SEC Filing | Baldwin Risk Partners

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_____________________________________________________________________________________________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

______________________________

(Mark One)



x	Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2019



¨	Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to _________

Commission File Number: 001-39095

______________________________

BRP GROUP, INC.

(Exact name of registrant as specified in its charter)

______________________________

4010 W. Boy Scout Blvd., Tampa, Florida 33607

(Address of principal executive offices) (Zip code)

(866) 279-0698

(Registrant's telephone number, including area code)

Not Applicable

(Former Name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share	BRP	Nasdaq Global Select Market

______________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No c

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No c

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	c	Accelerated filer	c
Non-accelerated filer	c	Smaller reporting company	x
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. c

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes c No x

The number of outstanding shares of the registrant’s Class A common stock, $0.01 par value, as of November 27, 2019 was approximately 18,859,300.

BRP GROUP, INC.

INDEX



			Page
PART I. FINANCIAL INFORMATION
	ITEM 1.	Financial Statements (Unaudited)	5
	ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	34
	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	48
	ITEM 4.	Controls and Procedures	49
PART II. OTHER INFORMATION			49
	ITEM 1.	Legal Proceedings	49
	ITEM 1A.	Risk Factors	49
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
	ITEM 3.	Defaults Upon Senior Securities	50
	ITEM 4.	Mine Safety Disclosures	50
	ITEM 5.	Other Information	50
	ITEM 6.	Exhibits	51

SIGNATURES			52

Note Regarding Forward-Looking Statements

We have made statements in this report, including matters discussed under Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, Part II, Item 1. Legal Proceedings, Part II, Item 1A. Risk Factors and in other sections of this report, that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed under Part II, Item 1A. Risk Factors. You should specifically consider the numerous risks outlined under Risk Factors in our prospectus (the “Prospectus”) relating to our Registration Statement on Form S-1, as amended (Registration No. 333-233908), filed with the SEC pursuant to Rule 424(b) under the Securities Act.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this report to conform our prior statements to actual results or revised expectations.

Commonly Used Defined Terms

The following terms have the following meanings throughout this Quarterly Report on Form 10-Q unless the context indicates or requires otherwise:


Book of Business	Insurance policies bound by us with our Partners on behalf of our Clients


Cadence Credit Agreement	Third amended and restated credit agreement between Baldwin Risk Partners, LLC as borrower and Cadence Bank, N.A. as lender entered into on March 13, 2019 and subsequently amended on September 21, 2019 with such amendment subsequently amended on October 18, 2019


Clients	Our insureds


Colleagues	Our employees


Credit Agreements	The Cadence Credit Agreement and the Villages Credit Agreement, collectively


Exchange Act	Securities Exchange Act of 1934, as amended


Insurance Company Partners	Insurance companies with which we have a contractual relationship


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


Risk Advisors	Our producers


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 Holding Company of the Villages, Inc. as lender entered into on March 13, 2019

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



		Page
Financial Statements
BRP Group, Inc.
Balance Sheet (Unaudited)		6
Notes to Balance Sheet (Unaudited)		7

Baldwin Risk Partners, LLC and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)		9
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)		11
Condensed Consolidated Statements of Members' Equity (Deficit) and Mezzanine Equity (Unaudited)		12
Condensed Consolidated Statements of Cash Flows (Unaudited)		14
Notes to Condensed Consolidated Financial Statements (Unaudited)		16

BRP GROUP, INC.

Balance Sheet

(Unaudited)



	September 30, 2019
Assets
Current assets:
Cash	$	—
Total assets	$	—

Commitments and contingencies (Note 3)

Stockholders' Equity
Stockholders' Equity:
Common stock, par value $0.01 per share, 1,000 shares authorized, no shares issued or outstanding	$	—
Total stockholders' equity	$	—

See accompanying Notes to Balance Sheet.

BRP GROUP, INC.

Notes to Balance Sheet

(Unaudited)

1. Business and Basis of Presentation

BRP Group, Inc. (“BRP Group”) was incorporated in the state of Delaware on July 1, 2019. BRP Group was formed for the purpose of completing an initial public offering of its common stock and related transactions in order to carry on the business of Baldwin Risk Partners, LLC (“BRP”) as a publicly-traded entity.

The accompanying balance sheet has been prepared in accordance with accounting principles generally accepted in the United States of America. Statements of income, stockholders' equity and cash flows have not been presented because BRP Group has not engaged in any business or other activities except in connection with its formation.

2. Stockholders' Equity

BRP Group is authorized to issue 1,000 shares of stock with the par value of $0.01 per share.

3. Commitments and Contingencies

BRP Group may be subject to legal proceedings that arise in the ordinary course of business. There are currently no proceedings to which BRP Group is a party, nor does BRP Group have knowledge of any proceedings that are threatened against it.

4. Subsequent Events

On October 28, 2019, BRP Group completed an initial public offering (the “Offering”) of its Class A common stock, in which it sold 18,859,300 shares including 2,459,300 shares pursuant to the underwriters’ over-allotment option, which subsequently settled on November 26, 2019. The shares began trading on the Nasdaq Global Select Market on October 24, 2019. The shares were sold at an initial offering price of $14.00 per share for net proceeds of approximately $241.9 million after deducting underwriting discounts and commissions of $17.8 million and estimated offering expenses of approximately $4.3 million payable by BRP. Pursuant to the reorganization transactions undertaken in connection with the Offering, all outstanding equity units in BRP automatically converted into a single class of LLC units (the “LLC Units”).

Upon the consummation of the Offering, BRP Group's authorized capital stock consists of 300,000,000 shares of Class A common stock with a par value $0.01, 50,000,000 shares of Class B common stock with a par value of $0.0001 per share, and 50,000,000 shares of preferred stock with a par value of $0.01 per share.

