SEC Filing | Baldwin Risk Partners

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brp-20200930

_____________________________________________________________________________________________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

______________________________

(Mark One)


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

For the quarterly period ended September 30, 2020


☐			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)

______________________________

Delaware

61-1937225

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

4211 W. Boy Scout Blvd., Suite 800 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 ☒ No ☐

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 ☒ No ☐

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

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

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. ☐

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

The number of outstanding shares of the registrant’s Class A common stock, $0.01 par value, as of November 6, 2020 was approximately 33,988,164.

BRP GROUP, INC.

INDEX

Page

PART I. FINANCIAL INFORMATION

ITEM 1.

Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2020 and 2019

Condensed Consolidated Statements of Stockholders’/Members’ Equity (Deficit) and Mezzanine Equity for the Three and Nine Months Ended September 30, 2020 and 2019

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019

Notes to Condensed Consolidated Financial Statements

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

ITEM 4.

Controls and Procedures

PART II. OTHER INFORMATION

Unregistered Sales of Equity Securities and Use of Proceeds

ITEM 3.

Defaults Upon Senior Securities

ITEM 4.

Mine Safety Disclosures

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. You should specifically consider the numerous risks outlined under Risk Factors in our Annual Report on Form 10-K filed with the SEC on March 24, 2020 and our Quarterly Report on Form 10-Q for the three months ended March 31, 2020 filed with the SEC on May 13, 2020.

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:

AgencyRM AgencyRM LLC, a Medicare Partner effective February 1, 2020

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

Clients Our insureds

Colleagues Our employees

Exchange Act Securities Exchange Act of 1934, as amended

Fletcher Fletcher Financial Group, Inc., a Medicare Partner effective July 31, 2020

Highland Highland Risk Services, LLC, a Specialty Partner effective January 1, 2020

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

IRP Insurance Risk Partners, LLC, a Middle Market Partner effective April 1, 2020

Lanier Lanier Upshaw, Inc., a Middle Market Partner effective January 1, 2020

MIA Medicare Insurance Advisors, Inc., a Medicare Partner effective July 31, 2020

MGA Managing General Agent

New JPM Credit Agreement Credit Agreement, dated as of October 14, 2020, between Baldwin Risk Partners, LLC, as borrower, JPMorgan Chase Bank, N.A., as the Administrative Agent, the Guarantors party thereto, the Lenders party thereto and the Issuing Lenders party thereto

Old JPM Credit Agreement Fourth amended and restated credit agreement between Baldwin Risk Partners, LLC, as borrower, JPMorgan Chase Bank, N.A., as agent and lender, and the several banks and other financial institutions as lenders entered into on December 19, 2019, pursuant to an amendment and restatement agreement between Baldwin Risk Partners, LLC, as borrower, Cadence Bank, N.A., as existing agent and lender, JPMorgan Chase Bank, N.A., as successor agent and lender, and the several banks and other financial institutions as lenders entered into on December 19, 2019, as amended by the Incremental Facility Amendment No. 1 entered into on March 12, 2020, the Amendment No. 2 to Credit Agreement entered into on April 6, 2020 and the Incremental Facility Amendment No. 3 entered into June 18, 2020

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

Pendulum Pendulum, LLC, a Specialty Partner effective May 1, 2020

Pre-IPO LLC Members Owners of LLC Units of Baldwin Risk Partners, LLC prior to our initial public offering

Risk Advisors Our producers

Rosenthal Rosenthal Bros., Inc., a Middle Market Partner effective June 1, 2020

SEC U.S. Securities and Exchange Commission

Securities Act Securities Act of 1933, as amended

SPG Southern Protective Group, LLC, a Middle Market Partner effective May 1, 2020

TBA/RBA Trinity Benefit Advisors, Inc./Russ Blakely & Associates, LLC, a Middle Market Partner effective June 1, 2020

Tax Receivable Agreement Tax Receivable Agreement between BRP Group, Inc. and the holders of LLC Units in Baldwin Risk Partners, LLC entered into on October 28, 2019

VibrantUSA VibrantUSA Inc., a Medicare Partner effective date of February 1, 2020

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRP GROUP, INC.

