TWFG, Inc.(TWFG) - 2024 Q3 - Quarterly Report

Financial Performance - Net income for the three months ended September 30, 2024, was $6.893 million, a decrease of 9.4$7.608 million in the same period of 2023[10]. - Comprehensive income attributable to TWFG, Inc. for the three months ended September 30, 2024, was $1.121 million, down from$7.573 million in the same period of 2023[10]. - Net income from continuing operations for the nine months ended September 30, 2024, was $20,440,000, compared to$20,047,000 for the same period in 2023, reflecting an increase of approximately 2%[21]. - Adjusted Net Income for the three months ended September 30, 2024, was $8,343 million, compared to$8,686 million in the same period of 2023[178]. - Adjusted Net Income Margin for the three months ended September 30, 2024, was 15.3%, down from 18.2% in the same period of 2023[178]. - Net income for the three months ended September 30, 2024, was $6.89 million, a decrease from$7.61 million in the same period of 2023, representing a decline of 9.4%[184]. Revenue Growth - Total revenues for the three months ended September 30, 2024, were $54.64 million, an increase of 14.1$47.71 million for the same period in 2023[68]. - Total revenues for the nine months ended September 30, 2024, were $154.22 million, up from$132.94 million in the same period of 2023[126]. - Commission income for the nine months ended September 30, 2024, was $139.45 million, up 13.9$122.45 million in the prior year[68]. - Total revenues for the three months ended September 30, 2024, increased by $6.9 million, or 14.5$4.2 million, or 9.7%, increase in commission income[130]. - Fee income for Q3 2024 was $2.89 million, representing 5$234.127 million as of September 30, 2024, compared to $75.108 million at December 31, 2023[13]. - Total liabilities decreased to$44.959 million as of September 30, 2024, from $84.386 million at December 31, 2023[13]. - Total assets increased to$313.093 million as of September 30, 2024, from $115.437 million at December 31, 2023[13]. - The balance at September 30, 2024, included total stockholders' equity of$268,134,000, reflecting a strong financial position[18]. Cash Flow and Financing - Cash provided by operating activities from continuing operations increased to $28,879,000 for the nine months ended September 30, 2024, up from$23,264,000 in the prior year, representing a growth of about 24%[21]. - The company reported a net cash provided by financing activities from continuing operations of $147,147,000 for the nine months ended September 30, 2024, compared to a net cash used of$6,086,000 in the prior year[21]. - The company repaid the outstanding balance of the Revolving Facility amounting to $41.0 million on August 5, 2024, using a portion of the net proceeds from the IPO[189]. - As of September 30, 2024, cash and cash equivalents were$191.2 million, significantly up from $39.3 million as of December 31, 2023[188]. IPO and Capital Structure - TWFG, Inc. completed an IPO on July 19, 2024, issuing 11,000,000 shares of Class A common stock at an initial price of$17.00 per share, raising significant capital for the company[25]. - The company used approximately $41.0 million of the IPO proceeds to repay outstanding debt under the Revolving Credit Agreement, enhancing its financial stability[30]. - The company issued 11,000,000 shares of Class A Common Stock at$17.00 per share during its IPO, resulting in net proceeds of approximately $192.9 million after deducting underwriting discounts and commissions[88][90]. Expenses and Cost Management - Total operating expenses for the three months ended September 30, 2024, were$46,895,000, compared to $39,808,000 in the same period in the prior year[130]. - Salaries and employee benefits increased by$4.9 million, or 145.8%, to $8.3 million for the three months ended September 30, 2024, driven by branch conversions and asset acquisitions[142]. - Other administrative expenses rose by$2.0 million, or 71.2%, to $4.8 million for the three months ended September 30, 2024, mainly due to increased consultant fees and IT costs[143]. Strategic Acquisitions - The company completed five asset acquisitions in 2023 with an annual revenue exceeding$0.5 million for a total purchase price of $19.4 million[118]. - In January 2024, the company acquired assets of nine independent branches for$40.8 million and remaining interests in partially owned branches for $5.2 million[119]. - The company purchased the assets of Wade for a total consideration of$4.3 million, with $3.0 million paid in cash and$1.3 million settled through an interest-bearing note[102]. Tax and Regulatory Matters - The estimated effective tax rate for the three months ended September 30, 2024, was 5.96%, significantly lower than the statutory rate of 21%[64]. - The company anticipates tax benefits from LLC Unit exchanges could aggregate to approximately $182.4 million over the next 15 years, with$155.1 million payable to Continuing Pre-IPO LLC Members[205]. Market Position and Future Outlook - TWFG Holding is positioned as an independent distribution platform for personal and commercial insurance in the U.S., with a focus on expanding its market presence[25]. - The company has plans for future market expansion and product development, leveraging its strong financial position post-IPO[25]. - The company expects to have sufficient financial resources to meet its business requirements in the next 12 months, including servicing debt and financing capital expenditures[204].