Ryan Specialty Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Equity-based Compensation

Equity-based Compensation

12 Months Ended

Dec. 31, 2024

Share-Based Payment Arrangement [Abstract]

Equity-based Compensation

EQUITY-BASED COMPENSATION

The Ryan Specialty Holdings, Inc., 2021 Omnibus Incentive Plan (the “Omnibus Plan”) governs, among other things, the

types of awards the Company can grant to employees as equity-based compensation awards. The Omnibus Plan provides

for potential grants of the following awards: (i) stock options, (ii) stock appreciation rights, (iii) restricted stock awards,

(iv) performance awards, (v) other stock-based awards, (vi) other cash-based awards, and (vii) analogous equity awards

made in equity of the LLC.

IPO-Related Awards

As a result of the Organizational Transactions, pre-IPO holders of LLC Units that were granted as incentive awards, which

had historically been classified as equity and vested pro rata over five years, were required to exchange their LLC Units for

either Restricted Stock or Restricted Common Units. Additionally, Reload Options or Reload Class C Incentive Units were

issued to employees in order to protect against the dilution of their existing awards upon exchange to the new awards.

Separately, certain employees were granted one or more of the following new awards: (i) RSUs, (ii) Staking Options, (iii)

RLUs, or (iv) Staking Class C Incentive Units. The terms of these awards are described below. All awards granted as part

of the Organizational Transactions and the IPO are subject to non-linear transfer restrictions for at least the five-year period

following the IPO.

Incentive Awards

As part of the Company’s annual compensation process, the Company issues certain employees and directors equity-based

compensation awards (“Incentive Awards”). Additionally, the Company offers Incentive Awards to certain new hires.

These Incentive Awards typically take the form of (i) RSUs, (ii) RLUs, (iii) Class C Incentive Units, (iv) Stock Options,

(v) PSUs, and (vi) PLUs. The terms of these awards are described below.

Restricted Stock and Restricted Common Units

As part of the Organizational Transactions, certain existing employee unitholders were granted Restricted Stock or

Restricted Common Units in exchange for their LLC Units. The Restricted Stock and Restricted Common Units follow the

vesting schedule of the LLC Units for which they were exchanged. LLC Units historically vested pro rata over 5 years.


	Year Ended December 31, 2024
	Restricted Stock	Weighted Average Grant Date Fair Value	Restricted Common Units	Weighted Average Grant Date Fair Value
Unvested at beginning of period	938,910	$21.15	1,122,564	$23.84
Granted	—	—	—	—
Vested	(516,679)	21.15	(986,573)	23.84
Forfeited	(8,411)	21.15	—	—
Unvested at end of period	413,820	$21.15	135,991	$23.84

Restricted Stock Units (RSUs)

IPO RSUs

Related to the IPO, the Company granted RSUs to certain employees. The IPO RSUs vest either pro rata over 5 years from

the grant date or over 10 years from the grant date, with 10% vesting in each of years 3 through 9 and 30% vesting in year

10.

Incentive RSUs

As part of the Company’s compensation process, the Company issues Incentive RSUs to certain employees. The Incentive

RSUs vest either 100% 3 or 5 years from the grant date, pro rata over 3 or 5 years from the grant date, over 5 years from

the grant date, with one-third of the grant vesting in each of years 3, 4 and 5, or over 7 years from the grant date, with 20%

vesting in each of years 3 through 7.

Upon vesting, RSUs automatically convert on a one-for-one basis into Class A common stock.


	Year Ended December 31, 2024
	IPO RSUs		Incentive RSUs
	Restricted Stock Units	Weighted Average Grant Date Fair Value	Restricted Stock Units	Weighted Average Grant Date Fair Value
Unvested at beginning of period	3,359,778	$23.07	1,819,916	$38.02
Granted	—	—	834,362	53.39
Vested	(608,355)	22.80	(199,772)	38.02
Forfeited	(51,457)	22.69	(79,819)	40.90
Unvested at end of period	2,699,966	$23.14	2,374,687	$43.33

The weighted-average grant date fair value of Incentive RSUs granted during the years ended December 31, 2023 and

2022, was $41.37 and $34.63, respectively. The fair value of RSUs vested during the years ended December 31, 2024,

2023, and 2022, was $46.2 million, $19.8 million, and $19.7 million, respectively.

