SEC Filing | Baldwin Risk Partners

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brp-20210331

_____________________________________________________________________________________________

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 March 31, 2021


☐			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 ☒

As of May 6, 2021, there were 46,592,268 shares of Class A common stock outstanding and 49,579,871 shares of Class B common stock outstanding.

BRP GROUP, INC.

INDEX

Page

PART I. FINANCIAL INFORMATION

ITEM 1.

Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2021 and 2020

Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity for the Three Months Ended March 31, 2021 and 2020

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31 2021 and 2020

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 Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K filed with the SEC on March 11, 2021.

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 on behalf of our Clients

Clients Our insureds

Colleagues Our employees

Exchange Act Securities Exchange Act of 1934, as amended

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

LeaseTrack LeaseTrack Services LLC and Effective Coverage LLC, a Specialty Partner effective February 1, 2021

Medicare Help Now Riley Financial, Inc. (operating as “Medicare Help Now”), a Medicare Partner effective March 1, 2021

MGA Managing General Agent

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, as amended by the Amendment No. 1 to Credit Agreement entered into on May 7, 2021

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

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

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRP GROUP, INC.

Condensed Consolidated Balance Sheets

(Unaudited)


(in thousands, except share and per share data)	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	90,544	$	108,462
Restricted cash	32,003		33,560
Premiums, commissions and fees receivable, net	206,594		155,501
Prepaid expenses and other current assets	4,643		4,447
Due from related parties	—		19
Total current assets	333,784		301,989
Property and equipment, net	11,577		11,019
Other assets	14,795		11,084
Intangible assets, net	547,751		554,320
Goodwill	669,126		651,502
Total assets	$	1,577,033	$	1,529,914
Liabilities, Mezzanine Equity and Stockholders’ Equity
Current liabilities:
Premiums payable to insurance companies	$	143,586	$	135,576
Producer commissions payable	33,711		24,260
Accrued expenses and other current liabilities	41,418		47,490
Due to related parties	155		—
Current portion of long-term debt	4,000		4,000
Current portion of contingent earnout liabilities	27,467		6,094
Total current liabilities	250,337		217,420
Long-term debt, less current portion	380,826		381,382
Contingent earnout liabilities, less current portion	137,816		158,725
Other liabilities	2,408		2,419
Total liabilities	771,387		759,946
Commitments and contingencies (Note 14)
Mezzanine equity:
Redeemable noncontrolling interest	125		98
Stockholders’ equity:
Class A common stock, par value $0.01 per share, 300,000,000 shares authorized; 45,925,711 and 44,953,166 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	460		450
Class B common stock, par value $0.0001 per share, 100,000,000 shares authorized; 49,715,644 and 49,828,383 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	5		5
Additional paid-in capital	398,885		392,139
Accumulated deficit	(9,733)		(24,346)
Notes receivable from stockholders	(349)		(465)
Total stockholders’ equity attributable to BRP Group, Inc.	389,268		367,783
Noncontrolling interest	416,253		402,087
Total stockholders’ equity	805,521		769,870
Total liabilities, mezzanine equity and stockholders’ equity	$	1,577,033	$	1,529,914

See accompanying Notes to Condensed Consolidated Financial Statements. 5

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)	March 31, 2021		December 31, 2020
Assets of Consolidated Variable Interest Entities That Can Only be Used to Settle the Obligations of Consolidated Variable Interest Entities:
Cash and cash equivalents	$	194	$	143
Premiums, commissions and fees receivable, net	430		130
Total current assets	624		273
Property and equipment, net	20		21
Other assets	5		5
Total assets	$	649	$	299
Liabilities of Consolidated Variable Interest Entities for Which Creditors Do Not Have Recourse to the Company:
Premiums payable to insurance companies	$	266	$	5
Producer commissions payable	13		17
Accrued expenses and other current liabilities	9		10
Total liabilities	$	288	$	32

See accompanying Notes to Condensed Consolidated Financial Statements. 6

BRP GROUP, INC.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	For the Three Months Ended March 31,
(in thousands, except share and per share data)		2021		2020
Revenues:
Commissions and fees		$	152,828	$	54,159

