BRP Group, Inc. Announces Third Quarter 2019 Results
- Revenue Grows 107% Year-Over-Year to
- Completed Initial Public Offering in
THIRD QUARTER 2019 AND SUBSEQUENT EVENT HIGHLIGHTS
- Revenue more than doubled over the prior-year period to
$38.4 million - Net loss of
$2.3 million - Produced Organic Revenue Growth(1) of 12% over the prior-year period
- “MGA of the Future” revenue(2) grew 43% to
$12.2 million , compared to$8.5 million in the prior-year period - Adjusted EBITDA(3) grew over 100% to
$7.4 million compared to the prior-year period - Adjusted EBITDA Margin(3) of 19%, compared to 18% in the prior-year period
- Closed three Partner acquisitions for
$33.5 million - Completed initial public offering in
October 2019 , raising approximately$242 million in net proceeds
(1) Organic Revenue for the three months ended
(2) “MGA of the Future” was acquired by the Company on
(3) Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures. Reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, is set forth in the reconciliation table accompanying this release.
“With our revenue more than doubling year-over-year, our third quarter results reflect the ongoing successful onboarding of all of our Partners and the benefits we are deriving from the integration of our ‘MGA of the Future’ platform,” said
“As we move forward, we remain keenly focused on growth, maintaining a robust pipeline of potential Partnership opportunities, and building the preeminent destination in our industry,” added Mr. Baldwin. “Additionally, through our ‘MGA of the Future’ platform, we will continue to identify and develop new, exclusive insurance solutions, such as our successful renter's insurance initiative, that leverage our proprietary technology to provide a premier experience for both our team and our clients. This quarter represents another positive step toward our goal of becoming a top 10 broker in the next 10 years while generating significant long-term value for our shareholders.”
THIRD QUARTER 2019 RESULTS
Revenues for the third quarter of 2019 grew over 100% to
Commissions, employee compensation and benefits expenses for the third quarter of 2019 were
Operating expenses for the third quarter of 2019 were
Amortization expense for the third quarter of 2019 was
Interest expense, net for the third quarter of 2019 was
Adjusted EBITDA for the third quarter of 2019 grew
NINE MONTHS ENDED
Revenues for the nine months ended
Total operating expenses for the nine months ended
Adjusted EBITDA for the nine months ended
OPERATING GROUP RESULTS
| ($mm) | For the three months ended September 30, | For the nine months ended September 30, | ||||||||||||
| Revenue | 2019 | 2018 | % change | 2019 | 2018 | % change | ||||||||
| Middle Market | $ | 12.836 | $ | 7.978 | 60.9 | % | $ | 41.482 | $ | 26.320 | 57.6 | % | ||
| Specialty | 16.732 | 3.579 | 367.5 | % | 32.497 | 9.856 | 229.7 | % | ||||||
| MainStreet | 6.642 | 5.020 | 32.3 | % | 18.942 | 15.710 | 20.6 | % | ||||||
| Medicare | 2.173 | 1.963 | 10.7 | % | 8.360 | 7.138 | 17.1 | % | ||||||
| Total | $ | 38.383 | $ | 18.539 | 107.0 | % | $ | 101.281 | $ | 59.024 | 71.6 | % | ||
| Net Income | ||||||||||||||
| Middle Market | $ | 0.295 | $ | (0.783 | ) | NA | $ | 10.475 | $ | 2.943 | 256.1 | % | ||
| Specialty | 2.191 | 0.752 | 191.4 | % | 1.590 | 0.883 | 80.1 | % | ||||||
| MainStreet | 1.015 | 0.979 | 3.7 | % | 4.596 | 3.869 | 18.8 | % | ||||||
| Medicare | 0.388 | 0.468 | -17.1 | % | 2.833 | 2.322 | 22.0 | % | ||||||
| Total | $ | 3.889 | $ | 1.416 | 174.6 | % | $ | 19.494 | $ | 10.017 | 94.6 | % | ||
Note: totals may not foot due to rounding
Revenues for the third quarter of 2019 grew 61% over the prior-year period to
Revenues for the nine months ended
Revenues for the third quarter of 2019 increased 368% over the prior-year period to
Revenues for the nine months ended
The MSI Partnership’s policies in force grew by 35% year-over-year to 355,744 at
Revenues for the third quarter of 2019 grew 32% over the prior-year period to
Revenues for the nine months ended
Revenues for the third quarter of 2019 rose 11% over the prior-year period to
Revenues for the nine months ended
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2019, cash and cash equivalents were
On October 28, 2019, the Company sold an aggregate 18,859,300 shares of its Class A common stock, including 2,459,300 shares pursuant to the underwriters' over-allotment, which subsequently settled on
On
WEBCAST AND CONFERENCE CALL INFORMATION
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ABOUT
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release may contain various “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which represent BRP Group’s expectations or beliefs concerning future events. Forward-looking statements are statements other than historical facts and may include statements that address future operating, financial or business performance or BRP Group’s strategies or expectations. In some cases, you can identify these statements by forward-looking words such as “may”, “might”, “will”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “projects”, “potential”, “outlook” or “continue”, or the negative of these terms or other comparable terminology. Forward-looking statements are based on management’s current expectations and beliefs and involve significant risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by these statements.