Stock Options

Reload and Staking Options

As part of the Organizational Transactions and IPO, certain employees were granted Reload Options or Staking Options

that entitle the award holder to future purchases of Class A common stock, on a one-for-one basis, at the IPO price of

$23.50. The Reload Options vest either 100% 3 years from the grant date or over 5 years from the grant date, with one-

third of the grant vesting in each of years 3, 4 and 5. In general, vested Reload Options are exercisable up to the tenth

anniversary of the grant date. The Staking Options vest over 10 years from the grant date, with 10% vesting in each of

years 3 through 9 and 30% vesting in year 10. In general, vested Staking Options are exercisable up to the eleventh

anniversary of the grant date.

Incentive Options

As part of the Company’s compensation process, the Company may issue Incentive Options to certain employees that

entitle the award holder to future purchases of Class A common stock, on a one-for-one basis, at the respective exercise

prices. The Incentive Options vest either over 5 years from the grant date, with one-third of the grant vesting in each of

years 3, 4 and 5 or pro rata over 7 years from the grant date. In general, vested Incentive Options are exercisable up to the

tenth anniversary of the grant date.


	Year Ended December 31, 2024
	Reload Options1	Staking Options1	Incentive Options	Incentive Options Weighted Average Exercise Price
Outstanding at beginning of period	4,473,388	66,667	165,684	$34.39
Granted	—	—	150,000	52.38
Exercised	(550,294)	—	—	—
Forfeited	(52,330)	—	(34,032)	34.39
Outstanding at end of period	3,870,764	66,667	281,652	$43.97

1 As the Reload and Staking Options were one-time grants at the IPO, the weighted average exercise price for any

movements in these awards will perpetually be $23.50. As such, the values are not presented in the table above.

The fair values of Incentive Options granted were determined using the Black-Scholes option pricing model with the

following assumptions:


	Year Ended December 31,
	2024	2022
Volatility	25.0%	27.5%
Time to maturity (years)	7.0	7.0
Risk-free rate	4.2%	2.2%
Dividend yield	0.8%	0.0%
Fair value per option	$17.09	$11.68

There were no Incentive Options granted during the year ended December 31, 2023.

The use of a valuation model for the Options requires management to make certain assumptions with respect to selected

model inputs. Expected volatility was calculated based on the observed volatility for comparable companies. The expected

times to maturity were based on the weighted-average vesting terms and contractual terms of the awards. The risk-free

interest rates were based on U.S. Treasury rates commensurate with the expected life of the respective award. The dividend

yields were based on the Company’s expected dividend rates.

As of December 31, 2024, there were 6,666 and 1,557,285 exercisable Staking and Reload Options, respectively, and no

exercisable Incentive Options. The aggregate intrinsic values and weighted average remaining contractual terms of Stock

Options outstanding and exercisable as of December 31, 2024, were as follows:


Aggregate intrinsic value ($ in thousands):
Reload Options outstanding	$157,385
Reload Options exercisable	63,319
Staking Options outstanding	2,711
Staking Options exercisable	271
Incentive Options outstanding	5,686
Incentive Options exercisable	—
Weighted-average remaining contractual term (in years):
Reload Options outstanding	6.3
Reload Options exercisable	6.2
Staking Options outstanding	7.6
Staking Options exercisable	7.6
Incentive Options outstanding	8.2
Incentive Options exercisable	—

Restricted LLC Units (RLUs)

IPO RLUs

Related to the IPO, the Company granted RLUs to certain employees that vest either pro rata over 5 years from the grant

date or over 10 years from the grant date, with 10% vesting in each of years 3 through 9 and 30% vesting in year 10.