In connection with the Offering, BRP Group and BRP entered into a series of transactions to implement an internal reorganization as follows:


•	BRP amended and restated its amended and restated limited liability company agreement (the “Amended LLC Agreement”) to, among other things, appoint BRP Group as the sole managing member of BRP and to modify BRP's capital structure to reclassify the equity interests into a single class of LLC Units;


•	as sole managing member of BRP, BRP Group will consolidate the financial results of BRP and a portion of the net income will be allocated to the noncontrolling interest to reflect the entitlement of the owners of BRP's outstanding equity interests (“BRP's LLC Members”) to a portion of BRP's net income;


•	through a series of internal transactions, BRP issued LLC Units to equity holders of its Partners (other than certain joint ventures) in exchange for all the equity interests in such Partners not held by BRP prior to such exchange;


•	BRP Group's certificate of incorporation authorized capital stock as discussed above;


•	each of BRP's members was issued shares of BRP Group's Class B common stock in an amount equal to the number of LLC Units held by each such member following the reclassification of the equity interest into LLC Units;


•	under the Amended LLC Agreement, BRP's LLC Members have the right to require BRP to redeem all or a portion of their LLC Units for, at BRP Group's election, newly-issued shares of Class A common stock on a one-for-one basis or a cash payment;


•	BRP Group and BRP's members entered into the Stockholders Agreement, which provides that approval by BRP's LLC Members is required for certain corporate actions; and


•	BRP Group entered into the Tax Receivable Agreement as discussed below.

Omnibus Incentive Plan

On October 24, 2019, BRP Group adopted the BRP Group, Inc. Omnibus Incentive Plan (the “Incentive Plan”). The purpose of the Incentive Plan is to motivate and reward employees and other individuals to perform at the highest level and contribute significantly to our success, thereby furthering the best interests of BRP Group's shareholders.

In connection with the Offering, BRP Group granted under the Incentive Plan an aggregate of 504,145 shares of Class A common stock to Risk Advisors and each BRP Colleague, subject to various vesting terms (collectively, the “IPO Grants”). These IPO Grants are one time grants solely related to the Offering.

Subject to adjustment, the Incentive Plan permits BRP Group to make awards of 696,000 shares of Class A common stock. Additionally, the number of shares of Class A common stock reserved for issuance under the Incentive Plan will increase automatically on the first day of each fiscal year following the effective date of the Incentive Plan, by the lesser of (i) 2% of outstanding shares of Class A common stock and Class B common stock on the last day of the immediately preceding fiscal year and (ii) such number of shares as determined by BRP Group's board of directors.

Tax Receivable Agreement

On October 28, 2019, BRP Group entered into the Tax Receivable Agreement with BRP's LLC Members that provides for the payment by BRP Group to BRP's LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that BRP Group actually realizes as a result of (i) any increase in tax basis in BRP assets resulting from (a) acquisitions by BRP Group of BRP's LLC Units from BRP's LLC Members in connection with the Offering, (b) the acquisition of LLC Units from BRP's LLC Members using the net proceeds from any future offering, (c) redemptions or exchanges by BRP's LLC Members of LLC Units and the corresponding number of shares of Class B common stock for shares of Class A common stock or cash or (d) payments under the Tax Receivable Agreement, and (ii) tax benefits related to imputed interest resulting from payments made under the Tax Receivable Agreement.

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 (Note 14)
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 Balance Sheets (Continued)

(Unaudited)

The following table presents the assets and liabilities of the Company’s consolidated variable interest entities, which are included on the condensed consolidated balance sheets above. The assets in the table below include those assets that can only be used to settle obligations of the consolidated variable interest entities.



	September 30, 2019		December 31, 2018
Assets of Consolidated Variable Interest Entities That Can Only be Used to Settle the Obligations of Consolidated Variable Interest Entities:
Cash and cash equivalents	$	1,481,520	$	796,076
Premiums, commissions and fees receivable, net	4,906,363		3,902,397
Prepaid expenses and other current assets	47,309		69,163
Due from related parties	—		12,500
Total current assets	6,435,192		4,780,136
Property and equipment, net	179,641		114,768
Deposits	—		2,163
Goodwill	4,034,761		4,034,761
Total assets	$	10,649,594	$	8,931,828
Liabilities of Consolidated Variable Interest Entities for Which Creditors Do Not Have Recourse to the Company:
Premiums payable to insurance companies	$	2,931,517	$	2,077,504
Producer commissions payable	729,581		514,345
Accrued expenses	433,274		320,536
Contract liabilities	809		—
Total liabilities	$	4,095,181	$	2,912,385

See accompanying Notes to Condensed Consolidated Financial Statements.

BALDWIN RISK PARTNERS, LLC AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues:
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

See accompanying Notes to Condensed Consolidated Financial Statements.

BALDWIN RISK PARTNERS, LLC AND SUBSIDIARIES

Condensed Consolidated Statements of Members' Equity (Deficit) and Mezzanine Equity

For the Three and Nine Months Ended September 30, 2019

(Unaudited)



