BRP Group, Inc. Announces Second Quarter 2022 Results

- Second Quarter 2022 Revenue Grew 94% Year-Over-Year to $232.5 Million -

- Second Quarter 2022 Organic Revenue Growth(1) of 24% -

BRP Group, Inc. (“BRP Group” or the “Company”) (NASDAQ: BRP), an independent insurance distribution firm delivering tailored insurance solutions, today announced its results for the second quarter ended June 30, 2022.

SECOND QUARTER 2022 HIGHLIGHTS AND SUBSEQUENT EVENTS

  • Revenue increased 94% year-over-year to $232.5 million
  • Pro Forma Revenue(2) grew 100% year-over-year to $239.9 million
  • Organic Revenue Growth was 24% year-over-year
  • “MGA of the Future” organic revenue grew 70% year-over-year
  • GAAP net income of $16.6 million and GAAP earnings per fully diluted share of $0.14
  • Adjusted Net Income(3) of $26.2 million, or $0.23(3) per fully diluted share
  • Adjusted EBITDA(4) grew 112% to $42.5 million
  • Adjusted EBITDA Margin(4) of 18%
  • Pro Forma Adjusted EBITDA(5) of $42.9 million and Pro Forma Adjusted EBITDA Margin(5) of 18%
  • Subsequent to June 30, 2022, closed one Partner acquisition that generated total revenue(6) of approximately $11.4 million for the 12-month period pre-acquisition

“It was an outstanding second quarter for BRP Group, as we nearly doubled revenue and adjusted net income on a year-over-year basis. We delivered industry leading organic growth of 24%, including double digit organic growth in all four segments, which was led by accelerating growth in both the MGA of the Future and MainStreet,” said Trevor Baldwin, Chief Executive Officer of BRP Group. “In April, we also completed the acquisition of Westwood Insurance Agency - our largest Partnership to date - which had a very strong quarter as a part of the BRP family. As we look ahead into the back half of the year, we remain confident that the business is well-positioned for continued outperformance.”

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2022, cash and cash equivalents were $183.4 million and there was $1.4 billion of long-term debt principal amount outstanding under the Company's credit facility. The Company had remaining availability for borrowing of $75.0 million under its revolving credit facility.

SIX MONTHS 2022 RESULTS

  • Revenue increased 74% year-over-year to $475.3 million
  • Pro Forma Revenue grew 82% year-over-year to $503.1 million
  • Organic Revenue Growth of 20% year-over-year
  • “MGA of the Future” revenue grew 57%
  • GAAP net income of $61.4 million and GAAP earnings per fully diluted share of $0.53
  • Adjusted Net Income of $83.7 million, or $0.73 per fully diluted share
  • Adjusted EBITDA grew 57% to $115.4 million
  • Adjusted EBITDA Margin of 24%
  • Pro Forma Adjusted EBITDA of $121.1 million and Pro Forma Adjusted EBITDA Margin of 24%

WEBCAST AND CONFERENCE CALL INFORMATION

BRP Group will host a webcast and conference call to discuss second quarter 2022 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 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 an 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 Group represents over 1,200,000 Clients across the United States and internationally. For more information, please visit www.baldwinriskpartners.com.

FOOTNOTES

(1)

 

Organic Revenue for the three and six months ended June 30, 2021 used to calculate Organic Revenue Growth for the three and six months ended June 30, 2022 was $119.6 million and $272.5 million, respectively, which is adjusted to reflect revenues from Partnerships that have reached the twelve-month owned mark during the three and six months ended June 30, 2022. Organic Revenue and Organic Revenue Growth are non-GAAP measures. Reconciliation of Organic Revenue and Organic Revenue Growth to commissions and fees, the most directly comparable GAAP financial measure, is set forth in the reconciliation table accompanying this release.

 

(2)

 

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.

 

(3)

 

Adjusted Net Income and Adjusted Diluted EPS are non-GAAP measures. Reconciliation of Adjusted Net Income to net income (loss) 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.

 

(4)

 

Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures. Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin to net income (loss), the most directly comparable GAAP financial measure, is set forth in the reconciliation table accompanying this release.

 

(5)

 

Pro Forma Adjusted EBITDA and Pro Forma Adjusted EBITDA Margin are non-GAAP measures. Reconciliation of Pro Forma Adjusted EBITDA and 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.

