Ft. Lauderdale, FL – Patriot National, Inc. (NYSE: PN), a national provider of outsourcing solutions to the workers’ compensation insurance industry, today announced its financial results for its fourth quarter and full year ended December 31, 2014.
Highlights
For the quarter ended December 31, 2014:
- Reference premium written of $82.0 million
- Gross reference premium written of $77.4 million
- Total revenues and fee income of $40.2 million
- Net loss of $2.4 million, or $0.13 per share
- Adjusted earnings of $0.1 million, or $0.01 per diluted share
- Adjusted EBITDA of $9.8 million or 24.3% of fee income
- Operating Cash Flow of $3.4 million
For the year ended December 31, 2014:
- Reference premium written of $359.9 million
- Gross reference premium written of $335.1 million
- Total revenues of $117.3 million
- Total fee income of $102.7 million
- Net income of $10.4 million, or $0.62 per diluted share
- Adjusted earnings of $3.0 million, or $0.18 per diluted share
- Adjusted EBITDA of $27.1 million or 26.4% of fee income
- Operating Cash Flow of $4.5 million
Current Quarter 2015
- Raised net proceeds of $98.3 million from the IPO completed on January 22, 2015
- Closed a new $80.0 million credit facility, also in January 2015
Management Commentary
“We appreciate the support of our new shareholders who made our initial public offering a success,” said Steven Mariano, Patriot National’s Chief Executive Officer. “The net proceeds of $98 million along with our new credit facility provides us greater financial flexibility to execute our strategy for both organic and acquisitive growth. Since the IPO, we have made a number of complementary acquisitions to build out our operations and enhance the scope of services we offer to our customers.
“Our fourth quarter results reflect strong execution by our team on all fronts. Gross reference premium written was better than expected, which speaks to the strong reception we are seeing in the marketplace for our outsourced workers’ compensation services. In December, we announced a new carrier relationship with AIG and just recently, we expanded the geographic reach of this program to include 42 states up from 20. We are excited about this program and anticipate further expansion opportunities with our other carrier partners.
“2015 is off to a great start. We are focused on continuing to expand our national platform through organic growth, which is a high priority. At the same time, we look forward to building momentum throughout the year by adding new carriers, expanding services with existing carriers, and pursuing geographic expansion opportunities in our key markets and in new markets. Finally, we will continue to make strategic acquisitions that enhance our competitive position and technology platform and to bolster our team to support future growth.”
Operating Results
Total revenue was $40.2 million for the fourth quarter of 2014, an increase of 190.2 percent from $13.9 million in the fourth quarter of 2013. The increase in total revenue for the fourth quarter of 2014 was primarily due to i) the inclusion of revenue from the acquisition of our managed care services business, Patriot Care Management, which occurred on August 6, 2014; ii) revenue from the contract that we entered into with Guarantee Insurance, also effective August 6, 2014, providing brokerage and policyholders services to Guarantee Insurance in addition to claims administration services that we were already providing; and iii) revenue from brokerage and policyholders services and claims management services that we provided to new insurance carrier clients secured in 2014. Total revenue for 2014 was $117.3 million, an increase of 109.7 percent from $55.9 million in 2013. Full year 2014 revenue includes a $14.0 million net realized gain on investment from the redemption of the MCMC preferred equity in connection with the Patriot Care Management acquisition. Total revenue is comprised of total fee income, net investment income and net realized gains (losses) on investments.
Total fee income was $40.2 million for the fourth quarter of 2014, an increase of 191.8 percent from $13.8 million in the fourth quarter of 2013. The increase in fee income during the fourth quarter of 2014 was primarily due to the above mentioned Patriot Care Management and Guarantee Insurance transactions, as well as fee income we generated from new business produced with new carrier clients secured in 2014. Total fee income for 2014 was $102.7 million, an increase of 83.9 percent from $55.9 million in 2013.
Total expenses for the fourth quarter of 2014 were $41.4 million compared with $18.7 million in the fourth quarter of 2013. For the full year 2014, total expenses were $95.2 million compared with $61.5 million in 2013. Total expenses increased for both the fourth quarter and full year 2014 primarily as a result of the above mentioned transactions.
Fourth quarter 2014 net loss was $2.4 million, or $0.13 per share, compared with a net loss of $5.5 million, or $0.38 per share, in the fourth quarter of 2013. Adjusted earnings for the fourth quarter of 2014 were $0.1 million, or $0.01 per diluted share, compared with an adjusted loss of $5.5 million, or $0.39 per share, in the fourth quarter of 2013. Patriot National defines adjusted earnings or loss and adjusted earnings or loss per share as net income (loss) adjusted for net realized gains (losses) on investments, increase/(decrease) in fair value of warrant redemption liability and, loss on exchange of units and warrants.
For the full year 2014, net income was $10.4 million, or $0.62 per diluted share, compared with a net loss of $6.2 million, or $0.43 per share, in 2013. Adjusted earnings for the full year 2014 were $3.0 million, or $0.18 per diluted share, compared with an adjusted loss of $4.5 million, or $0.32 per share, in 2013.
Adjusted EBITDA for the fourth quarter of 2014 was $9.8 million, compared to adjusted EBITDA of $1.6 million for the fourth quarter of 2013. Adjusted EBITDA for the full year 2014 was $27.1 million, compared to adjusted EBITDA of $6.6 million for 2013. Patriot National defines adjusted EBITDA as net income (loss) adjusted for income tax, interest, depreciation and amortization, net realized gains (losses) on investments, loss on exchange of units and warrants, and a provision for uncollectible fee income. The increase in Adjusted EBITDA for both the fourth quarter and full year 2014 was primarily due to the inclusion of the results from the above mentioned Patriot Care Management and Guarantee Insurance transactions.
Operating Cash Flow for the fourth quarter of 2014 was $3.4 million, compared to Operating Cash Flow of $0.3 million for the fourth quarter of 2013. Operating Cash Flow for the full year 2014 was $4.5 million, compared to Operating Cash Flow of $4.7 million for 2013. Patriot National defines Operating Cash Flow as Adjusted EBITDA less income tax expense, interest expense, and capital expenditures.
Capital Transactions
On January 22, 2015, the company completed its initial public offering (IPO) of 8,315,700 shares (including 965,700 shares sold by PennantPark Entities) of its common stock at an offering price of $14.00 per share and received approximately $98.3 million of net proceeds.
On January 22, 2015, the company entered into an $80.0 million, five-year syndicated credit facility led by BMO Harris Bank, N.A. The new facility consists of a $40.0 million revolving credit facility and a $40.0 million term loan facility. Subsequently, the company made borrowings of $40.0 million (or approximately $38.9 million net of loan fees), and together with the proceeds of its recent IPO, repaid $125.1 million outstanding under its previous loan agreements.
2015 Guidance
For the full year ending December 31, 2015, Patriot National currently expects the following from organic activity:
- Gross reference premium written of $520 million to $540 million, an increase of between 55% and 61%
- Reference premium written of $440 million to $460 million, an increase of between 22% and 28%
- Total fee income of $175 million to $178 million, an increase of between 70% and 73%
- Net income of $12.5 million to $13.5 million, an increase of between 20% and 30% (assumes a 39% effective tax rate)
- Adjusted earnings of $21.6 million to $22.5 million, an increase of between 620% and 650%
- Adjusted EBITDA of $49 million to $51 million, an increase of between 81% and 88%, and
- Operating Cash Flow of $20 million to $25 million, an increase of between 344% and 456%.
The complete earnings release is available here: Patriot National Fourth Quarter and Full Year 2014 Financial Results
Source: Patriot National