Operating expenses:
Commissions, employee compensation and benefits		89,375		34,548
Other operating expenses		17,568		8,885
Amortization expense		10,537		3,596
Change in fair value of contingent consideration		(1,503)		1,661
Depreciation expense		594		165
Total operating expenses		116,571		48,855

Operating income		36,257		5,304

Interest expense, net		(5,643)		(585)

Income before income taxes		30,614		4,719
Income tax provision		—		12
Net income		30,614		4,707
Less: net income attributable to noncontrolling interests		16,001		3,239
Net income attributable to BRP Group, Inc.		$	14,613	$	1,468

Comprehensive income		$	30,614	$	4,707
Comprehensive income attributable to noncontrolling interests		16,001		3,239
Comprehensive income attributable to BRP Group, Inc.		14,613		1,468

Basic earnings per share		$	0.33	$	0.08
Diluted earnings per share		$	0.32	$	0.07
Weighted-average shares of Class A common stock outstanding - basic		44,255,011		19,481,721
Weighted-average shares of Class A common stock outstanding - diluted		45,783,086		19,816,363

See accompanying Notes to Condensed Consolidated Financial Statements. 7

BRP GROUP, INC.

Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity

(Unaudited)


For the Three Months Ended March 31, 2021
	Stockholders’ Equity																Mezzanine Equity
	Class A Common Stock			Class B Common Stock
(in thousands, except share data)	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Notes Receivable from Stockholders		Non-controlling Interest		Total		Redeemable Non-controlling Interest
Balance at December 31, 2020	44,953,166	$	450	49,828,383	$	5	$	392,139	$	(24,346)	$	(465)	$	402,087	$	769,870	$	98
Net income	—	—		—	—		—		14,613		—		15,974		30,587		27
Equity issued in business combinations	154,132	2		—	—		3,632		—		—		(1,175)		2,459		—
Share-based compensation, net of forfeitures	705,674	7		—	—		2,245		—		—		237		2,489		—
Redemption of Class B common stock	112,739	1		(112,739)	—		869		—		—		(870)		—		—
Repayment of stockholder notes receivable	—	—		—	—		—		—		116		—		116		—
Balance at March 31, 2021	45,925,711	$	460	49,715,644	$	5	$	398,885	$	(9,733)	$	(349)	$	416,253	$	805,521	$	125


For the Three Months Ended March 31, 2020
	Stockholders’ Equity																Mezzanine Equity
	Class A Common Stock			Class B Common Stock
(in thousands, except share data)	Shares	Amount		Shares	Amount		Additional Paid-in Capital		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	—	—		—	—		—		1,468		—		3,223		4,691		16
Equity issued in business combinations	487,534	5		286,624	—		7,672		—		—		4,500		12,177		—
Share-based compensation, net of forfeitures	(3,164)	—		—	—		346		—		—		299		645		—
Repayment of stockholder notes receivable	—	—		—	—		—		—		41		—		41		—
Balance at March 31, 2020	19,847,354	$	199	43,544,362	$	4	$	90,443	$	(7,182)	$	(647)	$	171,988	$	254,805	$	39