 

(6)

 

Represents the aggregate revenues of Partners acquired during the relevant period presented, for the most recent trailing twelve-month period prior to acquisition by the Company, in each case, at the time the due diligence was concluded based on a quality of earnings review and not an audit.

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, 2021, and in BRP Group’s other filings with the SEC, which are available free of charge on the SEC'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.

BRP GROUP, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

 

 

 

For the Three Months

Ended June 30,

 

For the Six Months

Ended June 30,

(in thousands, except share and per share data)

 

2022

 

2021

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

 

Commissions and fees

 

$

232,460

 

 

$

119,706

 

 

$

475,308

 

 

$

272,534

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Commissions, employee compensation and benefits

 

 

172,848

 

 

 

89,065

 

 

 

326,598

 

 

 

178,440

 

Other operating expenses

 

 

40,770

 

 

 

19,537

 

 

 

77,212

 

 

 

36,412

 

Amortization expense

 

 

19,170

 

 

 

10,742

 

 

 

36,732

 

 

 

21,279

 

Change in fair value of contingent consideration

 

 

(26,872

)

 

 

13,325

 

 

 

(32,504

)

 

 

11,822

 

Depreciation expense

 

 

1,105

 

 

 

573

 

 

 

2,093

 

 

 

1,167

 

Total operating expenses

 

 

207,021

 

 

 

133,242

 

 

 

410,131

 

 

 

249,120

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

25,439

 

 

 

(13,536

)

 

 

65,177

 

 

 

23,414

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(14,632

)

 

 

(5,848

)

 

 

(24,982

)

 

 

(11,491

)

Other income (expense), net

 

 

5,786

 

 

 

(1,057

)

 

 

21,237

 

 

 

(1,057

)

Total other expense

 

 

(8,846

)

 

 

(6,905

)

 

 

(3,745

)

 

 

(12,548

)

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

16,593

 

 

 

(20,441

)

 

 

61,432

 

 

 

10,866

 

Less: net income (loss) attributable to noncontrolling interests

 

 

7,951

 

 

 

(10,348

)

 

 

29,921

 

 

 

5,653

 

Net income (loss) attributable to BRP Group, Inc.

 

$

8,642

 

 

$

(10,093

)

 

$

31,511

 

 

$

5,213

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$

16,593

 

 

$

(20,441

)

 

$

61,432

 

 

$

10,866

 

Comprehensive income (loss) attributable to noncontrolling interests

 

 

7,951

 

 

 

(10,348

)

 

 

29,921

 

 

 

5,653

 

Comprehensive income (loss) attributable to BRP Group, Inc.

 

 

8,642

 

 

 

(10,093

)

 

 

31,511

 

 

 

5,213

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

$

0.15

 

 

$

(0.23

)

 

$

0.56

 

 

$

0.12

 

Diluted earnings (loss) per share

 

$

0.14

 

 

$

(0.23

)

 

$

0.53

 

 

$

0.11

 

Weighted-average shares of Class A common stock outstanding - basic

 

 

56,270,491

 

 

 

44,671,308

 

 

 

55,996,668

 

 

 

44,464,312

 

Weighted-average shares of Class A common stock outstanding - diluted

 

 

59,858,816

 

 

 

44,671,308

 

 

 

59,354,168

 

 

 

46,160,474

 

BRP GROUP, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

 

(in thousands, except share and per share data)

 

June 30, 2022

 

December 31, 2021

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

183,402

 

 

$

138,292

 

Restricted cash

 

 

100,529

 

 

 

89,445

 

Premiums, commissions and fees receivable, net

 

 

427,351

 

 

 

340,837

 

Prepaid expenses and other current assets

 

 

13,533

 

 

 

8,151

 

Due from related parties

 

 

1,715

 

 

 

1,668

 

Total current assets

 

 

726,530

 

 

 

578,393

 

Property and equipment, net

 

 

22,756

 

 

 

17,474

 

Right-of-use assets

 

 

86,374

 

 

 

81,646

 

Other assets

 

 

34,316

 

 

 

25,586

 

Intangible assets, net

 

 

1,125,388

 

 

 

944,467

 

Goodwill

 

 

1,415,281

 

 

 

1,228,741

 

Total assets

 

$

3,410,645

 

 

$

2,876,307

 

Liabilities, Mezzanine Equity and Stockholders Equity

 

 

 

 

Current liabilities:

 

 

 

 

Premiums payable to insurance companies

 

$

366,217

 

 

$

310,045

 