For the Nine Months Ended September 30, 2019
			Members’ Equity (Deficit)															Mezzanine Equity
	Units		Members' Capital			Member Note Receivable			Accumulated Deficit			Noncontrolling Interest			Total			Redeemable Noncontrolling Interest			Redeemable Members’ Capital
Balance at December 31, 2018	6,796,052		$	—		$	(89,896	)	$	(63,605,576	)	$	937,329		$	(62,758,143	)	$	46,207,466		$	39,353,918
Net income	—		—			—			118,738			111,806			230,544			3,761,372			485,153
Contributions	—		—			—			—			—			—			35,307			—
Contributions through issuance of Member note receivable	—		—			(310,136		)	—			46,947			(263,189		)	263,189			—
Repayment of Member note receivable	—		—			159,594			—			—			159,594			—			—
Issuance and vesting of Management Incentive Units to Members	475,899		663,487			—			—			—			663,487			—			—
Issuance of Voting Common Units to redeemable common equity holder	293,660		—			—			—			—			—			—			5,509,355
Issuance of Non-Voting Common Units to Members and NCI Holders	61,982		611,954			—			—			385,710			997,664			—			—
Repurchase of Voting Common Units from Members	(595,780	)	—			—			—			—			—			—			(11,177,429		)
Repurchase redemption value adjustments	—		—			—			—			—			—			—			(1,322,571		)
Noncontrolling interest issued in business combinations and asset acquisitions	—		—			—			—			1,000,000			1,000,000			37,636,673			—
Change in the redemption value of redeemable interests	—		—			—			(140,708,042		)	—			(140,708,042		)	166,758			140,541,284
Distributions	—		(1,275,441		)	—			(1,847,318		)	(94,270		)	(3,217,029		)	(5,463,113		)	(1,151,241		)
Balance at September 30, 2019	7,031,813		$	—		$	(240,438	)	$	(206,042,198	)	$	2,387,522		$	(203,895,114	)	$	82,607,652		$	172,238,469



For the Three Months Ended September 30, 2019
		Members’ Equity (Deficit)															Mezzanine Equity
	Units	Members' Capital			Member Note Receivable			Accumulated Deficit			Noncontrolling Interest			Total			Redeemable Noncontrolling Interest			Redeemable Members’ Capital
Balance at June 30, 2019	7,001,813	$	—		$	(255,700	)	$	(128,869,332	)	$	2,424,252		$	(126,700,780	)	$	65,905,956		$	110,596,275
Net income (loss)	—	—			—			(2,577,996		)	(19,700		)	(2,597,696		)	1,439,904			(1,147,784		)
Contributions	—	—			—			—			—			—			1,780			—
Repayment of Member note receivable	—	—			15,262			—			—			15,262			—			—
Issuance and vesting of Management Incentive Unit to Members	30,000	303,312			—			—			—			303,312			—			—
Noncontrolling interest issued in business combinations and asset acquisitions	—	—			—			—			—			—			6,674,137			—
Change in the redemption value of redeemable interests	—	—			—			(74,165,529		)	—			(74,165,529		)	11,123,992			63,041,537
Distributions	—	(303,312		)	—			(429,341		)	(17,030		)	(749,683		)	(2,538,117		)	(251,559		)
Balance at September 30, 2019	7,031,813	$	—		$	(240,438	)	$	(206,042,198	)	$	2,387,522		$	(203,895,114	)	$	82,607,652		$	172,238,469

BALDWIN RISK PARTNERS, LLC AND SUBSIDIARIES

Condensed Consolidated Statements of Members' Equity (Deficit) and Mezzanine Equity (Continued)

For the Three and Nine Months Ended September 30, 2018

(Unaudited)



For the Nine Months Ended September 30, 2018
		Members’ Equity (Deficit)															Mezzanine Equity
	Units	Members' Capital			Member Note Receivable			Accumulated Deficit			Noncontrolling Interest			Total			Redeemable Noncontrolling Interest			Redeemable Members’ Capital
Balance at December 31, 2017	6,190,789	$	—		$	—		$	(40,465,787	)	$	547,053		$	(39,918,734	)	$	23,474,348		$	22,503,733
Adjustment to opening retained earnings due to adoption of ASC Topic 606	—	—			—			6,607,552			184,520			6,792,072			—			—
Adjusted beginning balance after adoption of ASC Topic 606	6,190,789	—			—			(33,858,235		)	731,573			(33,126,662		)	23,474,348			22,503,733
Net income (loss)	—	—			—			576,990			(72,759		)	504,231			2,782,475			265,287
Contributions	—	—			—			—			—			—			53,204			—
Contributions through issuance of Member note receivable	—	—			(179,792		)	—			—			(179,792		)	—			—
Repayment of Member note receivable	—	—			44,948			—			—			44,948			—			—
Issuance and vesting of Management Incentive Unit to Members	343,659	190,051			—			—			—			190,051			—			—
Issuance of Voting Common Units to redeemable common equity holder	251,447	—			—			—			—			—			—			2,892,145
Issuance of Non-Voting Common Units to NCI Holders	—	—			—			—			289,340			289,340			—			—
Noncontrolling interest issued in business combinations and asset acquisitions	—	—			—			—			—			—			13,394,424			—
Change in the redemption value of redeemable interests	—	—			—			(15,719,866		)	—			(15,719,866		)	5,216,369			10,503,497
Distributions	—	(190,051		)	—			(3,079,795		)	(49,267		)	(3,319,113		)	(3,305,574		)	(1,230,154		)
Balance at September 30, 2018	6,785,895	$	—		$	(134,844	)	$	(52,080,906	)	$	898,887		$	(51,316,863	)	$	41,615,246		$	34,934,508



For the Three Months Ended September 30, 2018
		Members’ Equity (Deficit)															Mezzanine Equity
	Units	Members' Capital			Member Note Receivable			Accumulated Deficit			Noncontrolling Interest			Total			Redeemable Noncontrolling Interest			Redeemable Members’ Capital
Balance at June 30, 2018	6,386,911	$	—		$	(179,792	)	$	(42,438,083	)	$	845,767		$	(41,772,108	)	$	36,915,222		$	29,959,326
Net income (loss)	—	—			—			(535,403		)	(32,795		)	(568,198		)	896,146			(275,500		)
Contributions	—	—			—			—			—			—			22,436			—
Repayment of Member note receivable	—	—			44,948			—			—			44,948			—			—
Issuance and vesting of Management Incentive Unit to Members	343,659	97,303			—			—			—			97,303			—			—
Issuance of Voting Common Units to redeemable common equity holder	55,325	—			—			—			—			—			—			636,346
Issuance of Non-Voting Common Units to NCI Holders	—	—			—			—			109,548			109,548			—			—
Noncontrolling interest issued in business combinations and asset acquisitions	—	—			—			—			—			—			2,641,203			—
Change in the redemption value of redeemable interests	—	—			—			(7,745,916		)	—			(7,745,916		)	2,590,387			5,155,529
Distributions	—	(97,303		)	—			(1,361,504		)	(23,633		)	(1,482,440		)	(1,450,148		)	(541,193		)
Balance at September 30, 2018	6,785,895	$	—		$	(134,844	)	$	(52,080,906	)	$	898,887		$	(51,316,863	)	$	41,615,246		$	34,934,508

See accompanying Notes to Condensed Consolidated Financial Statements.