Incentive RLUs

As part of the Company’s compensation process, the Company issues Incentive RLUs to certain employees. The Incentive

RLUs vest either 100% 3 years from the grant date, pro rata over 3 or 5 years from the grant date, or over 7 years from the

grant date, with 20% vesting in each of years 3 through 7.

Upon vesting, RLUs convert on a one-for-one basis into either LLC Common Units or Class A common stock at the

election of the Company.


	Year Ended December 31, 2024
	IPO RLUs		Incentive RLUs
	Restricted LLC Units	Weighted Average Grant Date Fair Value	Restricted LLC Units	Weighted Average Grant Date Fair Value
Unvested at beginning of period	1,448,127	$25.09	482,329	$39.80
Granted	—	—	249,971	51.33
Vested	(154,589)	25.05	(45,588)	35.60
Forfeited	—	—	—	—
Unvested at end of period	1,293,538	$25.10	686,712	$44.30

The weighted-average grant date fair value of Incentive RLUs granted during the years ended December 31, 2023 and

2022, was $41.14 and $34.86, respectively.

Class C Incentive Units

Reload and Staking Class C Incentive Units

As part of the Organizational Transactions and IPO, certain employees were granted Reload Class C Incentive Units or

Staking Class C Incentive Units, which are profits interests. When the value of Class A common stock exceeds the

participation threshold, vested profits interests may be exchanged for LLC Common Units of equal value. On exchange,

the LLC Common Units are immediately redeemed on a one-for-one basis for Class A common stock. The Reload Class C

Incentive Units vest either 100% 3 years from the grant date or over 5 years from the grant date, with one-third of the grant

vesting in each of years 3, 4 and 5. The Staking Class C Incentive Units vest either pro rata over 5 years from the grant date

or over 10 years from the grant date, with 10% vesting in each of years 3 through 9 and 30% vesting in year 10.

Class C Incentive Units

As part of the Company’s compensation process, the Company issues Class C Incentive Units to certain employees, which

are profits interests. When the value of Class A common stock exceeds the participation threshold, vested profits interests

may be exchanged for LLC Common Units of equal value. On exchange, the LLC Common Units are immediately

redeemed on a one-to-one basis for Class A common stock. The Class C Incentive Units vest over 8 years from the grant

date, with 15% vesting in each of years 3 through 7 and 25% vesting in year 8, or over 7 years from the grant date, with

20% vesting in each of years 3 through 7.


	Year Ended December 31, 2024
	Reload Class C Incentive Units	Staking Class C Incentive Units	Class C Incentive Units	Class C Incentive Units Weighted Average Participation Threshold
Unvested at beginning of period	3,911,490	1,876,669	495,822	$36.96
Granted	—	—	—	—
Vested	(2,958,895)	(271,666)	—	—
Forfeited	—	—	—	—
Unvested at end of period	952,595	1,605,003	495,822	$36.80

As the Reload and Staking Class C Incentive Units were one-time grants at the IPO, the weighted average participation

threshold for these awards will be consistent across any type of movement. The weighted average participation threshold

for Reload and Staking Class C Incentive Units was $23.34 and $23.50 as of December 31, 2024 and 2023, respectively.

The decrease in the participation thresholds for the various types of Class C Incentive Units was due to the distributions

declared with respect to these awards during the year ended December 31, 2024.

Valuation Considerations

The Restricted Common Units, once vested, are exchangeable into shares of Class A common stock of the Company on a

one-to-one basis, which entitles the unitholders to TRA payments resulting from 85% of the tax savings generated by the

Company. The various Class C Incentive Units have the same terms as the LLC Common Units, with the exception of their

respective participation thresholds. When the price of the Class A common stock exceeds the participation threshold, the

Class C Incentive Units can be exchanged for LLC Common Units of equal value and are entitled to the same TRA

benefits upon an exchange to Class A common stock. In order to value the Restricted Common Units and Class C Incentive

Units the Company is required to make certain assumptions with respect to select model inputs.