See accompanying Notes to Condensed Consolidated Financial Statements. 8

BRP GROUP, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	For the Three Months Ended March 31,
(in thousands)	2021		2020
Cash flows from operating activities:
Net income	$	30,614	$	4,707
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	11,131		3,761
Change in fair value of contingent consideration	(1,503)		1,661
Share-based compensation expense	3,542		1,139
Amortization of deferred financing costs	693		76
Changes in operating assets and liabilities, net of effect of acquisitions:
Premiums, commissions and fees receivable, net	(50,364)		(5,221)
Prepaid expenses and other current assets	(636)		(634)
Due from related parties	174		9
Accounts payable, accrued expenses and other current liabilities	9,636		(527)
Net cash provided by operating activities	3,287		4,971
Cash flows from investing activities:
Capital expenditures	(1,000)		(583)
Cash consideration paid for business combinations, net of cash received	(17,358)		(39,305)
Net cash used in investing activities	(18,358)		(39,888)
Cash flows from financing activities:
Proceeds from revolving line of credit	—		20,000
Payments on long-term debt	(1,000)		—
Payments of debt issuance costs	(59)		(230)
Purchase of interest rate caps	(3,461)		—
Proceeds from repayment of stockholder notes receivable	116		41
Net cash provided by (used in) financing activities	(4,404)		19,811
Net decrease in cash and cash equivalents and restricted cash	(19,475)		(15,106)
Cash and cash equivalents and restricted cash at beginning of period	142,022		71,071
Cash and cash equivalents and restricted cash at end of period	$	122,547	$	55,965


Supplemental schedule of cash flow information:
Cash paid during the period for interest	$	5,765	$	573
Disclosure of non-cash investing and financing activities:
Equity issued in business combinations	$	2,459	$	12,177
Contingent earnout liabilities assumed in business combinations	6,711		3,237
Capital expenditures incurred but not yet paid	244		—

See accompanying Notes to Condensed Consolidated Financial Statements. 9

BRP GROUP, INC.

Notes to Condensed Consolidated Financial Statements

(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 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 Operating Groups, including Middle Market, Specialty, MainStreet, and Medicare, which are discussed in more detail in Note 15. The term the “Company” refers to BRP Group and its consolidated subsidiaries.

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 Baldwin Risk Partners, LLC (“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 consolidates BRP in its consolidated financial statements, resulting in a noncontrolling interest related to the membership interests of BRP (the “LLC Units”) held by BRP’s LLC members in its consolidated financial statements.

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 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.

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, 2020 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, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 11, 2021.

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; the determination of fair value in relation to business combinations and purchase price allocation; impairment of long-lived assets including goodwill; valuation of the Tax Receivable Agreement liability and income taxes; and share-based compensation.

Recent Accounting Pronouncements

As an emerging growth company, the Jumpstart Our Business Startups Act of 2012 (the “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 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.

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, 2020 in the Company’s Annual Report on Form 10-K filed with the SEC on March 11, 2021, except as noted below.

Derivative Instruments

The Company utilizes derivative financial instruments, consisting of interest rate caps, to manage the Company’s interest rate exposure. Derivative instruments are recognized as assets or liabilities at fair value on the condensed consolidated balance sheets. The Company has not designated these derivatives as hedging instruments for accounting purposes and, accordingly, the changes in fair value of these derivatives are recognized in earnings. Cash payments and receipts under the derivative instruments are classified within cash flows from financing activities on the accompanying statements of cash flows. The Company does not use derivative instruments for trading or speculative purposes.

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 two business combinations for an aggregate purchase price of $26.7 million during the three months ended March 31, 2021. 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 most business combinations includes an estimation of the fair value of contingent consideration obligations associated with potential earnout provisions, which are generally based on recurring 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 when incurred.

The recorded purchase price for many business combinations also includes an estimation of the fair value of equity interests, which is calculated based on the value of the Company’s Class A common stock on the closing date taking into account a discount for lack of marketability. Any equity interests granted in shares of Class B common stock also include an upward adjustment for the cash flow associated with the Tax Receivable Agreement.

The Company completed the following two business combinations during the three months ended March 31, 2021:

•LeaseTrack Services LLC and Effective Coverage LLC (“LeaseTrack”), a Specialty Partner effective February 1, 2021, was made to provide a complementary service offering to the MGA of the Future’s Master Tenant product for property managers and distribution partners.

•Riley Financial, Inc. (operating as “Medicare Help Now”), a Medicare Partner effective March 1, 2021, was made to further bolster the Company’s Medicare business presence in the Pacific Northwest.

The operating results of these business combinations have been included in the condensed consolidated statements of comprehensive income since their respective acquisition dates. The Company recognized total revenues and net loss from these business combinations of $711,000 and $22,000, respectively, for the three months ended March 31, 2021.