Producer commissions payable

 

 

56,138

 

 

 

41,833

 

Accrued expenses and other current liabilities

 

 

104,330

 

 

 

92,223

 

Related party notes payable

 

 

 

 

 

61,500

 

Current portion of contingent earnout liabilities

 

 

43,615

 

 

 

35,088

 

Total current liabilities

 

 

570,300

 

 

 

540,689

 

Revolving line of credit

 

 

525,000

 

 

 

35,000

 

Long-term debt, less current portion

 

 

812,080

 

 

 

814,614

 

Contingent earnout liabilities, less current portion

 

 

166,381

 

 

 

223,501

 

Operating lease liabilities, less current portion

 

 

76,999

 

 

 

71,357

 

Other liabilities

 

 

 

 

 

3,590

 

Total liabilities

 

 

2,150,760

 

 

 

1,688,751

 

Commitments and contingencies

 

 

 

 

Mezzanine equity:

 

 

 

 

Redeemable noncontrolling interest

 

 

350

 

 

 

269

 

Stockholders’ equity:

 

 

 

 

Class A common stock, par value $0.01 per share, 300,000,000 shares authorized; 60,122,842 and 58,602,859 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

601

 

 

 

586

 

Class B common stock, par value $0.0001 per share, 100,000,000 shares authorized; 55,442,435 and 56,338,051 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

6

 

 

 

6

 

Additional paid-in capital

 

 

683,331

 

 

 

663,002

 

Accumulated deficit

 

 

(23,481

)

 

 

(54,992

)

Stockholder notes receivable

 

 

(131

)

 

 

(219

)

Total stockholders’ equity attributable to BRP Group, Inc.

 

 

660,326

 

 

 

608,383

 

Noncontrolling interest

 

 

599,209

 

 

 

578,904

 

Total stockholders’ equity

 

 

1,259,535

 

 

 

1,187,287

 

Total liabilities, mezzanine equity and stockholders’ equity

 

$

3,410,645

 

 

$

2,876,307

 

BRP GROUP, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For the Six Months

Ended June 30,

(in thousands)

 

2022

 

2021

Cash flows from operating activities:

 

 

 

 

Net income

 

$

61,432

 

 

$

10,866

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

Depreciation and amortization

 

 

38,825

 

 

 

22,446

 

Change in fair value of contingent consideration

 

 

(32,504

)

 

 

11,822

 

Share-based compensation expense

 

 

17,677

 

 

 

8,087

 

Amortization of deferred financing costs

 

 

2,474

 

 

 

1,443

 

Change in fair value of interest rate caps

 

 

(21,269

)

 

 

825

 

Other fair value adjustments

 

 

 

 

 

94

 

Payment of contingent earnout consideration in excess of purchase price accrual

 

 

(47,803

)

 

 

(602

)

Changes in operating assets and liabilities, net of effect of acquisitions:

 

 

 

 

Premiums, commissions and fees receivable, net

 

 

(78,365

)

 

 

(52,357

)

Prepaid expenses and other current assets

 

 

(10,061

)

 

 

(2,085

)

Due to/from related parties

 

 

(47

)

 

 

84

 

Right-of-use assets

 

 

(4,116

)

 

 

(57,816

)

Accounts payable, accrued expenses and other current liabilities

 

 

63,763

 

 

 

47,436

 

Operating lease liabilities

 

 

5,353

 

 

 

59,176

 

Net cash provided by (used in) operating activities

 

 

(4,641

)

 

 

49,419

 

Cash flows from investing activities:

 

 

 

 

Cash consideration paid for business combinations, net of cash received

 

 

(377,299

)

 

 

(24,276

)

Cash consideration paid for asset acquisitions, net of cash received

 

 

(3,356

)

 

 

(1,575

)

Capital expenditures

 

 

(8,565

)

 

 

(1,756

)

Investment in business venture

 

 

(675

)

 

 

 

Net cash used in investing activities

 

 

(389,895

)

 

 

(27,607

)

Cash flows from financing activities:

 

 

 

 

Payment of contingent earnout consideration up to amount of purchase price accrual

 

 

(43,184

)

 

 

(828

)

Proceeds from revolving line of credit

 

 

495,000

 

 

 

20,000

 

Payments on revolving line of credit

 

 

(5,000

)

 

 

 

Proceeds from long-term debt

 

 

 

 

 

97,914

 

Payments on long-term debt

 

 