Due to the nature of the underlying risks inherent in TRA payments and the uncertainty as to when the participation

threshold will be satisfied for the various Class C Incentive Units, the Company uses a Monte Carlo simulation to explicitly

model the impact of future stock prices on the size of the amortizable asset, as well as the impact of different levels of

taxable income on the timing of the TRA payments, in a risk-neutral framework. For Class C Incentive Units granted

during the years ended December 31, 2023 and 2022, the Monte Carlo simulation model used the following assumptions:

the simulated closing stock price, the simulated taxable income, the risk-free interest rate, the expected dividend yield, and

the expected volatility and correlation of the Company’s stock price and taxable income. The dividend yield was based on

the Company’s expected dividend rate of 0.0%. The risk-free interest rate range of 2.4%-4.0% was based on U.S. Treasury

rates commensurate with a term of 30 years. The weighted-average grant date fair value of Class C Incentive Units granted

during the years ended December 31, 2023 and 2022, was $22.98 and $19.04, respectively.

Performance Based Awards

Performance Stock Units (PSUs) and Performance LLC Units (PLUs)

Certain employees were granted performance-based equity awards, either PSUs or PLUs, subject to the Company’s

achievement of several defined performance metrics including (i) an Adjusted EBITDAC Margin target, (ii) an Organic

Revenue Growth Compound Annual Growth Rate (“CAGR”) target, and (iii) total shareholder return (“TSR”) CAGR

targets. The TSR CAGR targets are measured from the $52.38 base price of Class A common stock to the sum of (i) the

average of (a) the volume weighted average price (“VWAP”) of the Class A common stock for the fourth quarter of 2027

and (b) the VWAP of the Class A common stock for the first quarter of 2028 and (ii) dividends paid to Class A common

shareholders. The Adjusted EBITDAC Margin and the Organic Revenue Growth CAGR targets, as well as a minimum

threshold for the TSR CAGR target, must be achieved for the awards to vest. If the Adjusted EBITDAC Margin or the

Organic Revenue Growth CAGR targets are not met, or the TSR CAGR is below the minimum threshold, the awards will

be forfeit.

PSUs represent the right to receive Class A common shares and PLUs represent the right to receive LLC Common Units

upon vesting. If the Adjusted EBITDAC Margin and the Organic Revenue Growth CAGR targets are achieved, and the

TSR CAGR meets at least the minimum threshold, the TSR CAGR targets will determine how many Class A common

shares or LLC Common Units, as applicable, the awards vest into. Assuming the minimum threshold is met, the awards

will vest into between 75% and 150% of the applicable stock or units. The payout percentage between the TSR CAGR

range will be determined on a graduated basis. Confirmation of the targets will not occur until after the Company’s fiscal

year 2028 earnings are reported. If the targets are achieved, the awards will vest on April 1, 2029. The probability of

achieving the performance metrics is assessed each reporting period for expense purposes.


	Year Ended December 31, 2024
	PSUs		PLUs
	Performance Stock Units	Weighted Average Grant Date Fair Value	Performance LLC Units	Weighted Average Grant Date Fair Value
Unvested at beginning of period	—	$—	—	$—
Granted	366,996	27.99	487,218	24.40
Vested	—	—	—	—
Forfeited	—	—	—	—
Unvested at end of period	366,996	$27.99	487,218	$24.40

The fair values of the performance-based awards granted during the year ended December 31, 2024, were determined using

the Monte Carlo simulation valuation model with the following assumptions:


	PSUs and PLUs
Volatility	22.1% - 24.7%
Time to maturity (years)	3.4 - 4.1
Risk-free rate	4.1% - 4.2%
RYAN stock price at valuation date	$52.38 - $66.71

The use of a valuation model for the PSUs and PLUs requires management to make certain assumptions with respect to

selected model inputs. Expected volatility was calculated based on the observed volatility for comparable companies. The

time to maturity was based on the stock price CAGR target through the first quarter of 2028. The risk-free interest rate was

based on U.S. Treasury rates commensurate with the performance period. The difference in the grant date fair value of the

PSUs and PLUs relates to the difference in Dividend Equivalents and Distributions Declared (as defined below) each

award is entitled to accrue.