Factors that could cause actual results or performance to differ from the expectations expressed or implied in such forward-looking statements include, but are not limited to, those described under the caption “Risk Factors” in BRP Group’s prospectus relating to its Registration Statement on Form S-1 (Registration Number 333-233908) filed with the
CONTACTS
INVESTOR RELATIONS
Investor Relations
(813) 259-8032
IR@baldwinriskpartners.com
PRESS
Baldwin Risk Partners
(813) 418-5166
Rachel.carr@baldwinriskpartners.com
BALDWIN RISK PARTNERS, LLC AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Commissions and fees | $ | 38,383,455 | $ | 18,538,628 | $ | 101,280,661 | $ | 59,023,915 | ||||||||
| Operating expenses: | ||||||||||||||||
| Commissions, employee compensation and benefits | 26,787,773 | 12,407,704 | 67,067,347 | 37,887,003 | ||||||||||||
| Operating expenses | 6,320,213 | 3,588,312 | 16,711,495 | 9,306,295 | ||||||||||||
| Amortization expense | 3,081,578 | 722,971 | 6,792,779 | 1,812,542 | ||||||||||||
| Change in fair value of contingent consideration | 535,214 | 350,462 | (3,221,909 | ) | 877,235 | |||||||||||
| Depreciation expense | 184,179 | 126,531 | 460,364 | 366,577 | ||||||||||||
| Total operating expenses | 36,908,957 | 17,195,980 | 87,810,076 | 50,249,652 | ||||||||||||
| Operating income | 1,474,498 | 1,342,648 | 13,470,585 | 8,774,263 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense, net | (3,784,866 | ) | (1,292,016 | ) | (8,998,308 | ) | (5,012,174 | ) | ||||||||
| Other income (expense), net | 4,792 | 1,816 | 4,792 | (210,096 | ) | |||||||||||
| Total other expense | (3,780,074 | ) | (1,290,200 | ) | (8,993,516 | ) | (5,222,270 | ) | ||||||||
| Net income (loss) and comprehensive income (loss) | (2,305,576 | ) | 52,448 | 4,477,069 | 3,551,993 | |||||||||||
| Less: net income and comprehensive income attributable to noncontrolling interests | 1,420,204 | 863,351 | 3,873,178 | 2,709,716 | ||||||||||||
| Net income (loss) and comprehensive income (loss) attributable to Baldwin Risk Partners, LLC and Subsidiaries | $ | (3,725,780 | ) | $ | (810,903 | ) | $ | 603,891 | $ | 842,277 | ||||||
BALDWIN RISK PARTNERS, LLC AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
| September 30, 2019 | December 31, 2018 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 11,106,139 | $ | 7,995,118 | ||||
| Restricted cash | 6,403,532 | — | ||||||
| Premiums, commissions and fees receivable, net | 45,234,625 | 29,385,275 | ||||||
| Prepaid expenses and other current assets | 5,663,632 | 1,096,430 | ||||||
| Due from related parties | 44,272 | 116,776 | ||||||
| Total current assets | 68,452,200 | 38,593,599 | ||||||
| Property and equipment, net | 2,794,425 | 2,148,264 | ||||||
| Deposits and other non-current assets | 962,840 | 102,698 | ||||||
| Deferred financing costs, net | 7,362,927 | 590,249 | ||||||
| Deferred commission expense | 3,418,494 | 2,881,721 | ||||||
| Intangible assets, net | 92,392,570 | 29,743,832 | ||||||
| Goodwill | 170,815,670 | 65,764,251 | ||||||
| Total assets | $ | 346,199,126 | $ | 139,824,614 | ||||
| Liabilities, Mezzanine Equity and Members’ Equity (Deficit) | ||||||||
| Current liabilities: | ||||||||
| Premiums payable to insurance companies | $ | 42,889,326 | $ | 23,195,610 | ||||
| Producer commissions payable | 7,126,847 | 3,955,373 | ||||||
| Accrued expenses | 8,661,813 | 2,764,870 | ||||||
| Contract liabilities | 4,349,299 | 1,449,848 | ||||||
| Other current liabilities | 204,738 | 1,032,405 | ||||||
| Current portion of long-term debt | — | 527,005 | ||||||
| Current portion of contingent earnout liabilities | 2,646,695 | 301,905 | ||||||