(4,254

)

 

 

(1,000

)

Payments of debt issuance costs

 

 

(1,565

)

 

 

(634

)

Proceeds from the sale of interest rate caps

 

 

19,038

 

 

 

 

Tax distributions to BRP LLC members

 

 

(9,393

)

 

 

 

Purchase of interest rate caps

 

 

 

 

 

(3,461

)

Proceeds from repayment of stockholder notes receivable

 

 

88

 

 

 

159

 

Net cash provided by financing activities

 

 

450,730

 

 

 

112,150

 

Net increase in cash and cash equivalents and restricted cash

 

 

56,194

 

 

 

133,962

 

Cash and cash equivalents and restricted cash at beginning of period

 

 

227,737

 

 

 

142,022

 

Cash and cash equivalents and restricted cash at end of period

 

$

283,931

 

 

$

275,984

 

NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA, Adjusted EBITDA Margin, Organic Revenue, Organic Revenue Growth, Adjusted Net Income, Adjusted Diluted Earnings Per Share (“EPS”), Pro Forma Revenue, Pro Forma Adjusted EBITDA, Pro Forma Adjusted EBITDA Margin and adjusted net cash provided by operating activities ("free cash flow") 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 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), diluted earnings (loss) per share (for Adjusted Diluted EPS) or net cash provided by (used in) operating activities (for adjusted net cash provided by operating activities ), 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), net income (loss) attributable to BRP Group, Inc. 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.

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, severance, and certain non-recurring costs, including those related to raising capital. 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 Margin is a key metric used by management and our board of directors to assess our financial performance. We believe that Adjusted EBITDA Margin 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. Reconciliation of guidance regarding Adjusted EBITDA margin to the most directly comparable GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity, and low visibility with respect to the charges excluded from Adjusted EBITDA, the non-GAAP metric from which Adjusted EBITDA margin is derived; in particular, the measures and effects of share-based compensation expense, transaction-related expenses related to Partnerships, severance, and certain non-recurring costs, including those related to raising capital.

Adjusted EBITDA and Adjusted EBITDA Margin have important limitations as analytical tools. For example, Adjusted EBITDA and Adjusted EBITDA Margin:

  • do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;
  • do not reflect changes in, or cash requirements for, our working capital needs;
  • do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations;
  • do not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;
  • do not reflect share-based compensation expense and other non-cash charges; and
  • exclude certain tax payments that may represent a reduction in cash available to us.

We calculate Organic Revenue Growth based on commissions and fees 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, 2021 are excluded from Organic Revenue for 2021. However, after June 1, 2022, results from June 1, 2021 to December 31, 2021 for such Partners are compared to results from June 1, 2022 to December 31, 2022 for purposes of calculating Organic Revenue Growth in 2022. 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.

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 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, 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. We believe that Adjusted Net Income is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate to business performance.

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, 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, severance, and certain non-recurring costs, including those related to raising capital. 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 Margin is a key metric used by management and our board of directors to assess our financial performance. We believe that Pro Forma Adjusted EBITDA Margin 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.

We calculate adjusted net cash provided by operating activities because we hold fiduciary cash designated for our Insurance Company partners on behalf of our clients and incur substantial earnout liabilities in conjunction with its Partnership strategy. Adjusted net cash provided by operating activities is calculated as net cash provided by (used in) operating activities excluding: (i) the impact of the change in premiums, commissions and fees receivable, net; (ii) the change in accounts payable, accrued expenses and other current liabilities; and (iii) the payment of contingent earnout consideration in excess of purchase price accrual. We believe that adjusted net cash provided by operating activities is an important financial measure for use in evaluating financial performance because it measures our ability to generate additional cash from our business operations.

Adjusted EBITDA and Adjusted EBITDA Margin

The following table reconciles Adjusted EBITDA and Adjusted EBITDA Margin to net income (loss), which we consider to be the most directly comparable GAAP financial measure:

 

 

For the Three Months

Ended June 30,

 

For the Six Months

Ended June 30,

(in thousands, except percentages)

 

2022

 

2021(1)

 

2022

 

2021(1)

Commissions and fees

 

$

232,460

 

 

$

119,706

 

 

$

475,308

 

 

$

272,534

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

16,593

 

 

$

(20,441

)

 

$

61,432

 

 

$

10,866

 

Adjustments to net income (loss):

 

 

 

 

 

 

 

 

Amortization expense

 