Condensed Consolidated Balance Sheets

(Unaudited)


(in thousands, except share and per share data)	September 30, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	50,220	$	67,689
Restricted cash	7,778		3,382
Premiums, commissions and fees receivable, net	98,345		58,793
Prepaid expenses and other current assets	2,689		3,019
Due from related parties	41		43
Total current assets	159,073		132,926
Property and equipment, net	7,791		3,322
Other assets	7,949		5,600
Intangible assets, net	203,555		92,450
Goodwill	344,396		164,470
Total assets	$	722,764	$	398,768
Liabilities, Mezzanine Equity and Stockholders’ Equity
Current liabilities:
Premiums payable to insurance companies	$	83,617	$	50,541
Producer commissions payable	12,019		7,470
Accrued expenses and other current liabilities	21,851		12,334
Current portion of contingent earnout liabilities	7,065		2,480
Total current liabilities	124,552		72,825
Revolving lines of credit	101,000		40,363
Contingent earnout liabilities, less current portion	78,323		46,289
Other liabilities	2,194		2,017
Total liabilities	306,069		161,494
Commitments and contingencies (Note 14)
Mezzanine equity:
Redeemable noncontrolling interest	101		23
Stockholders’ equity:
Class A common stock, par value $0.01 per share, 300,000,000 shares authorized; 33,932,868 and 19,362,984 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively	339		194
Class B common stock, par value $0.0001 per share, 50,000,000 shares authorized; 45,247,711 and 43,257,738 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively	4		4
Additional paid-in capital	237,644		82,425
Accumulated deficit	(14,038)		(8,650)
Notes receivable from stockholders	(519)		(688)
Total stockholders’ equity attributable to BRP Group, Inc.	223,430		73,285
Noncontrolling interest	193,164		163,966
Total stockholders’ equity	416,594		237,251
Total liabilities, mezzanine equity and stockholders’ equity	$	722,764	$	398,768

See accompanying Notes to Condensed Consolidated Financial Statements.

BRP GROUP, INC.

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.


(in thousands)	September 30, 2020		December 31, 2019
Assets of Consolidated Variable Interest Entities That Can Only be Used to Settle the Obligations of Consolidated Variable Interest Entities:
Cash and cash equivalents	$	122	$	47
Premiums, commissions and fees receivable, net	153		75
Total current assets	275		122
Property and equipment, net	23		31
Other assets	5		7
Total assets	$	303	$	160
Liabilities of Consolidated Variable Interest Entities for Which Creditors Do Not Have Recourse to the Company:
Premiums payable to insurance companies	$	1	$	6
Producer commissions payable	19		15
Accrued expenses and other current liabilities	7		29
Total liabilities	$	27	$	50

See accompanying Notes to Condensed Consolidated Financial Statements.

BRP GROUP, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands, except share and per share data)	2020		2019		2020		2019
Revenues:
Commissions and fees	$	65,843	$	38,383	$	171,270	$	101,280

Operating expenses:
Commissions, employee compensation and benefits	48,469		26,788		122,280		67,068
Other operating expenses	12,146		6,320		30,577		16,711
Amortization expense	5,185		3,082		13,231		6,793
Change in fair value of contingent consideration	6,455		535		12,697		(3,222)
Depreciation expense	258		184		663		460
Total operating expenses	72,513		36,909		179,448		87,810

Operating income (loss)	(6,670)		1,474		(8,178)		13,470

Other expense:
Interest expense, net	(922)		(3,785)		(2,554)		(8,998)
Other income (expense)	(23)		5		(23)		5
Total other expense	(945)		(3,780)		(2,577)		(8,993)