Acquisition-related costs incurred in connection with these business combinations are recorded in other operating expenses in the condensed consolidated statements of comprehensive income. The Company incurred acquisition-related costs from these business combinations of $358,000 for the three months ended March 31, 2021.

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 consolidated financial statements may be provisional and subject to additional adjustments within the measurement period as permitted by Topic 805. Specifically, the Company's valuations of premiums, commissions and fees receivable in accordance with Topic 606 are estimates subject to change based on relevant factors over the policy period. The valuations of intangible assets are also estimates based on assumptions of factors such as discount rates and growth rates. Accordingly, these assets are subject to measurement period adjustments as determined after the passage of time. Any measurement period adjustments related to prior period business combinations are reflected as current period adjustments in accordance with Topic 805. Refer to Note 8 for information regarding measurement period adjustments recorded during the three months ended March 31, 2021.

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 three months ended March 31, 2021.


(in thousands)	LeaseTrack		Medicare Help Now		Totals
Cash consideration paid	$	12,984	$	4,526	$	17,510
Fair value of contingent earnout consideration	6,116		595		6,711
Fair value of equity interest	1,652		807		2,459
Total consideration	$	20,752	$	5,928	$	26,680

Cash	$	100	$	50	$	150
Restricted cash	2		—		2
Premiums, commissions and fees receivable	729		—		729
Property and equipment	43		—		43

Intangible assets	5,200		3,501		8,701
Goodwill	15,026		2,381		17,407
Total assets acquired	21,100		5,932		27,032
Premiums payable to insurance companies	(318)		—		(318)
Producer commissions payable	(4)		—		(4)
Accrued expenses and other current liabilities	(26)		(4)		(30)
Total liabilities acquired	(348)		(4)		(352)
Net assets acquired	$	20,752	$	5,928	$	26,680

Maximum potential contingent earnout consideration	$	8,500	$	2,514	$	11,014

The factors contributing to the recognition of the amount of goodwill are based on expanding business presence into new geographic locations and service markets, strategic benefits expected to be realized from acquiring the Partners’ assembled workforce and technology, in addition to other synergies gained from integrating the Partners’ operations into our consolidated structure.

The intangible assets acquired in connection with business combinations during the three months ended March 31, 2021 have the following values and estimated weighted-average lives:


	Amount		Weighted-Average Life
Purchased customer accounts	$	3,662	14.5 years
Distributor relationships	2,594		20.0 years
Software	2,095		5.0 years
Trade names	350		4.9 years

Future annual estimated amortization expense over the next five years for intangible assets acquired in connection with business combinations during the three months ended March 31, 2021 is as follows:


(in thousands)	Amount
For the remainder of 2021	$	606
2022	823
2023	761
2024	808
2025	869

The following unaudited pro forma consolidated results of operations are provided for illustrative purposes only and have been presented as if the acquisitions of LeaseTrack and Medicare Help Now occurred on January 1, 2020. 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 March 31,
(in thousands, except per share data)		2021		2020
Pro forma results:
Revenues		$	153,296	$	55,191
Net income		30,610		4,367
Net income attributable to BRP Group, Inc.		14,611		1,362

Basic earnings per share		$	0.33	$	0.07
Diluted earnings per share		$	0.32	$	0.07
Weighted-average shares of Class A common stock outstanding - basic		44,324		19,634
Weighted-average shares of Class A common stock outstanding - diluted		45,852		19,969

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 determined that it is the primary beneficiary of its VIEs, which, at March 31, 2021 and December 31, 2020, include Laureate Insurance Partners, LLC (“Laureate”), BKS Smith, LLC (“Smith”), BKS MS, LLC (“Saunders”) and BKS Partners Galati Marine Solutions, LLC (“Galati”). The Company has consolidated its VIEs into the consolidated financial statements.

Total revenues and expenses of the Company’s consolidated VIEs included in the condensed consolidated statements of comprehensive income were $213,000 and $156,000, respectively, for the three months ended March 31, 2021 and $238,000 and $189,000, respectively, for the three months ended March 31, 2020.