 

19,170

 

 

 

10,742

 

 

 

36,732

 

 

 

21,279

 

Change in fair value of contingent consideration

 

 

(26,872

)

 

 

13,325

 

 

 

(32,504

)

 

 

11,822

 

Interest expense, net

 

 

14,632

 

 

 

5,848

 

 

 

24,982

 

 

 

11,491

 

Change in fair value of interest rate caps

 

 

(5,459

)

 

 

825

 

 

 

(21,269

)

 

 

825

 

Share-based compensation

 

 

10,113

 

 

 

4,545

 

 

 

17,677

 

 

 

8,087

 

Transaction-related Partnership expenses

 

 

9,208

 

 

 

3,225

 

 

 

17,424

 

 

 

5,670

 

Depreciation expense

 

 

1,105

 

 

 

573

 

 

 

2,093

 

 

 

1,167

 

Severance

 

 

653

 

 

 

 

 

 

875

 

 

 

 

Other(2)

 

 

3,341

 

 

 

1,412

 

 

 

7,974

 

 

 

2,271

 

Adjusted EBITDA

 

$

42,484

 

 

$

20,054

 

 

$

115,416

 

 

$

73,478

 

Adjusted EBITDA Margin

 

 

18

%

 

 

17

%

 

 

24

%

 

 

27

%

__________

(1)

 

We revised operating expenses for the three and six months ended June 30, 2021 to reflect the adoption of Topic 842 as described further in our Quarterly Report of Form 10-Q filed with the SEC on August 9, 2022. This adjustment affected net income (loss) and Adjusted EBITDA values.

(2)

 

Other addbacks to Adjusted EBITDA include certain expenses that are considered to be non-recurring or non-operational, including certain recruiting costs, remediation efforts, professional fees and litigation costs, and bonuses.

Organic Revenue and Organic Revenue Growth

The following table reconciles Organic Revenue and Organic Revenue Growth to commissions and fees, which we consider to be the most directly comparable GAAP financial measure:

 

 

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

(in thousands, except percentages)

 

2022

 

2021

 

2022

 

2021

Commissions and fees

 

$

232,460

 

 

$

119,706

 

 

$

475,308

 

 

$

272,534

 

Partnership commissions and fees(1)

 

 

(84,186

)

 

 

(51,893

)

 

 

(148,963

)

 

 

(143,108

)

Organic Revenue

 

$

148,274

 

 

$

67,813

 

 

$

326,345

 

 

$

129,426

 

Organic Revenue Growth(2)

 

$

28,630

 

 

$

16,482

 

 

$

53,811

 

 

$

23,929

 

Organic Revenue Growth %(2)

 

 

24

%

 

 

32

%

 

 

20

%

 

 

23

%

__________

(1)

 

Includes the first twelve months of such commissions and fees generated from newly acquired Partners.

(2)

 

Organic Revenue for the three and six months ended June 30, 2021 used to calculate Organic Revenue Growth for the three and six months ended June 30, 2022 was $119.6 million and $272.5 million, respectively, which is adjusted to reflect revenues from Partnerships that have reached the twelve-month owned mark during the three and six months ended June 30, 2022.

Adjusted Net Income and Adjusted Diluted EPS

The following table reconciles Adjusted Net Income to net income (loss) attributable to BRP Group, Inc. and reconciles Adjusted Diluted EPS to diluted earnings (loss) per share, which we consider to be the most directly comparable GAAP financial measures:

 

 

For the Three Months

Ended June 30,

 

For the Six Months

Ended June 30,

(in thousands, except per share data)

 

2022

 

2021(1)(2)

 

2022

 

2021(1)(2)

Net income (loss) attributable to BRP Group, Inc.

 

$

8,642

 

 

$

(10,093

)

 

$

31,511

 

 

$

5,213

 

Net income (loss) attributable to noncontrolling interests

 

 

7,951

 

 

 

(10,348

)

 

 

29,921

 

 

 

5,653

 

Amortization expense

 

 

19,170

 

 

 

10,742

 

 

 

36,732

 

 

 

21,279

 

Change in fair value of contingent consideration

 

 

(26,872

)

 

 

13,325

 

 

 

(32,504

)

 

 

11,822

 

Change in fair value of interest rate caps

 

 

(5,459

)

 

 

825

 

 

 

(21,269

)

 

 

825

 

Share-based compensation

 

 

10,113

 

 

 

4,545

 

