BRP Group, Inc. (“BRP Group” or the “Company”) (NASDAQ: BRP), a
rapidly growing independent insurance distribution firm delivering
tailored insurance solutions, today announced its results for the
quarter ended March 31, 2020.
FIRST QUARTER 2020 AND SUBSEQUENT EVENT
HIGHLIGHTS
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Revenue increased 82% year-over-year to $54.2 million |
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Pro Forma Revenue(1) grew 34% year-over-year to $56.6 million |
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Organic Revenue Growth(2) was 5% year-over-year. Excluding impact
of lower contingent payments in the Mainstreet Operating Group and
reduced “other” income in the Medicare Operating Group, Core
Organic Revenue Growth(3) was 10% |
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“MGA of the Future” revenue(4) grew 41% to $11.0 million, compared
to $7.8 million in the prior-year period |
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Including “MGA of the Future,” Organic Revenue Growth was 12%
year-over-year. Excluding impact of lower contingent payments
in the Mainstreet Operating Group and reduced “other” income in the
Medicare Operating Group, Core Organic Revenue Growth plus MGA
revenue growth was 17% |
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GAAP net income of $4.7 million and GAAP earnings per fully diluted
share of $0.07 |
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Adjusted Net Income(5) of $12.0 million, or $0.19(5) per fully
diluted share |
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“MGA of the Future” policies in force grew by 26,929 to 401,520 at
March 31, 2020 from 374,591 at December 31, 2019.
Comparatively, in the first quarter 2019, before “MGA of the
Future” was owned by BRP Group, policies in force grew sequentially
by 19,175 |
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Adjusted EBITDA(6) grew 39% to $14.0 million, compared to $10.1
million in the prior-year period |
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Pro Forma Adjusted EBITDA(7) of $15.3 million and Pro Forma
Adjusted EBITDA Margin(7) of 27% (Pro Forma Adjusted EBITDA and Pro
Forma Adjusted EBITDA Margin excludes all Partnerships closed after
March 31, 2020) |
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Closed four Partner acquisitions that generated total annualized
revenue of over $30 million for the 12-month period
pre-acquisition; subsequent to March 31, 2020, closed three
additional Partner acquisitions that generated additional total
annualized revenue of $11 million for the 12-month period
pre-acquisition. |
“Our strong start to 2020 highlights the
resiliency of our business and continues to validate the strength
of our hybrid growth model,” said Trevor Baldwin, Chief Executive
Officer of BRP Group. “Our ‘MGA of the Future’ platform
continued to outperform with industry leading 41% revenue growth
and will be fully included in our organic growth metric beginning
in the second quarter of 2020. We seamlessly transitioned to
a virtual-first work environment in early March, enabling continued
Client stewardship and sales execution thanks to our investments in
technology and proactive approach to fully integrating new Partner
acquisitions.”
“Looking ahead, our proactive efforts to
strengthen our balance sheet have positioned us very well to
navigate the challenges stemming from the COVID-19 pandemic,” added
Mr. Baldwin. “During the first quarter, we completed four
Partner acquisitions, and have since completed another three
Partner acquisitions, representing over $42 million in annualized
revenue thus far in 2020. We continue to maintain a strong
balance sheet and have ample capacity to continue prudently
executing on our growth strategy. With a majority of our
businesses operating in geographies that have been less impacted by
COVID-19 to date and that are now starting to reopen their
economies, we are cautiously optimistic that many of our Clients
are beginning to see the road to recovery.”