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. 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 March 31, 2021
(in thousands)	Laureate		Smith		Saunders		Total
Assets
Cash and cash equivalents	$	159	$	9	$	26	$	194
Premiums, commissions and fees receivable, net	262		78		90		430
Total current assets	421		87		116		624
Property and equipment, net	20		—		—		20
Other assets	5		—		—		5
Total assets	$	446	$	87	$	116	$	649
Liabilities
Premiums payable to insurance companies	$	244	$	22	$	—	$	266
Producer commissions payable	—		—		13		13
Accrued expenses and other current liabilities	9		—		—		9
Total liabilities	$	253	$	22	$	13	$	288


	At December 31, 2020
(in thousands)	Laureate		Smith		Saunders		Total
Assets
Cash and cash equivalents	$	120	$	5	$	18	$	143
Premiums, commissions and fees receivable, net	3		52		75		130
Total current assets	123		57		93		273
Property and equipment, net	21		—		—		21
Other assets	5		—		—		5
Total assets	$	149	$	57	$	93	$	299
Liabilities
Premiums payable to insurance companies	$	4	$	—	$	1	$	5
Producer commissions payable	—		4		13		17
Accrued expenses and other current liabilities	10		—		—		10
Total liabilities	$	14	$	4	$	14	$	32

5. Revenue

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


	For the Three Months Ended March 31,
(in thousands)		2021		2020
Direct bill revenue (1)		$	94,505	$	28,109
Agency bill revenue (2)		33,946		16,429
Profit-sharing revenue (3)		10,292		5,124
Policy fee and installment fee revenue (4)		4,476		3,382
Consulting and service fee revenue (5)		1,394		715
Other income (6)		8,215		400
Total commissions and fees		$	152,828	$	54,159

__________

(1) Direct bill revenue represents commission revenue earned by facilitating the arrangement between individuals or businesses and Insurance Company Partners by providing insurance placement services to Clients, primarily for private risk management, commercial risk management, employee benefits and Medicare insurance types.

(2) Agency bill revenue primarily represents commission revenue earned by facilitating the arrangement between individuals or businesses and Insurance Company Partners by providing insurance placement services to Clients. The Company acts as an agent on behalf of the Client for the term of the insurance policy.

(3) Profit-sharing revenue represents bonus-type revenue that is earned by the Company as a sales incentive provided by certain Insurance Company Partners.

(4) Policy fee revenue represents revenue earned for acting in the capacity of an MGA on behalf of the Insurance Company Partner and fulfilling certain services including delivery of policy documents, processing payments and other administrative functions. Installment fee revenue represents revenue earned by the Company for providing payment processing services on behalf of the Insurance Company Partner related to policy premiums paid on an installment basis.

(5) Service fee revenue is earned by receiving negotiated fees in lieu of a commission and consulting revenue is earned by providing specialty insurance consulting.

(6) Other income consists of Medicare marketing income that is based on agreed-upon cost reimbursement for fulfilling specific targeted marketing campaigns in addition to other fee income and premium financing income generated across all Operating Groups.

The application of ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”), requires the use of management judgment. The following are the areas of most significant judgment as it relates to Topic 606:

•The Company considers the policyholders as representative of its customers in the majority of contractual relationships, with the exception of contracts in its Medicare operating segment, where the Insurance Company Partner is considered its customer.

•Contracts in the Medicare operating segment are multi-year arrangements in which the Company is entitled to renewal commissions. However, the Company has applied a constraint to renewal commission that limits revenue recognized on new policies to the policy year in effect, and revenue recognized on renewed policies to the receipt of periodic cash, when a risk of significant reversals exists based on: (i) insufficient history; and (ii) the influence of external factors outside of the Company’s control, including policyholder discretion over plans and Insurance Company Partner relationship, political influence, and a contractual provision, which limits the Company’s right to receive renewal commissions to ongoing compliance and regulatory approval of the relevant Insurance Company Partner and compliance with the Centers for Medicare and Medicaid Services.