Income (loss) before income taxes	(7,615)		(2,306)		(10,755)		4,477
Income tax provision	—		—		12		—
Net income (loss)	(7,615)		(2,306)		(10,767)		4,477
Less: net income (loss) attributable to noncontrolling interests	(4,347)		(2,306)		(5,379)		4,477
Net loss attributable to BRP Group, Inc.	$	(3,268)	$	—	$	(5,388)	$	—

Comprehensive income (loss)	$	(7,615)	$	(2,306)	$	(10,767)	$	4,477
Comprehensive income (loss) attributable to noncontrolling interests	(4,347)		(2,306)		(5,379)		4,477
Comprehensive loss attributable to BRP Group, Inc.	(3,268)		—		(5,388)		—

Basic and diluted net loss per share	$	(0.10)			$	(0.22)
Basic and diluted weighted-average shares of Class A common stock outstanding	33,098,356				24,371,304

See accompanying Notes to Condensed Consolidated Financial Statements.

BRP GROUP, INC.

Condensed Consolidated Statements of Stockholders’/Members’ Equity (Deficit) and Mezzanine Equity

(Unaudited)


For the Three Months Ended September 30, 2020
	Stockholders’ Equity																Mezzanine Equity
	Class A Common Stock			Class B Common Stock
(in thousands, except share data)	Shares	Amount		Shares	Amount		APIC		Accumulated Deficit		Notes Receivable from Stockholders		Non-controlling Interest		Total		Redeemable Non-controlling Interest
Balance at June 30, 2020	33,302,477	$	333	45,458,763	$	4	$	235,520	$	(10,770)	$	(573)	$	198,049	$	422,563	$	71
Net income (loss)	—	—		—	—		—		(3,268)		—		(4,369)		(7,637)		22
Offering costs	—	—		—	—		(28)		—		—		—		(28)		—
Equity issued in business combinations	25,491	—		—	—		445		—		—		—		445		—
Share-based compensation, net of forfeitures	393,848	4		—	—		908		—		—		285		1,197		—
Redemptions and repurchases of common stock	211,052	2		(211,052)	—		799		—		—		(801)		—		—
Repayment of stockholder notes receivable	—	—		—	—		—		—		54		—		54		—
Contributions	—	—		—	—		—		—		—		—		—		8
Balance at September 30, 2020	33,932,868	$	339	45,247,711	$	4	$	237,644	$	(14,038)	$	(519)	$	193,164	$	416,594	$	101


For the Nine Months Ended September 30, 2020
	Stockholders’ Equity																Mezzanine Equity
	Class A Common Stock			Class B Common Stock
(in thousands, except share data)	Shares	Amount		Shares	Amount		APIC		Accumulated Deficit		Notes Receivable from Stockholders		Non-controlling Interest		Total		Redeemable Non-controlling Interest
Balance at December 31, 2019	19,362,984	$	194	43,257,738	$	4	$	82,425	$	(8,650)	$	(688)	$	163,966	$	237,251	$	23
Net income (loss)	—	—		—	—		—		(5,388)		—		(5,438)		(10,826)		59
Issuance of Class A common stock in offering, net of underwriting discounts and offering costs	13,225,000	132		(2,475,000)	—		144,497		—		—		(9,398)		135,231		—
Equity issued in business combinations	513,025	5		4,805,572	—		8,117		—		—		44,453		52,575		—
Share-based compensation, net of forfeitures	580,045	6		—	—		2,600		—		—		880		3,486		—
Redemptions and repurchases of common stock	251,814	2		(340,599)	—		5		—		—		(1,299)		(1,292)		—
Repayment of stockholder notes receivable	—	—		—	—		—		—		169		—		169		—
Contributions	—	—		—	—		—		—		—		—		—		19
Balance at September 30, 2020	33,932,868	$	339	45,247,711	$	4	$	237,644	$	(14,038)	$	(519)	$	193,164	$	416,594	$	101

See accompanying Notes to Condensed Consolidated Financial Statements.