COVID-19 OPERATIONAL UPDATE
BRP Group’s priority is to ensure the health and
well-being of all of its Colleagues and Partners. To that
end, as the COVID-19 pandemic unfolded in March 2020, BRP Group
promptly activated its business continuity plans, and its
Colleagues and Partners are continuing to work safely and
uninterrupted on a remote basis. Additionally, the Company took
steps over the past few months to solidify its financial position
and is comfortably capitalized to operate flexibly and continue
executing on its growth strategy, as outlined below:
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Ample Liquidity - The Company’s liquidity profile
is strong due to several proactive measures to strengthen the
balance sheet in advance of the current macro environment. |
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In October 2019, with a portion of the proceeds from the Company’s
Initial Public Offering, the Company repaid the outstanding
indebtedness and accrued interest under the Villages Credit
Agreement of $89.0 million and concurrently closed the Villages
Credit Agreement. |
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In December 2019, the Company upsized its senior revolving credit
facility to $225.0 million and lowered its cost of capital on the
facility by 150 basis points. |
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In March 2020, in anticipation of the current macro environment,
the Company converted the accordion feature under its revolving
credit facility and increased the size of its credit facility to
$300.0 million. |
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As of May 12, 2020, the Company has approximately $255.9 million of
unrestricted cash and borrowing capacity. The Company
believes it has adequate capacity to support the fundamental
operations of its business and capitalize on potential Partnership
opportunities in 2020. |
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Resilient Business - While continuing to closely
monitor the current macro environment, the Company has multiple
recurring revenue streams and has continued to retain
Clients. As it relates to COVID-19, the Company experienced
the lowest period of new business during the last few days of March
and the first week of April. However, the business responded
nicely in the back half of April and, on an organic basis, the
Company’s two largest Operating Groups, Middle Market and
Specialty, sold more new business in April 2020 than April 2019,
further showing the resiliency of BRP Group’s model. Given
the nature of the Company’s business and its ample liquidity, BRP
Group has continued its investment plans with an eye toward
executing on its long-term growth objectives, and has prudently
allocated capital to high-quality Partnerships. As of
May 12, 2020, the Company has acquired Partnerships in 2020
with annualized revenue of over $42 million in the 12-months
pre-acquisition. |
LIQUIDITY AND CAPITAL
RESOURCES
As of March 31, 2020, cash and cash
equivalents were $52.1 million and there was $60.4 million of
long-term debt outstanding. The Company had aggregate borrowing
capacity of $300.0 million under its revolving credit facility.
As of May 12, 2020, the Company had cash
and cash equivalents of $54.0 million and long-term debt
outstanding of $84.9 million (0.9x net leverage on its balance
sheet). The Company retained approximately $255.9 million of
unrestricted cash and borrowing capacity.
WEBCAST AND CONFERENCE CALL INFORMATION
BRP Group will host a webcast and conference
call to discuss first quarter 2020 results today at 5:00 PM
ET. A live webcast and a slide presentation of the conference
call will be available on BRP Group’s investor relations website
at ir.baldwinriskpartners.com. The dial-in number for the
conference call is (877) 451-6152 (toll-free) or (201) 389-0879
(international). Please dial the number 10 minutes prior to the
scheduled start time.
A replay will be available following the end of
the call through Wednesday, May 27, 2020, by telephone at (844)
512-2921 (toll-free) or (412) 317-6671 (international), passcode
13702483. A webcast replay of the call will be available
at ir.baldwinriskpartners.com for one year following the
call.
ABOUT BRP GROUP, INC.
BRP Group, Inc. (NASDAQ: BRP) is a rapidly
growing independent insurance distribution firm delivering tailored
insurance and risk management insights and solutions that give our
Clients the peace of mind to pursue their purpose, passion and
dreams. We are innovating the industry by taking a holistic
and tailored approach to risk management, insurance and employee
benefits, and support our Clients, Colleagues, Insurance Company
Partners and communities through the deployment of vanguard
resources and capital to drive our growth. BRP represents
over 450,000 Clients across the United States and internationally.
For more information, please visit www.baldwinriskpartners.com.
FOOTNOTES
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(1) |
Pro Forma Revenue is a non-GAAP measure. Reconciliation of Pro
Forma Revenue to commissions and fees, the most directly comparable
GAAP financial measure, is set forth in the reconciliation table
accompanying this release. |
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(2) |
Organic Revenue for the three months ended March 31, 2019 used to
calculate Organic Revenue Growth for the three months ended March
31, 2020 was $29.8 million, which is adjusted to reflect revenues
from Partnerships that reach the 12-month owned mark during the
three months ended March 31, 2020. Organic Revenue is a
non-GAAP measure. Reconciliation of Organic Revenue to
commissions and fees, the most directly comparable GAAP financial
measure, is set forth in the reconciliation table accompanying this
release. |
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(3) |
Core Organic Revenue Growth for the three months ended March 31,
2020 is calculated as Organic Revenue less profit-sharing revenue
(or contingent payments) growth and other income revenue
growth. Core Organic Revenue Growth is a non-GAAP
measure. Reconciliation of Core Organic Revenue Growth to
commissions and fees, the most directly comparable GAAP financial
measure, is set forth in the reconciliation table accompanying this
release. |
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(4) |
“MGA of the Future” was acquired by the Company on April 1, 2019
and as a result is not included in the Organic Revenue Growth
calculation above because it has not reached the twelve-month owned
mark. Since “MGA of the Future” was not acquired by the
Company until April 1, 2019, the revenue of “MGA of the Future” for
the prior-year period is not included in the consolidated results
of operations for the Company for such period and the 41% revenue
growth rate for the three months ended March 31, 2020 was
calculated including periods during which “MGA of the Future” was
not owned by the Company. |
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(5) |
Adjusted Net Income and Adjusted Diluted EPS are non-GAAP measures.