•The Company recognizes separately contracted commissions revenue at the effective date of insurance placement and considers any ongoing interaction with the customer to be immaterial in the context of the contract.

•Variable consideration includes estimates of direct bill commissions, a reserve for policy cancellations and an estimate of profit-sharing revenue.

•Costs to obtain a contract are deferred and recognized over five years, which represents management’s estimate of the average period over which a Client maintains its initial coverage relationship with the original Insurance Company Partner.

•Due to the relatively short time period between the information gathering phase and binding insurance coverage, the Company has determined that costs to fulfill contracts are not significant. Therefore, costs to fulfill a contract are expensed as incurred.

6. Contract Assets and Liabilities

Contract assets arise when the Company recognizes revenue for amounts which have not yet been billed and contract liabilities relate to payments received in advance of performance under the contract before the transfer of a good or service to the customer. Contract assets are included in premiums, commissions and fees receivable, net and contract liabilities are included in accrued expenses and other current liabilities on the condensed consolidated balance sheets. The balances of contract assets and liabilities arising from contracts with customers are as follows:


(in thousands)	March 31, 2021		December 31, 2020
Contract assets	$	115,270	$	80,213
Contract liabilities	8,308		11,606

During the three months ended March 31, 2021, the Company recognized revenue of $8.6 million related to the contract liabilities balance at December 31, 2020.

7. Deferred Commission Expense

The Company pays an incremental amount of compensation in the form of producer commissions on new business. In accordance with ASC Topic 340, Other Assets and Deferred Costs, these incremental costs are deferred and amortized over five years, which represents management’s estimate of the average benefit period for new business. Deferred commission expense represents employee commissions that are capitalized and not yet expensed and are included in other assets on the condensed consolidated balance sheets. The table below provides a rollforward of deferred commission expense for each of the three months ended March 31, 2021 and 2020:


	For the Three Months Ended March 31,
(in thousands)		2021		2020
Balance at beginning of period		$	4,751	$	3,621
Costs capitalized		835		492
Amortization		(422)		(321)
Balance at end of period		$	5,164	$	3,792

8. Intangible Assets, Net and Goodwill

The Company recognizes certain separately identifiable intangible assets acquired in connection with business combinations and asset acquisitions. Refer to Note 3 for a summary of intangible assets acquired in connection with business combinations during the three months ended March 31, 2021. Intangible assets consist of the following:


	March 31, 2021						December 31, 2020
(in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Purchased customer accounts (1)	$	500,590	$	(26,446)	$	474,144	$	501,512	$	(18,604)	$	482,908
Distributor relationships	34,974		(1,753)		33,221		32,380		(1,377)		31,003
Software	32,930		(12,444)		20,486		30,828		(10,801)		20,027
Carrier relationships	7,859		(1,051)		6,808		7,859		(984)		6,875
Trade names (1)	14,633		(1,541)		13,092		14,439		(932)		13,507
Totals	$	590,986	$	(43,235)	$	547,751	$	587,018	$	(32,698)	$	554,320

__________

(1) During the first quarter of 2021, the Company recorded measurement period adjustments relating to certain businesses acquired in the fourth quarter of 2020, which decreased purchased customer accounts and trade names by $4.6 million and $156,000, respectively.

Amortization expense recorded for intangible assets was $10.5 million and $3.6 million for the three months ended March 31, 2021 and 2020, respectively.

Refer to Note 3 for a summary of goodwill recorded in connection with business combinations during the three months ended March 31, 2021. The changes in carrying value of goodwill by Operating Group for the period are as follows:


(in thousands)	Middle Market (1)		Specialty		MainStreet		Medicare		Total
Balance at December 31, 2020	$	526,858	$	65,319	$	38,892	$	20,433	$	651,502
Goodwill of acquired businesses	217		15,026		—		2,381		17,624
Balance at March 31, 2021	$	527,075	$	80,345	$	38,892	$	22,814	$	669,126

__________

(1) During the first quarter of 2021, the Middle Market Operating Group recorded measurement period adjustments relating to certain businesses acquired in the fourth quarter of 2020. These adjustments increased accrued expenses and other current liabilities by $93,000 and decreased property and equipment by $124,000, which resulted in an increase to goodwill of $217,000.