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



BALDWIN RISK PARTNERS, LLC AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
	For the Nine Months Ended September 30,
	2019		2018
Supplemental schedule of cash flow information:
Cash paid during the year for interest	$	7,479,755	$	1,710,954
Disclosure of non-cash investing and financing activities:
Change in the redemption value of redeemable interests	$	140,708,042	$	15,719,866
Noncontrolling interest issued in business combinations	38,636,673		13,394,424
Contingent earnout consideration for business combinations	29,101,001		5,815,272
Capitalization of issuance to redeemable common member	5,509,355		—
Capitalization of Offering costs	4,207,209		—
Contingently returnable consideration for business combinations	321,147		—
Contingent earnout consideration for asset acquisitions	15,742		1,042,523
Guaranteed earnout for asset acquisitions	—		250,000
Note payable issued to seller for asset acquisition	—		750,000

See accompanying Notes to Condensed Consolidated Financial Statements.

BALDWIN RISK PARTNERS, LLC AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Business and Basis of Presentation

On October 28, 2019, BRP Group, Inc. (“BRP Group”) completed its initial public offering (the “Offering”) of Class A common stock and became the sole managing member of Baldwin Risk Partners, LLC ("BRP" or the "Company”). The operations of BRP represent the predecessor to BRP Group prior to the Offering. The consolidated entities of BRP are described in more detail under Principles of Consolidation below.

BRP, a Delaware limited liability company, is a diversified insurance agency and services organization that markets and sells insurance products and services to its customers throughout the U.S. BRP and its subsidiaries operate through four Operating Groups, including Middle Market, Specialty, MainStreet, and Medicare, which are discussed in more detail in Note 15.

BRP was formed during 2012 when the members of Baldwin Krystyn Sherman Partners, LLC (“BKS”) contributed their units of ownership for an equal number of units in BRP, at which time BKS became a wholly-owned subsidiary of BRP.

BRP Group was incorporated in the state of Delaware on July 1, 2019.

Initial Public Offering

On October 28, 2019, BRP Group completed the Offering of 18,859,300 shares of its Class A common stock including 2,459,300 shares pursuant to the underwriters’ over-allotment option, which subsequently settled on November 26, 2019. The shares began trading on the Nasdaq Global Select Market on October 24, 2019. The shares were sold at an initial offering price of $14.00 per share for net proceeds of approximately $241.9 million after deducting underwriting discounts and commissions of $17.8 million and estimated offering expenses of approximately $4.3 million payable by the Company. Pursuant to the reorganization transactions undertaken in connection with the closing of the Offering, all outstanding equity units in BRP automatically converted into a single class of LLC units (the “LLC Units”).

The accompanying financial statements as of September 30, 2019, including share and per share amounts, do not give effect to the Offering or conversion into LLC Units as they were completed subsequent to September 30, 2019.

Principles of Consolidation

The consolidated financial statements include the accounts of BRP and its wholly-owned subsidiaries, BRP Main Street Holdings, LLC (“Main Street”), BRP Medicare Insurance Holdings, LLC (“MIH”), BRP Insurance Intermediary Holdings, LLC (“BIH”), BRP Colleague Inc. (“BRP Colleague”), and a 96.6% interest in BKS.

Main Street includes a 45% interest in Laureate Insurance Partners, LLC (“Laureate”), a 75% interest in BRP Ryan Insurance, LLC (“Ryan”), a 90% interest in BRP Bradenton Insurance, LLC (“Bradenton”), a 58.9% interest in BRP Affordable Home Insurance, LLC (“AHI”), a 60% interest in BRP Black Insurance, LLC (“Black”), a 50% interest in The Villages Insurance Partners, LLC (“TVIP”), and a 80% interest in BRP Foundation, LLC (“Foundation”).

MIH includes its wholly-owned subsidiaries, BRP Medicare Insurance I, LLC, BRP Medicare Insurance II, LLC and BRP Medicare Insurance III, LLC.

BIH includes a 70% interest in Millennial Specialty Insurance, LLC and a 60% interest in AB Risk Specialist, LLC (“ABRS”), which holds a 66.7% interest in KB Risk Solutions, LLC (“KBRS”).

BKS includes the accounts of its wholly-owned subsidiary BKS Private Risk Group, LLC, a 50% interest in BKS-IPEO JV Partners, LLC (“iPEO”), a 60% interest in BKS Smith, LLC (“Smith”), a 60% interest in BKS MS, LLC (“Saunders”), a 51% interest in BKS Partners Galati Marine Solutions, LLC (“Galati”), and an 89.1% interest in BKS D&M Holdings, LLC (“D&M Holdings”), which holds an 85% interest in BRP D&M Insurance, LLC (“D&M”).

All intercompany transactions and balances have been eliminated in consolidation.

The Company has prepared these consolidated financial statements in accordance with Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“Topic 810”). Topic 810 requires that if an enterprise is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity should be included in the consolidated financial statements of the enterprise. The Company has recognized TVIP and the Company's joint ventures, which include iPEO, Laureate, Smith, Saunders and Galati, as variable interest entities of which the Company is the primary beneficiary. Accordingly, the accounts of these entities are included in the consolidated financial statements of the Company. Refer to Note 4 for additional information regarding the Company's variable interest entities.