Reconciliation of Adjusted Net Income to net income attributable to
BRP Group, Inc. and reconciliation of Adjusted Diluted EPS to
diluted earnings per share, the most directly comparable GAAP
financial measures, are set forth in the reconciliation table
accompanying this release. |
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(6) |
Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures.
Reconciliation of Adjusted EBITDA to net income (loss), the most
directly comparable GAAP financial measure, is set forth in the
reconciliation table accompanying this release. |
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(7) |
Pro Forma Adjusted EBITDA and Pro Forma Adjusted EBITDA Margin are
non-GAAP measures. Reconciliation of Pro Forma Adjusted EBITDA to
net income (loss), the most directly comparable GAAP financial
measure, is set forth in the reconciliation table accompanying this
release. |
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release may contain various
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995, which represent BRP
Group’s expectations or beliefs concerning future events.
Forward-looking statements are statements other than historical
facts and may include statements that address future operating,
financial or business performance or BRP Group’s strategies or
expectations. In some cases, you can identify these statements by
forward-looking words such as “may”, “might”, “will”, “should”,
“expects”, “plans”, “anticipates”, “believes”, “estimates”,
“predicts”, “projects”, “potential”, “outlook” or “continue”, or
the negative of these terms or other comparable terminology.
Forward-looking statements are based on management’s current
expectations and beliefs and involve significant risks and
uncertainties that could cause actual results, developments and
business decisions to differ materially from those contemplated by
these statements.
Factors that could cause actual results or
performance to differ from the expectations expressed or implied in
such forward-looking statements include, but are not limited to,
those described under the caption “Risk Factors” in BRP Group’s
Annual Report on Form 10-K for the year ended December 31,
2019, BRP Group’s Quarterly Report on Form 10-Q for the three
months ended March 31, 2020 and BRP Group’s other filings with the
SEC, which are available free of charge on the Securities and
Exchange Commission's website at: www.sec.gov. Should one or more
of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those indicated. All forward-looking statements and all
subsequent written and oral forward-looking statements attributable
to BRP Group or to persons acting on behalf of BRP Group are
expressly qualified in their entirety by reference to these risks
and uncertainties. You should not place undue reliance on
forward-looking statements. Forward-looking statements speak only
as of the date they are made, and BRP Group does not undertake any
obligation to update them in light of new information, future
developments or otherwise, except as may be required under
applicable law.
CONTACTS
INVESTOR RELATIONS
Investor Relations(813)
259-8032IR@baldwinriskpartners.com
PRESS
Rachel CarrBaldwin Risk Partners(813)
418-5166Rachel.carr@baldwinriskpartners.com
|
BRP GROUP, INC. |
|
Condensed Consolidated Statements of Comprehensive
Income |
|
(Unaudited) |
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|
For the Three Months Ended March 31, |
(in thousands, except
share and per share data) |
2020 |
|
2019 |
Revenues: |
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Commissions and fees |
$ |
54,159 |
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$ |
29,837 |
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Operating expenses: |
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Commissions, employee compensation and benefits |
34,548 |
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16,286 |
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Other operating expenses |
8,885 |
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|
4,002 |
|
Amortization expense |
3,596 |
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|
876 |
|
Change in fair value of contingent consideration |
1,661 |
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|
(2,786 |
) |
Depreciation expense |
165 |
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127 |
|
Total operating expenses |
48,855 |
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|
18,505 |
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Operating income |
5,304 |
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|
11,332 |
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Interest expense, net |
(585 |
) |
|
(1,590 |
) |
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Income before income
taxes |
4,719 |
|
|
9,742 |
|
Income tax provision |
12 |
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— |
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Net income |
4,707 |
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|
9,742 |
|
Less: net income attributable to noncontrolling interests |
3,239 |
|
|
9,742 |
|
Net income attributable to BRP
Group, Inc. |
$ |
1,468 |
|
|
$ |
— |
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Comprehensive income |
$ |
4,707 |
|
|
$ |
9,742 |
|
Comprehensive income