BRP GROUP, INC.

Condensed Consolidated Statements of Stockholders’/Members’ Equity (Deficit) and Mezzanine Equity (Continued)

(Unaudited)


For the Three Months Ended September 30, 2019
	Members’ Equity (Deficit)								Mezzanine Equity
(in thousands)	Members’ Deficit		Notes Receivable from Members		Noncontrolling Interest		Total		Redeemable Noncontrolling Interest		Redeemable Members’ Capital
Balance at June 30, 2019	$	(128,869)	$	(256)	$	2,424	$	(126,701)	$	65,906	$	110,596
Net income (loss)	(2,578)		—		(20)		(2,598)		1,440		(1,148)
Contributions	—		—		—		—		1		—
Repayment of member notes receivable	—		16		—		16		—		—
Issuance and vesting of Management Incentive Units	303		—		—		303		—		—
Issuance of common units	—		—		—		—		—		—
Equity issued in business combinations	—		—		—		—		6,674		—
Change in the redemption value of redeemable interests	(74,166)		—		—		(74,166)		11,125		63,041
Distributions	(732)		—		(17)		(749)		(2,538)		(251)
Balance at September 30, 2019	$	(206,042)	$	(240)	$	2,387	$	(203,895)	$	82,608	$	172,238


For the Nine Months Ended September 30, 2019
	Members’ Equity (Deficit)								Mezzanine Equity
(in thousands)	Members’ Deficit		Notes Receivable from Members		Noncontrolling Interest		Total		Redeemable Noncontrolling Interest		Redeemable Members’ Capital
Balance at December 31, 2018	$	(63,606)	$	(90)	$	937	$	(62,759)	$	46,208	$	39,354
Net income	119		—		112		231		3,761		485
Contributions	—		—		—		—		35		—
Contributions through issuance of member notes receivable	—		(310)		47		(263)		263		—
Repayment of member notes receivable	—		160		—		160		—		—
Issuance and vesting of Management Incentive Units	663		—		—		663		—		—
Issuance of common units	612		—		386		998		—		5,509
Repurchase of common units	—		—		—		—		—		(11,177)
Repurchase redemption value adjustments	—		—		—		—		—		(1,323)
Equity issued in business combinations	—		—		1,000		1,000		37,637		—
Change in the redemption value of redeemable interests	(140,708)		—		—		(140,708)		167		140,541
Distributions	(3,122)		—		(95)		(3,217)		(5,463)		(1,151)
Balance at September 30, 2019	$	(206,042)	$	(240)	$	2,387	$	(203,895)	$	82,608	$	172,238

See accompanying Notes to Condensed Consolidated Financial Statements.

BRP GROUP, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	For the Nine Months Ended September 30,
(in thousands)	2020		2019
Cash flows from operating activities:
Net income (loss)	$	(10,767)	$	4,477
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	13,894		7,253
Change in fair value of contingent consideration	12,697		(3,222)
Share-based compensation expense	5,357		110
Payment of contingent earnout consideration in excess of purchase price accrual	(1,727)		—
Amortization of deferred financing costs	384		1,117
Loss on extinguishment of debt	—		115
Issuance and vesting of Management Incentive Units	—		663
Participation unit compensation	—		150
Changes in operating assets and liabilities, net of effect of acquisitions:
Premiums, commissions and fees receivable, net	(12,717)		(441)
Prepaid expenses and other current assets	230		(921)
Due from related parties	2		73
Accounts payable, accrued expenses and other current liabilities	23,418		5,090
Other liabilities	—		105
Net cash provided by operating activities	30,771		14,569
Cash flows from investing activities:
Capital expenditures	(4,135)		(1,465)
Investment in business venture	—		(200)
Cash consideration paid for asset acquisitions, net of cash received	(695)		(671)
Cash consideration paid for business combinations, net of cash received	(230,403)		(99,486)
Net cash used in investing activities	(235,233)		(101,822)
Cash flows from financing activities:
Proceeds from issuance of Class A common stock, net of underwriting discounts	167,346		—
Repurchase/redemption of LLC Units and Class B common stock	(32,610)		—
Payment of common stock offering costs	(798)		—
Payment of contingent and guaranteed earnout consideration	(1,192)		(813)
Proceeds from revolving line of credit	185,637		68,464
Repayments of revolving line of credit	(125,000)		—
Proceeds from related party debt	—		49,845
Payments on long-term debt	—		(204)
Payments of debt issuance costs and debt extinguishment costs	(2,182)		(15)
Proceeds from repayment of stockholder/member notes receivable	169		160
Repurchase of common units	—		(12,500)
Distributions	—		(9,831)
Other	19		1,662
Net cash provided by financing activities	191,389		96,768
Net increase (decrease) in cash and cash equivalents and restricted cash	(13,073)		9,515
Cash and cash equivalents and restricted cash at beginning of period	71,071		7,995
Cash and cash equivalents and restricted cash at end of period	$	57,998	$	17,510