Topic 810 also requires that the equity of a noncontrolling interest shall be reported in the consolidated balance sheets within total equity of the Company. Certain redeemable noncontrolling interests are reported in the condensed consolidated balance sheets as mezzanine equity. Topic 810 also requires revenues, expenses, gains, losses, net income or loss, and other comprehensive income or loss to be reported in the consolidated financial statements at consolidated amounts, which include amounts attributable to the owners of the parent and the noncontrolling interests. Refer to the Redeemable Noncontrolling Interest and Noncontrolling Interest sections of Note 2 for additional information.

Unaudited Interim Financial Reporting

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. Accordingly, they do not include all the information and related notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting of recurring accruals, considered necessary for fair statement have been included. The accompanying balance sheet for the year ended December 31, 2018 was derived from audited financial statements, but does not include all disclosures required by GAAP. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto for the year ended December 31, 2018 included in the Prospectus.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates underlying the accompanying consolidated financial statements include the application of guidance for revenue recognition, business combinations and purchase price allocation, allowances for estimated policy cancellations and doubtful accounts, impairment of long-lived assets including goodwill, redemption value of mezzanine equity, and the value of incentive units.

Changes in Presentation

A reclassification has been made to the statement of members' equity (deficit) and mezzanine equity for the six months ended June 30, 2019 that affects the balances of noncontrolling interest and redeemable noncontrolling interest at June 30, 2019 as well as the classification between noncontrolling interest and redeemable noncontrolling interest under contributions through issuance of member note receivable for the three months ended September 30, 2019.

Recent Accounting Pronouncements

As an emerging growth company, the Jumpstart Our Business Startups (“JOBS”) Act permits the Company an extended transition period for complying with new or revised accounting standards affecting public companies. The Company has elected to use this extended transition period and adopt certain new accounting standards on the private company timeline, which means that the Company’s financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards on a non-delayed basis. The Company has elected the extended transition period for the adoption of the Accounting Standards Updates (“ASU”) below, except those where early adoption was both permitted and elected.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The guidance in ASU 2016-02 supersedes the lease recognition requirements in ASC Topic 840, Leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. In March 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842): Codification Improvements, which improves upon the guidance issued in ASU 2016-02. This guidance is effective for the fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the full effect that the adoption of this standard will have on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements (“ASU 2016-13”), which amends the guidance for recognizing credit losses on financial instruments measured at amortized cost. ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The FASB has subsequently issued several additional ASUs related to credit losses, which improved upon, and provided transition relief for, the guidance issued in ASU 2016-13 and extended the adoption date for nonpublic business entities. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the full effect that the adoption of this standard will have on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 provides guidance on the classification of contingent consideration payments made after a business combination and other cash receipts and payments. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, with early adoption permitted. The adoption of this guidance will impact the presentation of the cash flows, but will not otherwise have a significant impact on the Company's results of operations or financial condition.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which requires that the statement of cash flows explain the changes during the period of cash and cash equivalents inclusive of amounts categorized as restricted cash. The Company adopted ASU 2016-18 in connection with the acquisition of Millennial Specialty Insurance LLC in April 2019. With the adoption of ASU 2016-18, the statements of cash flows detail the change in the balance of cash and cash equivalents and restricted cash. The adoption of this guidance did not have any effect on cash flows for the nine months ended September 30, 2018.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which amends the guidance on goodwill. Under ASU 2017-04, goodwill impairment is measured as the amount by which a reporting unit’s carrying value exceeds its fair value, while not exceeding the carrying value of goodwill. ASU 2017-04 eliminates existing guidance that requires an entity to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all its assets and liabilities as if that reporting unit had been acquired in a business combination. The Company early adopted this guidance for impairment tests effective January 1, 2019 and it did not have any impact on the Company's financial statements for the current period.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) (“Topic 820”): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure requirements related to fair value measurement, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in ASU 2018-13 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.

2. Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies from those that were disclosed for the year ended December 31, 2018 in the Prospectus, except as noted below.

Revenue Recognition

In connection with the Company's business acquisition of Millennial Specialty Insurance LLC in April 2019, the Company has a new revenue stream for policy fee and installment fee revenue. The Company earns policy fee revenue for acting in its capacity as a managing general agent (“MGA”) on behalf of the Insurance Company Partner and fulfilling certain services including delivery of policy documents, processing payments and other administrative functions during the term of the insurance policy. Policy fee revenue is deferred and recognized over the life of the policy. These deferred amounts are recognized as deferred policy fee revenue, which is included in contract liabilities on the condensed consolidated balance sheets. The Company earns installment fee revenue related to policy premiums paid on an installment basis for payment processing services performed on behalf of the Insurance Company Partner. The Company recognizes installment fee revenue in the period the services are performed.

Restricted Cash

Restricted cash includes amounts that are legally restricted as to use or withdrawal. Restricted cash represents cash collected from customers that is payable to insurance companies and for which segregation of this cash is either (i) required by the state of domicile for the office conducting the transaction, or (ii) required by contract with the relevant insurance company providing coverage.

Redeemable Noncontrolling Interest

ASC Topic 480, Distinguishing Liabilities from Equity (“Topic 480”), requires noncontrolling interests that are redeemable for cash or other assets to be classified outside of permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the control of the issuer. The equity securities of certain of the Company's noncontrolling interests contain an embedded put feature that is redeemable at the election of the interest holder. The Company has no control over whether the put option is exercised and, therefore, redemption is outside the Company's control. As such, these equity securities are recorded as redeemable noncontrolling interests, which are classified in mezzanine equity on the Company’s condensed consolidated balance sheets.