attributable to noncontrolling interests |
3,239 |
|
|
9,742 |
|
Comprehensive income
attributable to BRP Group, Inc. |
1,468 |
|
|
— |
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Basic earnings per share |
$ |
0.08 |
|
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|
Diluted earnings per
share |
$ |
0.07 |
|
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|
Weighted-average shares of
Class A common stock outstanding – basic |
19,481,721 |
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|
Weighted-average shares of
Class A common stock outstanding – diluted |
19,816,363 |
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BRP GROUP, INC. |
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Condensed Consolidated Balance Sheets
(Unaudited) |
|
(in thousands, except
share and per share data) |
March 31, 2020 |
|
December 31, 2019 |
Assets |
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Current assets: |
|
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Cash and cash equivalents |
$ |
52,125 |
|
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$ |
67,689 |
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Restricted cash |
3,840 |
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|
3,382 |
|
Premiums, commissions and fees receivable, net |
71,637 |
|
|
58,793 |
|
Prepaid expenses and other current assets |
3,287 |
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|
3,019 |
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Due from related parties |
34 |
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43 |
|
Total current assets |
130,923 |
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|
132,926 |
|
Property and equipment,
net |
4,027 |
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|
3,322 |
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Other assets |
6,505 |
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|
5,600 |
|
Intangible assets, net |
111,264 |
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|
92,450 |
|
Goodwill |
197,531 |
|
|
164,470 |
|
Total assets |
$ |
450,250 |
|
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$ |
398,768 |
|
Liabilities, Mezzanine Equity and Stockholders’
Equity |
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Current liabilities: |
|
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Premiums payable to insurance companies |
$ |
58,390 |
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$ |
50,541 |
|
Producer commissions payable |
9,681 |
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|
7,470 |
|
Accrued expenses and other current liabilities |
11,094 |
|
|
12,334 |
|
Current portion of contingent earnout liabilities |
2,788 |
|
|
2,480 |
|
Total current liabilities |
81,953 |
|
|
72,825 |
|
Revolving lines of credit |
60,363 |
|
|
40,363 |
|
Contingent earnout
liabilities, less current portion |
51,067 |
|
|
46,289 |
|
Other liabilities |
2,023 |
|
|
2,017 |
|
Total liabilities |
195,406 |
|
|
161,494 |
|
Commitments and contingencies
(Note 14) |
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Mezzanine equity: |
|
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Redeemable noncontrolling interest |
39 |
|
|
23 |
|
Stockholders’ equity: |
|
|
|
Class A common stock, par value $0.01 per share, 300,000,000 shares
authorized; 19,847,354 and 19,362,984 shares issued and outstanding
at March 31, 2020 and December 31, 2019, respectively |
199 |
|
|
194 |
|
Class B common stock, par value $0.0001 per share, 50,000,000
shares authorized; 43,544,362 and 43,257,738 shares issued and
outstanding at March 31, 2020 and December 31, 2019,
respectively |
4 |
|
|
4 |
|
Additional paid-in capital |
90,443 |
|
|
82,425 |
|
Accumulated deficit |
(7,182 |
) |
|
(8,650 |
) |
Notes receivable from stockholders |
(647 |
) |
|
(688 |
) |
Total stockholders’ equity attributable to BRP Group, Inc. |
82,817 |
|
|
73,285 |
|
Noncontrolling interest |
171,988 |
|
|
163,966 |
|
Total stockholders’ equity |
254,805 |
|
|
237,251 |
|
Total liabilities, mezzanine equity and stockholders’ equity |
$ |
450,250 |
|
|
$ |
398,768 |
|
|
BRP GROUP, INC. |
|
Condensed Consolidated Statements of Cash
Flows |
|
(Unaudited) |
|
|
For the Three Months Ended March 31, |
(in
thousands) |
2020 |
|
2019 |
Cash flows from operating
activities: |
|
|
|
Net income |
$ |
4,707 |
|
|
$ |
9,742 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
3,761 |
|
|
1,003 |
|
Change in fair value of contingent consideration |
1,661 |
|
|
(2,786 |
) |
Share-based compensation expense |
1,139 |
|
|
— |
|
Amortization of deferred financing costs |
76 |
|
|
200 |
|
Loss on extinguishment of debt |
— |
|
|
115 |
|
Issuance and vesting of Management Incentive Units |
— |
|
|
130 |
|
Participation unit compensation |
— |
|
|
23 |
|
Changes in operating assets and liabilities, net of effect of
acquisitions: |
|
|
|
Premiums, commissions and fees receivable, net |
(5,221 |
) |
|
(1,039 |
) |
Prepaid expenses and other current assets |
(634 |
) |
|
(285 |
) |
Due from related parties |
9 |
|
|
(7 |
) |
Accounts payable, accrued expenses and other current
liabilities |
(527 |
) |
|
(2,244 |
) |
Other liabilities |
— |
|
|
13 |
|
Net cash provided by operating activities |
4,971 |
|
|
4,865 |
|
Cash flows from investing
activities: |
|
|
|
Capital expenditures |
(583 |
) |
|
(416 |
) |
Investment in business venture |