See accompanying Notes to Condensed Consolidated Financial Statements.


BRP GROUP, INC.
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
	For the Nine Months Ended September 30,
(in thousands)	2020		2019
Supplemental schedule of cash flow information:
Cash paid during the period for interest	$	2,309	$	7,480
Disclosure of non-cash investing and financing activities:
Equity issued in business combinations	$	52,575	$	38,637
Contingent earnout consideration issuances	26,612		29,117
Additions to property and equipment included in accrued expenses and other current liabilities	561		—
Change in the redemption value of redeemable interests	—		140,708
Capitalization of issuance to redeemable common member	—		5,509
Capitalization of offering costs	—		4,207
Debt issuance costs added to revolving line of credit	—		2,554
Transfer of long-term debt to revolving line of credit	—		1,820
Contingently returnable consideration for business combinations	—		321

See accompanying Notes to Condensed Consolidated Financial Statements.

BRP GROUP, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Business and Basis of Presentation

BRP Group, Inc. (“BRP Group” or the “Company”) 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. On October 28, 2019, BRP Group completed an initial public offering of its Class A common stock (the “Initial Public Offering”) and became the sole managing member of BRP. The consolidated financial statements of BRP Group have been presented as a combination of the financial results of BRP Group and BRP as of the earliest period presented as discussed further under Principles of Consolidation below.

BRP Group is a diversified insurance agency and services organization that markets and sells insurance products and services to its customers throughout the U.S., although a significant portion of the Company’s business is concentrated in the southeastern U.S. BRP Group and its subsidiaries operate through four reportable segments (“Operating Groups”), including Middle Market, Specialty, MainStreet, and Medicare, which are discussed in more detail in Note 15.

Public Offering

On June 29, 2020, the Company completed a public offering of 13,225,000 shares of its Class A common stock, including 1,725,000 shares sold pursuant to the underwriters’ over-allotment option. The shares were sold at an offering price of $13.25 per share for net proceeds of $166.5 million after deducting underwriting discounts and commissions of $7.9 million and offering expenses of $798,000.

Principles of Consolidation

The consolidated financial statements include the accounts of BRP Group and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

As the sole manager of BRP, BRP Group operates and controls all the business and affairs of BRP, and has the sole voting interest in, and controls the management of, BRP. Accordingly, BRP Group began consolidating BRP in its consolidated financial statements as of the closing date of the Initial Public Offering, resulting in a noncontrolling interest related to the LLC Units held by BRP’s LLC members (the “LLC Units”) on its consolidated financial statements.

