December 16, 2017

Patriot National Reports Record Fee Income and Adjusted EBITDA for Q1 2016

Ft. Lauderdale, FL – Patriot National, Inc. (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.

“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 DecisionUR. 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.

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 and 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.

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.

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.

The complete results release is available here: Patriot National First Quarter 2016 Results

Source: Patriot National

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