— |
|
|
(200 |
) |
Cash consideration paid for business combinations, net of cash
received |
(39,305 |
) |
|
(35,572 |
) |
Net cash used in investing activities |
(39,888 |
) |
|
(36,188 |
) |
Cash flows from financing
activities: |
|
|
|
Payment of guaranteed earnout consideration |
— |
|
|
(813 |
) |
Proceeds from revolving line of credit |
20,000 |
|
|
29,304 |
|
Proceeds from related party debt |
— |
|
|
19,460 |
|
Payments on long-term debt |
— |
|
|
(204 |
) |
Payments of debt issuance costs and debt extinguishment costs |
(230 |
) |
|
(15 |
) |
Proceeds from advisor incentive buy-ins |
— |
|
|
355 |
|
Proceeds received from repayment of stockholder/member notes
receivable |
41 |
|
|
45 |
|
Proceeds from issuance of common units |
— |
|
|
386 |
|
Repurchase of common units |
— |
|
|
(12,500 |
) |
Contributions |
— |
|
|
15 |
|
Distributions |
— |
|
|
(1,911 |
) |
Net cash provided by financing activities |
19,811 |
|
|
34,122 |
|
Net increase (decrease) in
cash and cash equivalents and restricted cash |
(15,106 |
) |
|
2,799 |
|
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 |
$ |
55,965 |
|
|
$ |
10,794 |
|
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA, Adjusted EBITDA Margin, Organic
Revenue, Organic Revenue Growth, Core Organic Revenue, Core Organic
Revenue Growth, Adjusted Net Income, Adjusted Diluted Earnings Per
Share (“EPS”), Pro Forma Revenue, Pro Forma Adjusted EBITDA and Pro
Forma Adjusted EBITDA Margin are not measures of financial
performance under GAAP and should not be considered substitutes for
GAAP measures, including commissions and fees (for Organic Revenue,
Organic Revenue Growth, Core Organic Revenue, Core Organic Revenue
Growth and Pro Forma Revenue), net income (loss) (for Adjusted
EBITDA, Adjusted EBITDA Margin, Pro Forma Adjusted EBITDA and Pro
Forma Adjusted EBITDA Margin), net income (loss) attributable to
BRP Group, Inc. (for Adjusted Net Income) or diluted EPS (for
Adjusted Diluted EPS), which we consider to be the most directly
comparable GAAP measures. These non-GAAP financial measures have
limitations as analytical tools, and when assessing our operating
performance, you should not consider these non-GAAP financial
measures in isolation or as substitutes for commissions and fees,
net income (loss) or other consolidated income statement data
prepared in accordance with GAAP. Other companies in our industry
may define or calculate these non-GAAP financial measures
differently than we do, and accordingly these measures may not be
comparable to similarly titled measures used by other
companies.
Adjusted EBITDA eliminates the effects of
financing, depreciation, amortization and change in fair value of
contingent consideration. We define Adjusted EBITDA as net income
(loss) before interest, taxes, depreciation, amortization, change
in fair value of contingent consideration and certain items of
income and expense, including share-based compensation expense,
transaction-related expenses related to Partnerships including
severance, and certain non-recurring costs, including those related
to the Initial Public Offering and loss on modification and
extinguishment of debt. We believe that Adjusted EBITDA is an
appropriate measure of operating performance because it eliminates
the impact of expenses that do not relate to business performance,
and that the presentation of this measure enhances an investor’s
understanding of our financial performance.
Adjusted EBITDA Margin is Adjusted EBITDA
divided by commissions and fees. Adjusted EBITDA is a key metric
used by management and our board of directors to assess our
financial performance. We believe that Adjusted EBITDA is an
appropriate measure of operating performance because it eliminates
the impact of expenses that do not relate to business performance,
and that the presentation of this measure enhances an investor’s
understanding of our financial performance. We believe that
Adjusted EBITDA Margin is helpful in measuring profitability of
operations on a consolidated level.
Adjusted EBITDA and Adjusted EBITDA Margin have
important limitations as analytical tools. For example, Adjusted
EBITDA and Adjusted EBITDA Margin:
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do not reflect any cash capital expenditure requirements for the
assets being depreciated and amortized that may have to be replaced
in the future; |
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|
• |
do not reflect changes in, or cash requirements for, our working
capital needs; |
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|
• |
do not reflect the impact of certain cash charges resulting from
matters we consider not to be indicative of our ongoing
operations; |
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|
• |
do not reflect the interest expense or the cash requirements
necessary to service interest or principal payments on our
debt; |
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|
• |
do not reflect stock-based compensation expense and other non-cash
charges; and |
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|
• |
exclude certain tax payments that may represent a reduction in cash
available to us. |
We calculate Organic Revenue Growth based on
commissions and fees for the relevant period by excluding the first
twelve months of commissions and fees generated from new Partners.