Redeemable noncontrolling interests are reported at estimated redemption value measured as the greater of estimated fair value at the end of each reporting period or the historical cost basis of the redeemable noncontrolling interest adjusted for cumulative earnings or loss allocations. The resulting increases or decreases to redemption value, if applicable, are recognized as adjustments to retained earnings.

The accounts of the following joint ventures have been consolidated into the Company’s consolidated financial statements since their respective inceptions. The noncontrolling ownership interests in the Company's subsidiaries described below are presented as redeemable noncontrolling interest in the consolidated financial statements.


•	In 2012, the Company formalized a purchase agreement with Insurance Agencies of the Villages, Inc. (“IAV”) in order to acquire a 50% equity stake in TVIP by purchasing units of membership interest.


•	In 2014, iPEO was formed to join with iPEO Solutions, LLC (“Solutions”) in order to share commissions for services related to Solutions customers. Solutions has a 50% ownership interest in iPEO.


•	In 2017, Ryan was formed in order to acquire substantially all the assets and liabilities of Ryan Insurance & Financial Services, Inc. from Sean D. Ryan. Sean D. Ryan has a 25% ownership interest in Ryan.


•	In 2017, AHI was formed in order to acquire substantially all the assets and liabilities of Affordable Home Insurance, Inc. from Dennis P. Gagnon, Jr. (“Gagnon”). Gagnon has since transferred some of his original interest to other employees of AHI (“AHI Members”). Gagnon and AHI Members have a combined 41.1% ownership interest in AHI.


•	In 2017, D&M was formed in order to acquire substantially all the assets and liabilities of D&M Insurance Solutions, LLC from W. David Cox and Michael P. Ryan. Additionally, D&M Holdings was formed by BKS and KMW Consulting, LLC (“KMW”) to hold D&M. W. David Cox and Michael P. Ryan have a 15% ownership interest in D&M and KMW has a 9.9% ownership interest in D&M Holdings.


•	In 2017, Bradenton was formed in order to acquire substantially all the assets and liabilities of Bradenton Insurance, Inc. from Robert J. Wentzell and Robert J. Wentzell Family Partnership (collectively, “Wentzell”). Wentzell has a 10% ownership interest in Bradenton.


•	In 2017, Smith was formed to join with Smith & Associates Real Estate, Inc. (“Smith & Associates”) in order to share commissions for services related to Smith & Associates customers. Smith & Associates has a 40% ownership interest in Smith.


•	In 2017, Saunders was formed to join with Michael Saunders & Company (“Saunders & Company”) in order to share commissions for services related to Saunders & Company customers. Saunders and Company has a 40% ownership interest in Saunders.


•	In 2018, Black was formed in order to acquire substantially all the assets and liabilities of Black Insurance and Financial Services, LLC from Christopher R. Black (“Chris Black”). Chris Black has a 40% ownership interest in Black.


•	In 2018, BIH was formed in order to acquire 60% of the membership interests of ABRS, which owned a 100% membership interest in KBRS, from AB Risk Holdco, Inc. (“AB Holdco”). Additionally, immediately following BIH’s acquisition of the membership interests of ABRS, Emanuel Lauria (“Lauria”) was issued a 33.3% membership interest in KBRS. AB Holdco has a 40% ownership interest in ABRS.


•	In 2018, BKS acquired substantially all the assets and liabilities of Montoya Property & Casualty Insurance from Montoya and Associates, LLC (“Montoya & Associates”). Montoya & Associates has a 1.5% ownership interest in BKS.


•	In 2019, BIH acquired 70% of the membership interests of Millennial Specialty Insurance, LLC from Millennial Specialty Holdco, LLC (“MSH”). MSH has a 30% ownership interest in Millennial Specialty Insurance, LLC.


•	In 2019, BKS Financial Investments, LLC was formed to acquire substantially all the assets and liabilities of Fiduciary Partners Investment Consulting, LLC and BKS acquired substantially all the assets and liabilities of Fiduciary Partners Retirement Group, Inc. (“FPRG”) and Fiduciary Partners Group, LLC. FPRG has a 0.3% ownership interest in BKS.


•	In 2019, Foundation was formed in order to acquire substantially all the assets and liabilities of Foundation Insurance of Florida, LLC from its members (“Foundation Members”). The Foundation Members have a 20% ownership interest in Foundation.

Redeemable Members’ Capital

Topic 480 requires common units that are redeemable for cash or other assets to be classified outside of permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the control of the issuer. The Voting Common Units of two minority holders contain certain put and call rights in conjunction with termination at the greater of fair value or a floor, as defined in the Company’s amended and restated limited liability operating agreement (“Operating Agreement”). The Company has no control over whether the put option is exercised and, therefore, redemption is outside the Company's control. As such, these equity securities are recorded as redeemable members’ capital, which are classified in mezzanine equity on the Company’s condensed consolidated balance sheets.

The Voting Common Units of the two minority holders are measured as the greater of estimated redemption value at the end of each reporting period or the historical cost basis of the redeemable common units adjusted for cumulative earnings or loss allocations. During March 2019, the Company repurchased 595,780 Voting Common Units of the two minority founders for $12.5 million.

Noncontrolling Interest

Noncontrolling interests are reported at historical cost basis adjusted for cumulative earnings or loss allocations and classified in members’ equity (deficit) on the condensed consolidated balance sheets.

The accounts of the following entities have been consolidated into the Company’s consolidated financial statements since their respective inceptions. The noncontrolling ownership interests in the Company's subsidiaries described below are presented as noncontrolling interest in the condensed consolidated financial statements.


•	In 2007, Galati was formed to join with GMI Holdings (“GMI”) in order to share commissions from policies related to GMI customers. GMI has a 49% ownership interest in Galati.