| Total current liabilities | 65,878,718 | 33,227,016 | ||||||
| Advisor incentive liabilities | 3,085,578 | 2,346,868 | ||||||
| Revolving lines of credit | 105,000,000 | 33,860,994 | ||||||
| Long-term debt, less current portion | — | 1,497,472 | ||||||
| Related party debt | 88,425,293 | 36,880,334 | ||||||
| Contingent earnout liabilities, less current portion | 32,497,049 | 8,947,005 | ||||||
| Other long-term liabilities | 361,481 | 261,684 | ||||||
| Total liabilities | 295,248,119 | 117,021,373 | ||||||
| Commitments and contingencies | ||||||||
| Mezzanine equity: | ||||||||
| Redeemable noncontrolling interest | 82,607,652 | 46,207,466 | ||||||
| Redeemable members’ capital | 172,238,469 | 39,353,918 | ||||||
| Members’ equity (deficit): | ||||||||
| Members’ capital (7,031,813 and 6,796,052 units authorized, issued and outstanding, of which 1,927,105 and 2,056,525 are included in redeemable members' capital, at September 30, 2019 and December 31, 2018, respectively) | — | — | ||||||
| Member note receivable | (240,438 | ) | (89,896 | ) | ||||
| Accumulated deficit | (206,042,198 | ) | (63,605,576 | ) | ||||
| Noncontrolling interest | 2,387,522 | 937,329 | ||||||
| Total members’ equity (deficit) | (203,895,114 | ) | (62,758,143 | ) | ||||
| Total liabilities, mezzanine equity and members’ equity (deficit) | $ | 346,199,126 | $ | 139,824,614 | ||||
BALDWIN RISK PARTNERS, LLC AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| For the Nine Months Ended September 30, | ||||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 4,477,069 | $ | 3,551,993 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 7,253,143 | 2,179,119 | ||||||
| Amortization of deferred financing costs | 1,117,037 | 91,665 | ||||||
| Loss on modification and extinguishment of debt | 114,839 | — | ||||||
| Issuance of Voting Common Units to redeemable common equity holder | — | 2,892,145 | ||||||
| Issuance and vesting of Management Incentive Units to Members | 663,487 | 190,051 | ||||||
| Participation unit compensation | 149,797 | 93,750 | ||||||
| Stock-based compensation expense | 109,810 | 930,155 | ||||||
| Change in fair value of contingent consideration | (3,221,909 | ) | 877,235 | |||||
| Changes in operating assets and liabilities, net of effect of acquisitions: | ||||||||
| Premiums, commissions and fees receivable, net | (441,086 | ) | 1,309,824 | |||||
| Prepaid expenses and other assets | (384,176 | ) | (107,429 | ) | ||||
| Due from related parties | 72,504 | (26,273 | ) | |||||
| Deferred commission expense | (536,773 | ) | (633,078 | ) | ||||
| Accounts payable, accrued expenses and other current liabilities | 5,015,551 | (1,825,051 | ) | |||||
| Contract liabilities | 105,467 | 1,005,148 | ||||||
| Other long-term liabilities | — | (552,529 | ) | |||||
| Net cash provided by operating activities | 14,494,760 | 9,976,725 | ||||||
| Cash flows from investing activities: | ||||||||
| Capital expenditures | (1,464,723 | ) | (364,560 | ) | ||||
| Investment in business venture | (200,000 | ) | — | |||||
| Cash consideration paid for asset acquisitions, net of cash received | (671,342 | ) | (6,137,830 | ) | ||||
| Cash consideration paid for business combinations, net of cash received | (99,486,015 | ) | (35,091,989 | ) | ||||
| Net cash used in investing activities | (101,822,080 | ) | (41,594,379 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Payment of contingent earnout consideration | — | (2,892,000 | ) | |||||
| Payment of guaranteed earnout consideration | (812,500 | ) | (62,500 | ) | ||||
| Net borrowings on revolving line of credit | 71,139,006 | 23,878,188 | ||||||