Organic Revenue Growth is the change in Organic Revenue
period-to-period, with prior period results adjusted for Organic
Revenues that were excluded in the prior period because the
relevant Partners had not yet reached the twelve-month owned mark,
but which have reached the twelve-month owned mark in the current
period. For example, revenues from a Partner acquired on June 1,
2019 are excluded from Organic Revenue for 2019. However, after
June 1, 2020, results from June 1, 2019 to December 31, 2019 for
such Partners are compared to results from June 1, 2020 to December
31, 2020 for purposes of calculating Organic Revenue Growth in
2020. Organic Revenue Growth is a key metric used by management and
our board of directors to assess our financial performance. We
believe that Organic Revenue and Organic Revenue Growth are
appropriate measures of operating performance as they allow
investors to measure, analyze and compare growth in a meaningful
and consistent manner.
We calculate Core Organic Revenue Growth as the
change in Organic Revenue used to calculate Organic Revenue Growth
for the current period less profit-sharing income revenue growth
and other income revenue growth. Core Organic Revenue Growth is
being presented for the current period as a measure of the
consistency of our core revenue during the economic downturn
related to COVID-19.
Adjusted Net Income is presented for the purpose
of calculating Adjusted Diluted EPS. We define Adjusted Net Income
as net income (loss) attributable to BRP Group, Inc. adjusted for
amortization, change in fair value of contingent consideration and
certain items of income and expense, including share-based
compensation expense, transaction-related expenses related to
Partnerships including severance, and certain non-recurring costs
that, in the opinion of management, significantly affect the
period-over-period assessment of operating results, and the related
tax effect of those adjustments.
Adjusted Diluted EPS measures our per share
earnings excluding certain expenses as discussed above and assuming
all shares of Class B common stock were exchanged for Class A
common stock. Adjusted Diluted EPS is calculated as Adjusted Net
Income divided by adjusted dilutive weighted-average shares
outstanding. We believe Adjusted Diluted EPS is useful to investors
because it enables them to better evaluate per share operating
performance across reporting periods.
Pro Forma Revenue reflects GAAP revenue
(commissions and fees), plus revenue from Partnerships in the
unowned periods.
Pro Forma Adjusted EBITDA takes into account
Adjusted EBITDA from Partnerships in the unowned periods and
eliminates the effects of financing, depreciation and amortization.
We define Pro Forma Adjusted EBITDA as pro forma net income (loss)
before interest, taxes, depreciation, amortization and certain
items of income and expense, including share-based compensation
expense, transaction-related expenses related to Partnerships
including severance, and certain non-recurring costs, including
those related to the Initial Public Offering and loss on
modification and extinguishment of debt. We believe that Pro Forma
Adjusted EBITDA is an appropriate measure of operating performance
because it eliminates the impact of expenses that do not relate to
business performance, and that the presentation of this measure
enhances an investor’s understanding of our financial
performance.
Pro Forma Adjusted EBITDA Margin is Pro Forma
Adjusted EBITDA divided by Pro Forma Revenue. Pro Forma Adjusted
EBITDA is a key metric used by management and our board of
directors to assess our financial performance. We believe that Pro
Forma Adjusted EBITDA is an appropriate measure of operating
performance because it eliminates the impact of expenses that do
not relate to business performance, and that the presentation of
this measure enhances an investor’s understanding of our financial
performance. We believe that Pro Forma Adjusted EBITDA Margin is
helpful in measuring profitability of operations on a consolidated
level.