•	In 2017, Laureate was formed to join with Tavistock Insurance Partners, LLC (“Tavistock”) and Matthew Hammer (“Hammer”) in order to share commissions for services related to Tavistock customers. Tavistock has a 50% ownership interest in Laureate and Hammer has a 5% ownership interest in Laureate.


•	In 2019, BKS acquired substantially all the assets and liabilities of Lykes Insurance, Inc. from Lykes Bros. Inc. Certain former employees of Lykes Insurance, Inc. have a 0.7% ownership interest in BKS.


•	One of the Company's Risk Advisors holds 19,639 Non-Voting Common Units in BKS.

3. Business Combinations

The Company completed four business combinations for an aggregate purchase price of $173.5 million during the nine months ended September 30, 2019. In accordance with ASC Topic 805, Business Combinations (“Topic 805”), total consideration was first allocated to the fair value of assets acquired, including liabilities assumed, with the excess being recorded as goodwill. For financial statement purposes, goodwill is not amortized but rather is evaluated for impairment at least annually or more frequently if an event occurs that indicates goodwill may be impaired. Goodwill is deductible for tax purposes and will be amortized over a period of fifteen years.

The intangible assets acquired in connection with business combinations during the nine months ended September 30, 2019 have an estimated weighted-average life as follows:



	Weighted-Average Life
Purchased customer accounts	16.6	years
Software	5	years
Carrier relationships	20	years
Trade names	5	years

The recorded purchase price for certain business combinations includes an estimation of the fair value of continent consideration obligations associated with potential earnout provisions, which are generally based on earnings before income taxes, depreciation and amortization (“EBITDA”). The contingent earnout consideration identified in the tables below are measured at fair value within Level 3 of the fair value hierarchy as discussed further in Note 13. Any subsequent changes in the fair value of contingent earnout liabilities will be recorded in the consolidated statements of comprehensive income (loss) when incurred.

The recorded purchase price for certain business combinations also includes an estimation of the fair value of noncontrolling interests, which are calculated based on a valuation of the entity with the relevant percentage applied.

The Company completed the following four business combinations during the nine months ended September 30, 2019:


•	Lykes Insurance, Inc. (“Lykes”), a Middle Market Partnership effective March 1, 2019, was made to expand the Company’s Middle Market business presence in Florida.

•

Millennial Specialty Insurance LLC (“MSI”), a Specialty Partnership effective April 1, 2019, was made to obtain access to certain technology and invest in executive talent for building and growing the MGA of the Future and to apply its functionality to other insurance placement products, as well as to expand the Company's market share in specialty renter’s insurance. MGA of the Future is a national renter's insurance product distributed via sub-agent partners and property management software providers, which has expanded distribution capabilities for new products through the Company's wholesale and retail networks.


•	Fiduciary Partners Retirement Group, Inc., Fiduciary Partners Group, LLC and Fiduciary Partners Investment Consulting, LLC (“Fiduciary Partners”), a Middle Market Partnership effective July 1, 2019, was made to expand our employee benefits group business in the Middle Market Operating Group.


•	Foundation Insurance of Florida, LLC (“Foundation Insurance”), a MainStreet Partnership effective date of August 1, 2019, was made to expand the Company's MainStreet business presence in Florida.

The operating results of these business combinations have been included in the condensed consolidated statements of comprehensive income (loss) since their respective acquisition dates. The Company recognized total revenues and net income from its business combinations of $29.5 million and $1.5 million, respectively, for the nine months ended September 30, 2019.

Acquisition-related costs incurred in connection with these business combinations are recorded in operating expenses in the condensed consolidated statements of comprehensive income (loss). The Company incurred acquisition-related costs from its business combinations of $502,000 for the nine months ended September 30, 2019.

The table below provides a summary of the total consideration and the estimated purchase price allocations made for each of the business acquisitions that became effective during the nine months ended September 30, 2019. Due to the complexity of valuing the consideration paid and the purchase price allocation and the timing of these activities, certain amounts included in the condensed consolidated financial statements may be provisional and subject to additional adjustments within the measurement period as permitted by Topic 805. Any measurement period adjustments related to prior period business combinations have been reflected as current period adjustments for the nine months ended September 30, 2019 in accordance with Topic 805.



	Lykes			MSI			Fiduciary Partners			Foundation Insurance			Totals
Cash consideration paid	$	36,044,000		$	45,505,000		$	2,550,000		$	20,800,000		$	104,899,000
Fair value of contingent earnout consideration	—			25,603,000			151,454			3,346,547			29,101,001
Fair value of noncontrolling interest	1,000,000			30,962,536			637,500			6,036,637			38,636,673
Fair value of contingently returnable consideration	—			—			(321,147		)	—			(321,147		)
Trust balance adjustment	—			1,137,918			—			—			1,137,918
Total consideration	$	37,044,000		$	103,208,454		$	3,017,807		$	30,183,184		$	173,453,445

Cash	$	471,635		$	6,029,268		$	—		$	50,000		$	6,550,903
Premiums, commissions and fees receivable	951,246			14,436,999			20,019			—			15,408,264
Other assets	17,778			306,970			1,300			—			326,048
Intangible assets
Purchased customer accounts	8,742,000			11,240,000			1,874,000			8,709,000			30,565,000
Carrier relationships	—			6,000,000			—			—			6,000,000
Software	—			30,000,000			—			—			30,000,000
Trade names	—			1,820,000			—			—			1,820,000
Goodwill	28,692,525			53,764,165			1,123,988			21,470,741			105,051,419
Total assets acquired	38,875,184			123,597,402			3,019,307			30,229,741			195,721,634
Premiums and producer commissions payable	(1,831,184		)	(17,447,050		)	—			—			(19,278,234		)
Deferred revenue	—			(2,793,984		)	—			—			(2,793,984		)
Other current liabilities	—			(147,914		)	(1,500		)	(46,557		)	(195,971		)
Total liabilities acquired	(1,831,184		)	(20,388,948		)	(1,500		)	(46,557		)	(22,268,189		)
Net assets acquired	$	37,044,000		$	103,208,454		$	3,017,807		$	30,183,184		$	173,453,445

Maximum potential contingent earnout consideration	$	—		$	61,500,000		$	2,225,000		$	21,750,000		$	85,475,000

Concurrently with the Lykes Partnership, certain former employees of Lykes purchased 4,658 Non-Voting Common Units of BKS for approximately $433,000, which resulted in a noncontrolling interest in BKS.