9. Long-Term Debt

The Company has a credit agreement with JPMorgan Chase Bank, N.A., which provides senior secured credit facilities in an aggregate principal amount of $800.0 million (the "JPM Credit Agreement"). The amount consists of (i) a term loan facility in the principal amount of $400.0 million maturing in 2027 (the “Term Loan B”) and (ii) a revolving credit facility with commitments in an aggregate principal amount of $400.0 million maturing in 2025 (the “Revolving Facility”).

The Term Loan B bears interest at LIBOR plus 400 basis points (“bps”) with a floor of 4.75%. The applicable interest rate on the Term Loan B at March 31, 2021 was 4.75%. Borrowings under the Revolving Facility accrue interest at LIBOR plus 200 bps to LIBOR plus 300 bps based on the total net leverage ratio. The Company did not have any outstanding borrowings on the Revolving Facility at March 31, 2021, but was subject to a commitment fee of 0.25%.

The JPM Credit Agreement requires the Company to meet certain financial covenants and comply with customary affirmative and negative covenants as listed in the underlying agreement. The Company was in compliance with these covenants at March 31, 2021.

Subsequent to March 31, 2021, the Company entered into an amendment to the JPM Credit Agreement to modify its financial covenant requirements. Refer to Note 16 for additional information regarding this amendment.

Interest Rate Caps

The Company entered into interest rate caps to mitigate its exposure to interest rate risk by limiting the impact of interest rate changes on cash flows. In March 2021, the Company executed interest rate cap agreements with a notional amount of $300.0 million (the “Interest Rate Cap Agreements”) to limit the exposure of the variable component of interest rates under its Term Loan B to a maximum of 4.75%. The Interest Rate Cap Agreements were entered into with financial institutions at positions with participating interest rate caps of 0.75%, 1.50%, and 2.50%, expiring on March 10, 2022, March 10, 2024 and March 8, 2026, respectively. The interest rate caps are recorded at an aggregate fair value of $3.5 million at March 31, 2021 and are included as a component of other assets on the condensed consolidated balance sheets. There was no fair value adjustment related to the interest rate caps for the three months ended March 31, 2021.

10. Related Party Transactions

Commission Revenue

The Company serves as a broker for Holding Company of the Villages, Inc. (“The Villages”) and certain affiliated entities. Commission revenue recorded as a result of transactions with The Villages was $647,000 and $269,000 for the three months ended March 31, 2021 and 2020, respectively.

Rent Expense

The Company has various agreements to lease office space from wholly-owned subsidiaries of The Villages. Total rent expense incurred with respect to The Villages and its wholly-owned subsidiaries was $131,000 and $133,000 for the three months ended March 31, 2021 and 2020, respectively.

The Company has various agreements to lease office space from other related party entities. Total rent expense incurred with respect to related parties other than The Villages was $522,000 and $248,000 for the three months ended March 31, 2021 and 2020, respectively.

11. Share-Based Compensation

Omnibus Incentive Plan

The Company has an Omnibus Incentive Plan (the “Omnibus Plan”) and a Partnership Inducement Award Plan (the “Inducement Plan” and collectively, the “Plans”) to motivate and reward Colleagues and other individuals, including those who join the Company through Partnerships, to perform at the highest level and contribute significantly to the Company’s success, thereby furthering the best interests of its shareholders. The Omnibus Plan and the Inducement Plan provide for the Company to make awards of 3,844,044 and 1,500,000 shares of Class A common stock, respectively, at March 31, 2021.

During the three months ended March 31, 2021, the Company made awards of restricted stock and unrestricted stock under the Plans to its non-employee directors and Colleagues. Shares of unrestricted stock issued to directors during the three months ended March 31, 2021 were vested upon issuance while restricted shares issued to Colleagues and Risk Advisors generally either cliff vest after 4 years or vest ratably over 3 to 4 years.