Adjusted EBITDA and Adjusted EBITDA Margin
The following table reconciles Adjusted EBITDA
and Adjusted EBITDA Margin to net income, which we consider to be
the most directly comparable GAAP financial measure to Adjusted
EBITDA and Adjusted EBITDA Margin:
|
For the Three Months Ended March 31, |
|
2020 |
|
2019 |
Commissions and fees |
$ |
54,159 |
|
|
$ |
29,837 |
|
|
|
|
|
Net income |
$ |
4,707 |
|
|
$ |
9,742 |
|
Adjustments to net
income: |
|
|
|
Amortization expense |
3,596 |
|
|
876 |
|
Change in fair value of contingent consideration |
1,661 |
|
|
(2,786 |
) |
Share-based compensation |
1,139 |
|
|
130 |
|
Interest expense, net |
585 |
|
|
1,590 |
|
Depreciation expense |
165 |
|
|
127 |
|
Transaction-related Partnership expenses |
1,848 |
|
|
257 |
|
Severance related to Partnership activity |
53 |
|
|
— |
|
Offering expenses |
— |
|
|
38 |
|
Income tax provision |
12 |
|
|
— |
|
Other |
266 |
|
|
155 |
|
Adjusted EBITDA |
$ |
14,032 |
|
|
$ |
10,129 |
|
Adjusted EBITDA Margin |
26 |
% |
|
34 |
% |
Organic Revenue, Organic Revenue Growth, Core Organic
Revenue and Core Organic Revenue Growth
The following table reconciles Organic Revenue to commissions
and fees, which we consider to be the most directly comparable GAAP
financial measure to Organic Revenue:
|
For the Three Months Ended March 31, |
(in thousands, except
percentages) |
2020 |
|
2019 |
Commissions and fees |
$ |
54,159 |
|
|
$ |
29,837 |
|
Partnership commissions and
fees (1) |
(22,868 |
) |
|
(5,358 |
) |
Organic Revenue |
$ |
31,291 |
|
|
$ |
24,479 |
|
Organic Revenue Growth
(2) |
$ |
1,454 |
|
|
$ |
2,693 |
|
Organic Revenue Growth %
(2) |
5 |
% |
|
12 |
% |
__________
- Includes the first twelve months of such commissions and fees
generated from newly acquired Partners.
- Organic Revenue for the three months ended March 31, 2019 used
to calculate Organic Revenue Growth for the three months ended
March 31, 2020 was $29.8 million, which is adjusted to reflect
revenues from Partnerships that reached the twelve-month owned mark
during the three months ended March 31, 2020.
The following table reconciles Core Organic Revenue for the
three months ended March 31, 2020 to Organic Revenue used to
calculate Organic Revenue Growth for the three months ended March
31, 2020:
|
Organic Revenue used to Calculate Organic Revenue Growth
for the Three Months Ended March 31, 2020 |
|
2020 |
|
2019 |
Organic Revenue |
$ |
31,291 |
|
|
$ |
29,837 |
|
Less profit-sharing organic
revenue(1) |
(3,816 |
) |
|
(4,453 |
) |
Less other income organic
revenue(2) |
(195 |
) |
|
(565 |
) |
Core Organic Revenue |
$ |
27,280 |
|
|
$ |
24,819 |
|
Core Organic Revenue
Growth |
2,461 |
|
|
|
Core Organic Revenue Growth
% |
10 |
% |
|
|
__________
- Profit-sharing revenue (or contingent payments) represents
bonus-type revenue that is earned by the Company as a sales
incentive provided by certain Insurance Company Partners.
- Other income consists primarily of Medicare marketing income
that is based on agreed-upon cost reimbursement for fulfilling
specific targeted marketing campaigns.
Adjusted Net Income and Adjusted Diluted
EPS
The following table reconciles Adjusted Net Income to net income
attributable to BRP Group, Inc. and reconciles Adjusted Diluted EPS
to diluted earnings per share attributable to BRP Group, Inc. Class
A common stock:
(in thousands, except
per share data) |
For the Three Months Ended March 31, 2020 |
Net income attributable to BRP Group, Inc. |
$ |
1,468 |
|
Net income attributable to noncontrolling interests |
3,239 |
|
Amortization expense |
3,596 |
|
Change in fair value of contingent consideration |
1,661 |
|
Share-based compensation |
1,139 |
|
Transaction-related Partnership expenses |
1,848 |
|
Amortization of deferred financing costs |
76 |
|
Severance related to Partnership activity |
53 |
|
Other |
266 |
|
Adjusted pre-tax income |
13,346 |
|
Adjusted income taxes (1) |
1,321 |
|
Adjusted Net Income |
$ |
12,025 |
|
|
|
Weighted-average shares of
Class A common stock outstanding - diluted |
19,816 |
|
Exchange of Class B shares (2) |
43,541 |
|
Adjusted dilutive
weighted-average shares outstanding |
63,357 |
|
|
|
Adjusted Diluted EPS |
$ |
0.19 |
|
|
|
Diluted earnings per
share |
$ |
0.07 |
|
Effect of exchange of Class B shares and net income attributable to
noncontrolling interests per share |
— |
|
Other adjustments to net income per share |
0.14 |
|
Adjusted income taxes per share |
(0.02 |
) |
Adjusted Diluted EPS |
$ |
0.19 |
|
___________
- Represents corporate income taxes at assumed
effective tax rate of 9.9% applied to adjusted pre-tax income.