 

 

17,677

 

 

 

8,087

 

Transaction-related Partnership expenses

 

 

9,208

 

 

 

3,225

 

 

 

17,424

 

 

 

5,670

 

Amortization of deferred financing costs

 

 

1,188

 

 

 

750

 

 

 

2,474

 

 

 

1,443

 

Depreciation

 

 

1,105

 

 

 

573

 

 

 

2,093

 

 

 

1,167

 

Severance

 

 

653

 

 

 

 

 

 

875

 

 

 

 

Other(3)

 

 

3,341

 

 

 

1,412

 

 

 

7,974

 

 

 

2,271

 

Adjusted pre-tax income

 

 

29,040

 

 

 

14,956

 

 

 

92,908

 

 

 

63,430

 

Adjusted income taxes(4)

 

 

2,875

 

 

 

1,481

 

 

 

9,198

 

 

 

6,280

 

Adjusted Net Income

 

$

26,165

 

 

$

13,475

 

 

$

83,710

 

 

$

57,150

 

 

 

 

 

 

 

 

 

 

Weighted-average shares of Class A common stock outstanding - diluted

 

 

59,859

 

 

 

44,671

 

 

 

59,354

 

 

 

46,160

 

Dilutive effect of unvested restricted shares of Class A common stock

 

 

 

 

 

1,862

 

 

 

 

 

 

 

Exchange of Class B shares(5)

 

 

55,864

 

 

 

49,600

 

 

 

56,065

 

 

 

49,694

 

Adjusted dilutive weighted-average shares outstanding

 

 

115,723

 

 

 

96,133

 

 

 

115,419

 

 

 

95,854

 

 

 

 

 

 

 

 

 

 

Adjusted Diluted EPS

 

$

0.23

 

 

$

0.14

 

 

$

0.73

 

 

$

0.60

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per share

 

$

0.14

 

 

$

(0.23

)

 

$

0.53

 

 

$

0.11

 

Effect of exchange of Class B shares and net income (loss) attributable to noncontrolling interests per share

 

 

 

 

 

0.02

 

 

 

 

 

 

 

Other adjustments to earnings (loss) per share

 

 

0.11

 

 

 

0.37

 

 

 

0.28

 

 

 

0.56

 

Adjusted income taxes per share

 

 

(0.02

)

 

 

(0.02

)

 

 

(0.08

)

 

 

(0.07

)

Adjusted Diluted EPS

 

$

0.23

 

 

$

0.14

 

 

$

0.73

 

 

$

0.60

 

___________

(1)

 

We revised operating expenses for the three and six months ended June 30, 2021 to reflect the adoption of Topic 842 as described further in our Quarterly Report of Form 10-Q filed with the SEC on August 9, 2022. This adjustment affected net income (loss) attributable to BRP Group, Inc. and Adjusted Net Income values as well as diluted earnings per share and Adjusted Diluted EPS.

(2)

 

Calculation was adjusted in the fourth quarter of 2021 to include depreciation. Prior year amounts have been conformed to current year presentation.

(3)

 

Other addbacks to Adjusted Net Income include certain expenses that are considered to be non-recurring or non-operational, including certain recruiting costs, remediation efforts, professional fees and litigation costs, and bonuses.

(4)

 

Represents corporate income taxes at assumed effective tax rate of 9.9% applied to adjusted pre-tax income.

(5)

 

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 and Pro Forma Revenue Growth to commissions and fees, which we consider to be the most directly comparable GAAP financial measure:

 

 

For the Three Months

Ended June 30,

 

For the Six Months

Ended June 30,

(in thousands, except percentages)

 

2022

 

2021

 

2022

 

2021

Commissions and fees

 

$

232,460

 

 

$

119,706

 

 

$

475,308

 

 

$

272,534

 

Revenue for Partnerships in the unowned period(1)

 

 

7,452

 

 

 

489

 

 

 

27,750

 

 

 

3,714

 

Pro Forma Revenue

 

$

239,912

 

 

$

120,195

 

 

$

503,058

 

 

$

276,248

 

Pro Forma Revenue Growth

 

$

119,717

 

 

$

64,374

 

 

$

226,810

 

 

$

142,343

 

Pro Forma Revenue Growth %

 

 

100

%

 

 

115

%

 

 

82

%

 

 

106

%

___________

(1)

 