BRP and BRP Group were under the common control of the Company’s Chairman, Lowry Baldwin, before and immediately after the reorganization transactions undertaken in connection with the Initial Public Offering (the “Reorganization Transactions”). Prior to the Reorganization Transactions, Mr. Baldwin held a controlling interest in Baldwin Investment Group Holdings, LLC (“BIGH”), which was the controlling owner of BRP through its majority ownership of BRP’s common units. In addition, Mr. Baldwin was the sole shareholder of BRP Group. Upon reorganization, BRP Group became the sole managing member of BRP. Holders of the Class B common stock hold a majority of the voting power of BRP Group and stockholders of the then majority of the Class B common stock, including BIGH, executed a Voting Agreement in which they agreed to vote in the same manner as Mr. Baldwin. As a result, Mr. Baldwin continued to control BRP Group subsequent to the Initial Public Offering and Reorganization Transactions. Accordingly, we have accounted for the Reorganization Transactions as a transaction between entities under common control in accordance with Accounting Standards Codification (“ASC”) Topic 805-50, Business Combinations - Related Issues, under which the financial information of BRP Group has been combined with that of BRP as of the earliest period presented.

The Company has prepared these consolidated financial statements in accordance with 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 certain entities as variable interest entities of which the Company is the primary beneficiary and has included the accounts of these entities in the consolidated financial statements. 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 on the condensed consolidated balance sheets within total equity of the Company. Certain redeemable noncontrolling interests are reported on 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.

Noncontrolling Interest

Noncontrolling interests are reported at historical cost basis adjusted for cumulative earnings or loss allocations and classified as a component of stockholders’ equity on the condensed consolidated balance sheets. Noncontrolling interest as presented as of September 30, 2020 and December 31, 2019 and for the nine months ended September 30, 2020 and 2019 consists of the noncontrolling interest holdings of BRP Group subsequent to the Company’s reorganization in connection with the Initial Public Offering. The controlling interest holdings of BRP for the period from January 1, 2019 through September 30, 2019 have been reclassified to noncontrolling interest holdings of BRP Group for presentation of activity for the three and nine months ended September 30, 2019.

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, 2019 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, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2020.

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, including determination of allowances for estimated policy cancellations, business combinations and purchase price allocation, impairment of long-lived assets including goodwill, and valuation of the Tax Receivable Agreement liability and share-based compensation.

Changes in Presentation

Certain prior year amounts have been reclassified to conform to current year presentation.

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 (“ASUs”) 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 Accounting Standards Codification (“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. The FASB has subsequently issued several additional ASUs related to leases, which improved upon, provided interpretation of and transition relief for, the guidance issued in ASU 2016-02 and extended the adoption date for nonpublic business entities. This guidance is effective for the fiscal years beginning after December 15, 2021, and interim periods within 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 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, provided interpretation of and 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 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”). This update modifies the disclosure requirements related to fair value measurement by removing certain disclosure requirements related to the fair value hierarchy. This update also modifies existing disclosure requirements related to measurement uncertainty and adds 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 Company adopted the guidance in ASU 2018-13 effective January 1, 2020, which impacted the presentation of the fair value measurements disclosure in Note 13 but did not otherwise impact 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, 2019 in the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2020, except as noted below.

Self-Insurance Reserve

The Company converted to a self-insured health insurance plan beginning in March 2020 for which it carries an insurance program with specific retention levels or high per-claim deductibles for expected losses. The Company records a liability for all unresolved claims and for an estimate of incurred but not reported ("IBNR") claims at the anticipated cost that falls below its specified retention levels or per-claim deductible amounts. In establishing reserves, the Company considers actuarial assumptions and judgments regarding economic conditions and the frequency and severity of claims. The Company had an IBNR reserve of $1.1 million at September 30, 2020, which is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents. The Company manages this risk using high creditworthy financial institutions. Interest-bearing accounts and noninterest-bearing accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. Deposits exceed amounts insured by the FDIC. The Company has not experienced any losses from its deposits.

3. Business Combinations

The Company completed 11 business combinations for an aggregate purchase price of $317.7 million during the nine months ended September 30, 2020. 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 or change in circumstances occurs that indicates goodwill may be impaired. Goodwill is deductible for tax purposes and will be amortized over a period of 15 years.