- Assumes the full exchange of Class B shares for
Class A common stock pursuant to the Amended LLC Agreement.
Pro Forma Revenue
The following table reconciles Pro Forma Revenue
to commissions and fees, which we consider to be the most directly
comparable GAAP financial measure to Pro Forma Revenue:
|
For the Three Months Ended March 31, |
(in
thousands) |
2020 |
|
2019 |
Commissions and fees |
$ |
54,159 |
|
|
$ |
29,837 |
|
Revenue for Partnerships in
the unowned period (1) |
2,391 |
|
|
12,434 |
|
Pro Forma Revenue |
$ |
56,550 |
|
|
$ |
42,271 |
|
___________
- The adjustment for the three months ended March 31, 2020
reflects commissions and fees revenue for AgencyRM LLC and
VibrantUSA Inc. as if the Company had acquired the Partners on
January 1, 2020. The adjustment for the three months ended March
31, 2019 reflects commissions and fees revenue for Lykes Insurance,
Inc., Millennial Specialty Insurance LLC, Foundation Insurance of
Florida, LLC and Fiduciary Partners Retirement Group, Inc., as well
as two asset acquisitions for the unowned period, as if the Company
had acquired the Partners on January 1, 2019. 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 the results that may be
obtained in the future.
Pro Forma Adjusted EBITDA and Pro Forma Adjusted EBITDA
Margin
The following table reconciles Pro Forma
Adjusted EBITDA and Pro Forma Adjusted EBITDA Margin to net income,
which we consider to be the most directly comparable GAAP financial
measure to Pro Forma Adjusted EBITDA and Pro Forma Adjusted EBITDA
Margin:
|
For the Three Months Ended March 31, |
(in
thousands) |
2020 |
|
2019 |
Pro Forma Revenue |
$ |
56,550 |
|
|
$ |
42,271 |
|
|
|
|
|
Net income |
$ |
4,707 |
|
|
$ |
9,742 |
|
Net income (loss) for Partnerships in the unowned period (1) |
1,210 |
|
|
(346 |
) |
Pro Forma Net Income |
5,917 |
|
|
9,396 |
|
Adjustments to pro forma net
income: |
|
|
|
Interest expense, net |
585 |
|
|
4,608 |
|
Amortization expense |
3,657 |
|
|
2,740 |
|
Change in fair value of contingent consideration |
1,661 |
|
|
(2,786 |
) |
Share-based compensation |
1,139 |
|
|
130 |
|
Transaction-related Partnership expenses |
1,848 |
|
|
257 |
|
Depreciation expense |
165 |
|
|
144 |
|
Severance related to Partnership activity |
53 |
|
|
— |
|
Offering expenses |
— |
|
|
38 |
|
Income tax provision |
12 |
|
|
— |
|
Other |
266 |
|
|
155 |
|
Pro Forma Adjusted EBITDA |
$ |
15,303 |
|
|
$ |
14,682 |
|
Pro Forma Adjusted EBITDA
Margin |
27 |
% |
|
35 |
% |
___________
- The adjustment for the three months ended March 31, 2020
reflects net income (loss) for AgencyRM LLC and VibrantUSA Inc. as
if the Company had acquired the Partners on January 1, 2020. The
adjustment for the three months ended March 31, 2019 reflects net
income (loss) for Lykes Insurance, Inc., Millennial Specialty
Insurance LLC, Foundation Insurance of Florida, LLC and Fiduciary
Partners Retirement Group, Inc., as well as two asset acquisitions
for the unowned period, as if the Company had acquired the Partners
on January 1, 2019. 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 the results that may be obtained in the future.
COMMONLY USED DEFINED TERMS
The following terms have the following meanings
throughout this press release unless the context indicates or
requires otherwise:
Clients |
Our insureds |
|
|
Colleagues |
Our employees |
|
|
GAAP |
Accounting principles generally accepted in the United States of
America |
|
|
Initial Public Offering |
BRP Group Inc.’s initial public offering of its Class A common
stock completed on October 28, 2019 in which it
sold 18,859,300 shares,
including 2,459,300 shares pursuant to the underwriters’
over-allotment option that subsequently settled
on November 26, 2019 |
|
|
Operating Groups |
Our reportable segments |
|
|
Partners |
Companies that we have acquired, or in the case of asset
acquisitions, the producers |
|
|
Partnerships |
Strategic acquisitions made by the Company |
|
|
SEC |
U.S. Securities and Exchange Commission |
|
|
Villages Credit Agreement |
Amended and restated credit agreement between Baldwin Risk
Partners, LLC as borrower and Holding Company of the Villages, Inc.
as lender entered into on March 13, 2019 |
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