The following table summarizes the activity for non-vested awards granted by the Company under the Plans:


	Shares	Weighted-Average Grant-Date Fair Value Per Share
Outstanding at December 31, 2020	826,027	$	15.92
Granted	716,441	29.97
Vested and settled	(12,602)	17.83
Forfeited	(8,038)	23.62
Outstanding at March 31, 2021	1,521,828	22.48

The total fair value of shares that vested and settled under the Plans during the three months ended March 31, 2021 was $225,000.

The Company recognizes share-based compensation expense for the Plans net of actual forfeitures. The Company recorded share-based compensation expense of $3.3 million and $645,000 in connection with the Plans for the three months ended March 31, 2021 and 2020, respectively, which is included in commissions, employee compensation and benefits expense in the condensed consolidated statements of comprehensive income.

12. Earnings Per Share

Basic earnings per share is computed by dividing net income attributable to BRP Group, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share is computed giving effect to all potentially dilutive shares of Class B common stock.

During the period presented, potentially dilutive securities include restricted stock awards and shares of Class B common stock that are cancellable upon the redemption or exchange, on a one-for-one basis, of LLC Units for shares of our Class A common stock. The 49,715,644 and 43,544,362 outstanding shares of Class B common stock and the corresponding LLC Units have been excluded in computing diluted earnings per share for the three months ended March 31, 2021 and 2020, respectively, because including them on an “if-converted” basis would have an anti-dilutive effect. The Company’s shares of Class B common stock do not share in the earnings or losses attributable to BRP Group, and therefore, are not participating securities. Accordingly, a separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been included.

The following is a calculation of the basic and diluted weighted-average number of shares of Class A common stock outstanding and earnings per share for the three months ended March 31, 2021 and 2020.


	For the Three Months Ended March 31,
(in thousands, except per share data)		2021		2020
Basic earnings per share:
Net income attributable to BRP Group, Inc.		$	14,613	$	1,468
Shares used for basic earnings per share:
Weighted-average shares of Class A common stock outstanding - basic		44,255		19,482
Basic earnings per share		$	0.33	$	0.08

Diluted earnings per share:
Net income attributable to BRP Group, Inc.		$	14,613	$	1,468
Shares used for diluted earnings per share:
Weighted-average shares of Class A common stock outstanding		44,255		19,482
Dilutive effect of unvested restricted shares of Class A common stock		1,528		334
Weighted-average shares of Class A common stock outstanding - diluted		45,783		19,816
Diluted earnings per share		$	0.32	$	0.07

13. Fair Value Measurements

Topic 820 established a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy under Topic 820 are described below:

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2: Inputs to the valuation methodology are quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The fair value measurement level for assets and liabilities within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis within each level of the fair value hierarchy:


(in thousands)	March 31, 2021		December 31, 2020
Level 2
Interest rate caps	$	3,461	$	—
Level 2 Assets	$	3,461	$	—
Level 3
Contingent earnout liabilities	$	165,283	$	164,819
Level 3 Liabilities	$	165,283	$	164,819

Methodologies used for assets and liabilities measured at fair value on a recurring basis within Level 3 of the fair value hierarchy at March 31, 2021 and December 31, 2020 are based on limited unobservable inputs. These methods may produce a fair value calculation that may not be indicative of the net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The fair value of interest rate caps was valued based on the premiums paid of $3.5 million at March 31, 2021 as a result of the contracts having closed earlier in March 2020.

The fair value of contingent earnout liabilities is based on sales projections for the acquired entities, which are reassessed each reporting period. Based on the Company’s ongoing assessment of the fair value of its contingent earnout liabilities, the Company recorded a net decrease in the estimated fair value of such liabilities of $1.5 million for the three months ended March 31, 2021. The Company has assessed the maximum estimated exposure to the contingent earnout liabilities to be $525.7 million at March 31, 2021.

The Company measures contingently returnable consideration and contingent earnout liabilities at fair value at each reporting period using signi