The recorded purchase price for certain of the foregoing business combinations includes an estimation of the fair value of contingent consideration obligations associated with potential earnout provisions, which are generally based on recurring commissions and fees revenue. The contingent earnout consideration amounts 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 condensed 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 11 business combinations during the nine months ended September 30, 2020:

•Lanier, a Middle Market Partner effective January 1, 2020, was made to expand the Company’s Middle Market presence in the healthcare, higher education, construction, property and non-profit businesses throughout Florida and other states.

•Highland, a Specialty Partner effective January 1, 2020, was made to expand the Company’s Specialty presence in the healthcare and cyber insurance businesses and to add capabilities within the real estate business.

•AgencyRM, a Medicare Partner effective February 1, 2020, was made to expand the Company’s Medicare business presence in Texas.

•VibrantUSA, a Medicare Partner effective February 1, 2020, was made to expand the Company’s Medicare business presence in Washington.

•IRP, a Middle Market Partner effective April 1, 2020, was made to expand the Company’s capabilities within the energy and infrastructure business.

•Southern Protective Group, a Middle Market Partner effective May 1, 2020, was made to expand the Company's risk consulting capabilities in the medical malpractice market.

•Pendulum, a Specialty Partner effective May 1, 2020, was made to expand the Company's specialty risk consulting capabilities in the long-term care and senior living markets.

•Rosenthal, a Middle Market Partner effective June 1, 2020, was made to expand the Company’s capabilities within the habitational real estate industry.

•TBA/RBA, a Middle Market Partner effective June 1, 2020, was made to expand the Company’s employee benefits business in Tennessee and across the Southeastern U.S.

•Fletcher, a Medicare Partner effective July 31, 2020, was made to expand the Company’s Medicare business presence in Washington.

•MIA, a Medicare Partner effective July 31, 2020, was made to expand the Company’s Medicare business presence in Tennessee.

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 these business combinations of $37.1 million and $3.0 million, respectively, for the nine months ended September 30, 2020.

Acquisition-related costs incurred in connection with these business combinations are recorded in other operating expenses in the condensed consolidated statements of comprehensive income (loss). The Company incurred acquisition-related costs from these business combinations of $1.7 million for the nine months ended September 30, 2020.

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, 2020. The "All Others" column includes amounts for the AgencyRM, VibrantUSA, Southern Protective Group, Pendulum, Fletcher and MIA business combinations.


(in thousands)	Lanier		Highland		IRP		Rosenthal		TBA/RBA		All Others		Totals
Cash consideration paid	$	24,450	$	6,603	$	26,223	$	75,936	$	76,272	$	28,634	$	238,118
Fair value of contingent earnout consideration	1,628		788		5,521		7,051		7,000		4,624		26,612
Fair value of equity interest	6,119		4,500		7,535		10,147		21,427		2,847		52,575
Deferred payment	—		—		—		—		300		59		359
Total consideration	$	32,197	$	11,891	$	39,279	$	93,134	$	104,999	$	36,164	$	317,664

Cash	$	2,413	$	1,542	$	1,694	$	954	$	—	$	1,112	$	7,715
Premiums, commissions and fees receivable	2,494		5,929		3,229		4,734		8,731		1,718		26,835
Property and equipment	294		—		123		—		—		26		443
Other assets	168		13		11		11		—		19		222
Intangible assets													—
Purchased customer accounts	4,312		—		6,250		33,670		53,900		3,489		101,621
Distributor relationships	—		6,500		—		—		—		12,880		19,380
Carrier relationships	—		659		—		—		—		—		659
Software	—		—		—		—		—		565		565
Trade names	—		214		—		939		179		77		1,409
Goodwill	25,735		4,276		32,273		56,253		44,264		17,125		179,926
Total assets acquired	35,416		19,133		43,580		96,561		107,074		37,011		338,775
Premiums and producer commissions payable	(2,954)		(6,374)		(4,301)