The following unaudited pro forma consolidated results of operations are provided for illustrative purposes only and have been presented as if the acquisitions of Lykes, MSI, Fiduciary Partners and Foundation Insurance occurred on January 1, 2018. This unaudited pro forma information should not be relied upon as being indicative of the historical results that would have been obtained if the acquisitions had occurred on that date, nor of the results that may be obtained in the future.



	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2019			2018		2019		2018
Total revenues	$	38,800,566		$	31,656,150	$	115,837,987	$	94,225,271
Net income (loss)	(2,183,808		)	3,282,393		9,772,443		10,496,985

4. Variable Interest Entities

Topic 810 requires a reporting entity to consolidate a variable interest entity (“VIE”) when the reporting entity has a variable interest or combination of variable interests that provide the entity with a controlling financial interest in the VIE. The Company continually assesses whether it has a controlling financial interest in each of its VIEs to determine if it is the primary beneficiary of the VIE and should, therefore, consolidate each of the VIEs. A reporting entity is considered to have a controlling financial interest in a VIE if it has (i) the power to direct the activities of a VIE that most significantly impact the VIE's economic performance, and (ii) the obligation to absorb the losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.

The Company has determined that it is the primary beneficiary of its VIEs, which include TVIP and the Company’s joint ventures, iPEO, Laureate, Smith, Saunders and Galati, and has consolidated these entities into the consolidated financial statements. The assets of the consolidated VIEs can only be used to settle the obligations of the consolidated VIEs and the creditors of the liabilities of the consolidated VIEs do not have recourse to the Company.

Total revenues and expenses of the Company's consolidated VIEs included in the condensed consolidated statements of comprehensive income (loss) were $3.3 million and $2.4 million, respectively, for the three months ended September 30, 2019, $2.9 million and $2.2 million, respectively, for the three months ended September 30, 2018, $11.1 million and $7.1 million, respectively, for the nine months ended September 30, 2019 and $10.1 million and $6.7 million, respectively, for the nine months ended September 30, 2018.

The following tables provide a summary of the carrying amounts of the assets and liabilities of the Company's consolidated VIEs at each of the balance sheet dates:



	At September 30, 2019
	TVIP		iPEO		Laureate		Smith		Saunders		Total
Assets
Cash and cash equivalents	$	1,441,613	$	7,837	$	23,821	$	159	$	8,090	$	1,481,520
Premiums, commissions and fees receivable, net	1,395,029		3,458,920		1,242		2,492		48,680		4,906,363
Prepaid expenses and other current assets	35,805		5,552		4,425		—		1,527		47,309
Total current assets	2,872,447		3,472,309		29,488		2,651		58,297		6,435,192
Property and equipment, net	145,242		—		34,399		—		—		179,641
Goodwill	4,034,761		—		—		—		—		4,034,761
Total assets	$	7,052,450	$	3,472,309	$	63,887	$	2,651	$	58,297	$	10,649,594
Liabilities
Premiums payable to insurance companies	$	296,842	$	2,629,160	$	240	$	5,084	$	191	$	2,931,517
Producer commissions payable	344,672		367,063		1,166		—		16,680		729,581
Accrued expenses	433,274		—		—		—		—		433,274
Contract liabilities	809		—		—		—		—		809
Total liabilities	$	1,075,597	$	2,996,223	$	1,406	$	5,084	$	16,871	$	4,095,181



	At December 31, 2018
	TVIP		iPEO		Laureate		Smith		Saunders		Total
Assets
Cash and cash equivalents	$	770,196	$	646	$	24,872	$	259	$	103	$	796,076
Premiums, commissions and fees receivable, net	1,170,739		2,725,471		122		—		6,065		3,902,397
Prepaid expenses and other current assets	50,311		13,948		4,904		—		—		69,163
Due from related parties	—		—		12,500		—		—		12,500
Total current assets	1,991,246		2,740,065		42,398		259		6,168		4,780,136
Property and equipment, net	73,723		—		41,045		—		—		114,768
Deposits	2,163		—		—		—		—		2,163
Goodwill	4,034,761		—		—		—		—		4,034,761
Total assets	$	6,101,893	$	2,740,065	$	83,443	$	259	$	6,168	$	8,931,828
Liabilities
Premiums payable to insurance companies	$	28,744	$	2,043,246	$	—	$	—	$	5,514	$	2,077,504
Producer commissions payable	226,956		281,885		—		5,161		343		514,345
Accrued expenses	316,212		2,007		1,439		505		373		320,536
Total liabilities	$	571,912	$	2,327,138	$	1,439	$	5,666	$	6,230	$	2,912,385

5. Revenue

The following table provides disaggregated commissions and fees revenue by major source:



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
Direct bill revenue⁽¹⁾	$	17,663,486	$	12,631,632	$	53,257,805	$	38,234,171
Agency bill revenue⁽²⁾	14,253,187		4,143,598		31,084,397		13,349,345
Profit-sharing revenue⁽³⁾	1,586,861		553,969		7,877,062		4,727,964
Policy fee and installment fee revenue⁽⁴⁾	2,719,353		—		5,112,315		—
Consulting and service fee revenue⁽⁵⁾	1,111,616		768,880		2,337,181		1,985,561
Other income⁽⁶⁾	1,048,952		440,549		1,611,901		726,874
Total commissions and fees