| Proceeds from related party debt | 51,544,959 | 23,520,000 | ||||||
| Payments on long-term debt | (2,024,477 | ) | (420,369 | ) | ||||
| Payments of debt issuance costs | (2,495,199 | ) | (355,660 | ) | ||||
| Proceeds from advisor incentive buy-ins | 628,902 | 81,510 | ||||||
| Proceeds from issuance of Non-Voting Common Units to Members | 1,157,258 | 154,496 | ||||||
| Repurchase of Voting Common Units from Members | (12,500,000 | ) | — | |||||
| Contributions | 35,307 | 53,204 | ||||||
| Distributions | (9,831,383 | ) | (7,854,841 | ) | ||||
| Net cash provided by financing activities | 96,841,873 | 36,102,028 | ||||||
| Net increase in cash and cash equivalents and restricted cash | 9,514,553 | 4,484,374 | ||||||
| Cash and cash equivalents and restricted cash at beginning of period | 7,995,118 | 3,123,413 | ||||||
| Cash and cash equivalents and restricted cash at end of period | $ | 17,509,671 | $ | 7,607,787 | ||||
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA, Adjusted EBITDA Margin, Organic Revenue and Organic Revenue Growth are not measures of financial performance under GAAP and should not be considered substitutes for GAAP measures, including commissions and fees (for Organic Revenue and Organic Revenue Growth) or net income (for Adjusted EBITDA and Adjusted EBITDA Margin), which we consider to be the most directly comparable GAAP measures. These non-GAAP financial measures have limitations as analytical tools, and when assessing our operating performance, you should not consider these non-GAAP financial measures in isolation or as substitutes for commissions and fees, net income or other consolidated income statement data prepared in accordance with GAAP. Other companies in our industry may define or calculate these non-GAAP financial measures differently than we do, and accordingly these measures may not be comparable to similarly titled measures used by other companies.
Adjusted EBITDA eliminates the effects of financing, depreciation and amortization. We define Adjusted EBITDA as net income (loss) before interest, taxes, depreciation, amortization and certain items of income and expense, including share-based compensation expense, transaction-related expenses related to forming Partnerships including severance, and certain non-recurring costs, including those related to the Offering and loss on modification and extinguishment of debt. We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate to business performance, and that the presentation of this measure enhances an investor's understanding of our financial performance.
Adjusted EBITDA Margin is Adjusted EBITDA divided by commissions and fees. Adjusted EBITDA is a key metric used by management and our board of directors to assess our financial performance. We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate to business performance, and that the presentation of this measure enhances an investor’s understanding of our financial performance. We believe that Adjusted EBITDA Margin is helpful in measuring profitability of operations on a consolidated level.
Adjusted EBITDA and Adjusted EBITDA Margin have important limitations as analytical tools. For example, Adjusted EBITDA and Adjusted EBITDA Margin:
- do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;
- do not reflect changes in, or cash requirements for, our working capital needs;
- do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations;
- do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;
- do not reflect stock-based compensation expense and other non-cash charges; and
- exclude certain tax payments that may represent a reduction in cash available to us.