Non-Employee Director Stock Grants

The Company grants RSUs to non-employee directors serving as members of the Company’s Board of Directors (“Director

Stock Grants”), with the exception of one director who has agreed to forgo any compensation for their service to the Board.

The Director Stock Grants are fully vested upon grant. During the years ended December 31, 2024, 2023, and 2022, the

Company granted 22,935, 19,698, and 53,159 Director Stock Grants, respectively, with weighted-average grant date fair

values of $49.07, $40.86, and $36.30, respectively.

Dividend Equivalents and Declared Distributions

A majority of the Company’s unvested equity-based compensation awards, with the exception of Options and Class C

Incentive Units, are entitled to accrue dividend equivalents if the award vests into Class A common stock (“Dividend

Equivalents”) or declared distributions if the award vests into LLC Common Units (“Declared Distributions”) over the

period the underlying award vests. The Dividend Equivalents and Declared Distributions will be paid in cash to award

holders at the time the underlying award vests. If an award holder forfeits their underlying award, the accrued Dividend

Equivalents or Declared Distributions will also be forfeit. Class C Incentive Units do not accrue cash distributions but

instead have their participation thresholds lowered by each declared distribution. Options do not participate in dividends.

As of December 31, 2024, the Company accrued $0.9 million and $0.1 million related to Dividend Equivalents and

Declared Distributions, respectively, in Accounts payable and accrued liabilities, and $2.9 million and $0.4 million related

to Dividend Equivalents and Declared Distributions, respectively, in Other non-current liabilities on the Consolidated

Balance Sheets.

Equity-Based Compensation Expense

As of December 31, 2024, the unrecognized equity-based compensation expense related to each type of equity-based

compensation award described above and the related weighted-average remaining expense period were as follows:


	Amount	Weighted Average Remaining Expense Period (Years)
Restricted Stock	$896	0.4
IPO RSUs	27,358	3.3
Incentive RSUs	56,548	2.3
Reload Options	951	0.6
Staking Options	236	3.7
Incentive Options	2,230	1.5
PSUs	8,866	4.0
Restricted Common Units	458	0.1
IPO RLUs	16,817	4.6
Incentive RLUs	19,278	1.8
Reload Class C Incentive Units	626	0.8
Staking Class C Incentive Units	9,035	4.1
Class C Incentive Units	5,362	3.6
PLUs	9,829	4.0
Total unrecognized equity-based compensation expense	$158,490

The following table includes the equity-based compensation the Company recognized by award type from the view of

expense related to pre-IPO and post-IPO awards. The table also presents the unrecognized equity-based compensation

expense as of December 31, 2024, in the same view.


	Recognized			Unrecognized
	Year Ended December 31,			As of
	2024	2023	2022	December 31, 2024
IPO awards
IPO RSUs and Staking Options	$11,522	$15,760	$22,700	$27,594
IPO RLUs and Staking Class C Incentive Units	9,284	11,424	12,561	25,852
Incremental Restricted Stock and Reload Options	2,820	4,332	7,126	1,399
Incremental Restricted Common Units and Reload Class C Incentive Units	3,328	7,119	11,705	947
Pre-IPO incentive awards
Restricted Stock	1,473	2,387	4,860	448
Restricted Common Units	5,170	1,454	3,079	137
Post-IPO incentive awards
Incentive RSUs	29,769	19,245	7,417	56,548
Incentive RLUs	7,728	4,567	2,148	19,278
Incentive Options	974	466	431	2,230
Class C Incentive Units	2,072	1,906	873	5,362
PSUs	1,407	—	—	8,866
PLUs	2,058	—	—	9,829
Other expense
Director Stock Grants	1,390	1,083	2,000	—
Profit sharing contribution	—	—	2,580	—
Total equity-based compensation expense	$78,995	$69,743	$77,480	$158,490