Ft. Lauderdale, FL – Patriot National, Inc. (NYSE: PN), a national provider of outsourcing solutions to the workers’ compensation insurance industry, recently announced its financial results for its first quarter ended March 31, 2015.
Highlights
For the quarter ended March 31, 2015:
- Reference premium written of $103.0 million
- Gross reference premium written of $119.5 million
- Total revenues and fee income of $43.0 million
- GAAP Net loss of $4.8 million, or $0.19 per share
- Adjusted earnings of $4.6 million, or $0.18 per diluted share
- Adjusted EBITDA of $10.8 million or 25.2% of fee income
- Operating Cash Flow of $8.2 million
Management Commentary
“I am pleased to report that our first quarter results continued to reflect strong execution of our strategy. Gross reference premium written increased to $119.5 million from $77.4 million in the December quarter and total fee income increased to $43 million, up from $40 million. In addition, Adjusted EBITDA grew to $10.8 million from $9.8 million in the last quarter,” said Steven M. Mariano, Chief Executive Officer of Patriot National.
“We also made significant progress in implementing our strategic growth plan. For the first four months of 2015, we completed eight strategic acquisitions. Taken together, these acquisitions significantly enhance our competitive position, bolster our capabilities, expand our carrier relationships and retail agent network, and enhance our robust technology platform. In aggregate we expect these acquisitions to add approximately $18-$20 million in revenue in 2015 and approximately double that in 2016.
“Year-to-date, we have also added numerous new carrier relationships, including, Chubb, Hartford, and Safety National, among others, and expanded our existing relationship with Falls Lake National Insurance, a subsidiary of James River Group Holdings. We now have 64 carrier relationships versus 17 at the time of our IPO. We have also expanded our retail agent network to 1,600 agents from 1,100 at the beginning of the year.
“We are well positioned for continued strong growth in the remainder of 2015. We are excited about the growing demand we are seeing for our technology enabled solutions in the workers’ comp sector and pleased that we are also starting to see opportunities to leverage our successful track record to deliver solutions to other select property and casualty lines.”
Operating Results
Total revenue was $43.0 million for the first quarter of 2015, an increase of 172% from $15.8 million in the first quarter of 2014. The increase in fee income during the first quarter of 2015 was primarily due to transactions which occurred in August of 2014, fee income we generated from new business produced with new carrier clients secured in 2014 and fee income from acquisitions completed in the first quarter of 2015.
Total expenses for the first quarter of 2015 were $51.1 million compared with $13.3 million in the first quarter of 2014. Included in total expenses for the first quarter of 2015 were nonrecurring charges of $13.7 million relating to the extinguishment of debt in connection with our IPO that was completed on January 22, 2015. These charges included early payment penalties, original issue discount (“OID”) and the write-off of deferred financing fees. In addition, a non-cash charge for stock based compensation of $2.5 million was recorded in connection with employee stock grants issued on the IPO date. Partially offsetting the above-mentioned charges, was a decrease of $1.3 million in the fair value of warrant redemption liability.
First quarter 2015 GAAP net loss was $4.8 million, or $0.19 per share, compared with net income of $1.5 million, or $0.11 per share, in the first quarter of 2014. Adjusted earnings for the first quarter of 2015 were $4.6 million, or $0.18 per diluted share, compared with adjusted earnings of $1.5 million, or $0.11 per share, in the first quarter of 2014. Patriot National defines adjusted earnings or loss and adjusted earnings or loss 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 and loss on exchange of units and warrants.
Adjusted EBITDA for the first quarter of 2015 was $10.8 million, compared to adjusted EBITDA of $5.1 million for the first quarter of 2014. 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 the first quarter of 2015 was primarily due to the inclusion of the results from the above mentioned Patriot Care Management and Guarantee Insurance transactions, new business produced with new carrier clients secured in 2014 and fees generated by the companies that we acquired during the quarter.
Operating Cash Flow for the first quarter of 2015 was $8.2 million, compared to Operating Cash Flow of $2.7 million for the first quarter of 2014. 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, 2015, the Company had total debt of $48.7 million and cash and cash equivalents of $11.3 million, compared with $115.6 million and $4.3 million at December 31, 2014, respectively. At March 31, 2015, the Company had $35.3 million available to borrow under its $40.0 million revolving credit facility.
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 from the IPO, repaid $125.1 million outstanding under its previous loan agreements.
Subsequent to the end of the first quarter we increased the borrowing capacity on our $40 million term loan by $10 million.
2015 Guidance
For the full year ending December 31, 2015, Patriot National currently expects the following financial results, excluding the impact of any current year acquisitions:
- 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 $21.5 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%.
As noted above, the Company expects the acquisitions completed through April 24, 2015 will add approximately $18-$20 million in revenue in 2015 and approximately double that range in 2016.
The complete results release is available here: Patriot National First Quarter 2015 Financial Results
Source: Patriot National