
| Acquisition costs |
614 | 604 | ||||||
| Severance expense |
927 | — | ||||||
| Public offering costs |
10 | — | ||||||
|
|
|
|
|
|||||
| Adjusted EBITDA |
$ | 15,659 | $ | 10,828 | ||||
|
|
|
|
|
|||||
| Calculation of Adjusted EBITDA margins: |
||||||||
| Total Fee Income |
$ | 64,867 | $ | 42,992 | ||||
| Adjusted EBITDA |
$ | 15,659 | $ | 10,828 | ||||
|
|
|
|
|
|||||
| Adjusted EBITDA margins |
24.1 | % | 25.2 | % | ||||
|
|
|
|
|
|||||
Patriot National
Page 10
| Three Months Ended March 31, | ||||||||
| In thousands, except per share amounts |
2016 | 2015 | ||||||
| Net Income (Loss) |
$ | 3,401 | $ | (4,816 | ) | |||
| Net income attributable to non-controlling interest in subsidiary |
37 | 15 | ||||||
| Income tax expense (benefit) |
2,859 | (3,352 | ) | |||||
|
|
|
|
|
|||||
| Net income (loss) before income tax expense |
6,297 | (8,153 | ) | |||||
| Adjustments to Net income (loss) before income tax expense: |
||||||||
| Decrease in fair value of warrant redemption liability |
— | (1,385 | ) | |||||
| Costs related to extinguishment of debt |
— | 13,681 | ||||||
| Net losses on investments |
295 | — | ||||||
| Stock compensation expense |
1,424 | 2,535 | ||||||
| Acquisition costs |
614 | 604 | ||||||
| Severance expense |
927 | — | ||||||
| Public offering costs |
10 | — | ||||||
|
|
|
|
|
|||||
| Total |
3,270 | 15,435 | ||||||
| Adjusted net income before income tax expense |
9,567 | 7,282 | ||||||
| Income tax expense at statutory rate |
3,731 | 2,840 | ||||||
|
|
|
|
|
|||||
| Adjusted Net Income Including Non-Controlling Interest in Subsidiary |
5,836 | 4,442 | ||||||
| Net income attributable to non-controlling interest in subsidiary |
37 | 15 | ||||||
|
|
|
|
|
|||||
| Adjusted Earnings |
$ | 5,799 | $ | 4,427 | ||||
|
|
|
|
|
|||||
| Calculation of Adjusted Earnings Per Common Share |
||||||||
| Basic |
$ | 0.21 | $ | 0.18 | ||||
| Diluted |
0.21 | 0.17 | ||||||
|
|
|
|
|
|||||
| Weighted Average Common Shares Outsanding |
||||||||
| Basic |
27,407 | 25,163 | ||||||
| Diluted |
28,037 | 25,439 | ||||||
| Statutory Tax Rate |
39.0 | % | 39.0 | % | ||||
Patriot National
Page 11
| Three Months Ended March 31, | ||||||||
| In thousands |
2016 | 2015 | ||||||
| Reconciliation from Net Income (Loss) to Operating Cash Flow: |
||||||||
| Net Income (Loss) |
$ | 3,401 | $ | (4,816 | ) | |||
| Income tax (benefit) expense |
2,859 | (3,352 | ) | |||||
| Interest expense |
1,412 | 1,258 | ||||||
| Depreciation and amortization |
4,717 | 2,303 | ||||||
|
|
|
|
|
|||||
| EBITDA |
12,389 | (4,607 | ) | |||||
| Decrease in fair value of warrant redemption liability |
— | (1,385 | ) | |||||
| Costs related to extinguishment of debt |
— | 13,681 | ||||||
| Net realized (gains) losses on investments |
295 | — | ||||||
| Stock compensation expense |
1,424 | 2,535 | ||||||
| Acquisition costs |
614 | 604 | ||||||
| Severance expense |
927 | — | ||||||
| Public offering costs |
10 | — | ||||||
|
|
|
|
|
|||||
| Adjusted EBITDA |
15,659 | 10,828 | ||||||
|
|
|
|
|
|||||
| Less: Income tax expense |
(2,859 | ) | — | |||||
| Less: Cash interest expense, excluding $152 and $85 of deferred loan fees |
(1,260 | ) | (1,173 | ) | ||||
| Less: Purchase of fixed assets and other long-term assets |
(1,224 | ) | (1,429 | ) | ||||
|
|
|
|
|
|||||
| Operating Cash Flow (1) |
$ | 10,316 | $ | 8,226 | ||||
|
|
|
|
|
|||||
| (1) | Operating Cash Flow is defined as Adjusted EBITDA less income tax expense, interest expense, and capital expenditures |