We calculate Organic Revenue Growth based on commissions and fees excluding (i) the first twelve months of commissions and fees generated from Partnerships and (ii) the impact of the change in our method of accounting for commissions and fees from contracts with customers as a result of the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, effective
Adjusted EBITDA
The following table reconciles Adjusted EBITDA to net income (loss), which we consider to be the most directly comparable GAAP financial measure to Adjusted EBITDA:
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Net income (loss) | $ | (2,305,576 | ) | $ | 52,448 | $ | 4,477,069 | $ | 3,551,993 | |||||||
| Adjustments to net income (loss): | ||||||||||||||||
| Amortization expense | 3,081,578 | 722,971 | 6,792,779 | 1,812,542 | ||||||||||||
| Depreciation expense | 184,179 | 126,531 | 460,364 | 366,577 | ||||||||||||
| Interest expense, net | 3,784,866 | 1,292,016 | 8,998,308 | 5,012,174 | ||||||||||||
| Change in fair value of contingent consideration | 535,214 | 350,462 | (3,221,909 | ) | 877,235 | |||||||||||
| Share-based compensation | 381,901 | 407,355 | 773,297 | 1,120,206 | ||||||||||||
| Transaction-related Partnership expenses | 500,048 | 312,195 | 1,535,445 | 681,590 | ||||||||||||
| Offering expenses | 1,123,509 | — | 2,214,113 | — | ||||||||||||
| Severance related to Partnership activity | — | — | 300,000 | — | ||||||||||||
| Other | 92,254 | 20,000 | 275,870 | 20,000 | ||||||||||||
| Adjusted EBITDA | $ | 7,377,973 | $ | 3,283,978 | $ | 22,605,336 | $ | 13,442,317 | ||||||||
| Adjusted EBITDA Margin | 19 | % | 18 | % | 22 | % | 23 | % | ||||||||
Organic Revenue and Organic Revenue Growth
The following table reconciles Organic Revenue to commissions and fees, which we consider to be the most directly comparable GAAP financial measure to Organic Revenue:
| For the Three Months Ended September 30, 2019 | For the Nine Months Ended September 30, 2019 | |||||||
| Commissions and fees | $ | 38,383,455 | $ | 101,280,661 | ||||
| Partnership commissions and fees (1) | (17,519,871 | ) | (36,748,949 | ) | ||||
| Organic Revenue | $ | 20,863,584 | $ | 64,531,712 | ||||
| Organic Revenue Growth (2) | 2,297,499 | 5,479,349 | ||||||
| Organic Revenue Growth (2) | 12 | % | 9 | % | ||||
__________
- Includes the first twelve months of such commissions and fees generated from newly acquired Partners.
- Organic Revenue for the three and nine months ended
September 30, 2018 used to calculate Organic Revenue Growth for the three and nine months endedSeptember 30, 2019 was$18.6 million and$59.1 million , respectively, which is adjusted to reflect revenues from Partnerships that reach the twelve-month owned mark during the three and nine months endedSeptember 30, 2019 .
COMMONLY USED DEFINED TERMS
The following terms have the following meanings throughout this press release unless the context indicates or requires otherwise:
| Clients | Our insureds |
| Colleagues | Our employees |
| Exchange Act | Securities Exchange Act of 1934, as amended |
| Fiduciary Partners | Fiduciary Partners Retirement Group, Inc., Fiduciary Partners Group, LLC and Fiduciary Partners Investment Consulting, LLC, a Middle Market Partnership effective July 1, 2019 |
| Foundation Insurance | Foundation Insurance of Florida, LLC, a MainStreet Partnership effective August 1, 2019 |
| Lykes | Lykes Insurance, Inc., a Middle Market Partnership effective March 1, 2019 |
| MSI | Millennial Specialty Insurance LLC, a Specialty Partnership effective April 1, 2019 |
| Operating Groups | Our reportable segments |
| Partners | Companies that we have acquired, or in the case of asset acquisitions, the producers |
| Partnerships | Strategic acquisitions made by the Company |
| SEC | U.S. Securities and Exchange Commission |
| Securities Act | Securities Act of 1933, as amended |
| Villages Credit Agreement | Amended and restated credit agreement between Baldwin Risk Partners, LLC as borrower and Villages as lender entered into on March 13, 2019 |
Source: Baldwin Risk Partners