The adjustments for the three and six months ended June 30, 2022 reflect commissions and fees revenue for Westwood Insurance Agency and Venture Captive Management, LLC as if the Company had acquired the Partners on January 1, 2022. The adjustments for the three months ended June 30, 2021 reflect commissions and fees revenue for Tim Altman, Inc. (operating as "Only Medicare Solutions"), Seniors’ Insurance Services of Washington, Inc. and Mid-Continent Companies, Ltd./Mid-Continent Securities Ltd. as if the Company had acquired the Partners on January 1, 2021. The adjustments for the six months ended June 30, 2021 reflect commissions and fees revenue for LeaseTrack Services LLC/Effective Coverage LLC, Riley Financial, Inc. (operating as "Medicare Help Now"), Only Medicare Solutions, Seniors’ Insurance Services of Washington, Inc. and Mid-Continent Companies, Ltd./Mid-Continent Securities Ltd. as if the Company had acquired the Partners on January 1, 2021. 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 (loss), which we consider to be the most directly comparable GAAP financial measure:

 

 

For the Three Months

Ended June 30,

 

For the Six Months

Ended June 30,

(in thousands, except percentages)

 

2022

 

2021(1)

 

2022

 

2021(1)

Pro Forma Revenue

 

$

239,912

 

 

$

120,195

 

 

$

503,058

 

 

$

276,248

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

16,593

 

 

 

(20,441

)

 

 

61,432

 

 

 

10,866

 

Net income (loss) for Partnerships in the unowned period(2)

 

 

(840

)

 

 

76

 

 

 

(1,062

)

 

 

1,571

 

Pro Forma Net Income (Loss)

 

 

15,753

 

 

 

(20,365

)

 

 

60,370

 

 

 

12,437

 

Adjustments to Pro Forma Net Income (Loss):

 

 

 

 

 

 

 

 

Amortization expense

 

 

20,119

 

 

 

10,773

 

 

 

40,450

 

 

 

21,530

 

Change in fair value of contingent consideration

 

 

(26,872

)

 

 

13,325

 

 

 

(32,504

)

 

 

11,822

 

Interest expense, net

 

 

14,956

 

 

 

5,848

 

 

 

27,976

 

 

 

11,491

 

Change in fair value of interest rate caps

 

 

(5,459

)

 

 

825

 

 

 

(21,269

)

 

 

825

 

Share-based compensation

 

 

10,113

 

 

 

4,545

 

 

 

17,677

 

 

 

8,087

 

Transaction-related Partnership expenses

 

 

9,208

 

 

 

3,225

 

 

 

17,424

 

 

 

5,670

 

Depreciation expense

 

 

1,105

 

 

 

573

 

 

 

2,093

 

 

 

1,167

 

Severance

 

 

653

 

 

 

 

 

 

875

 

 

 

 

Other

 

 

3,341

 

 

 

1,412

 

 

 

7,974

 

 

 

2,271

 

Pro Forma Adjusted EBITDA

 

$

42,917

 

 

$

20,161

 

 

$

121,066

 

 

$

75,300

 

Pro Forma Adjusted EBITDA Margin

 

 

18

%

 

 

17

%

 

 

24

%

 

 

27

%

___________

(1)

We revised operating expenses for the three and six months ended June 30, 2021 to reflect the adoption of Topic 842 as described further in our Quarterly Report of Form 10-Q filed with the SEC on August 9, 2022. This adjustment affected net income (loss) and Adjusted EBITDA values.

(2)

The adjustments for the three and six months ended June 30, 2022 reflect net income (loss) for Westwood Insurance Agency and Venture Captive Management, LLC as if the Company had acquired the Partners on January 1, 2022. The adjustments for the three months ended June 30, 2021 reflect net income (loss) for Only Medicare Solutions, Seniors’ Insurance Services of Washington, Inc. and Mid-Continent Companies, Ltd./Mid-Continent Securities Ltd. as if the Company had acquired the Partners on January 1, 2021. The adjustments for the six months ended June 30, 2021 reflect net income (loss) for LeaseTrack Services LLC/Effective Coverage LLC, Medicare Help Now, Only Medicare Solutions, Seniors’ Insurance Services of Washington, Inc. and Mid-Continent Companies, Ltd./Mid-Continent Securities Ltd. as if the Company had acquired the Partners on January 1, 2021. 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.

Adjusted Net Cash Provided by Operating Activities ("Free Cash Flow")

The following table reconciles adjusted net cash provided by operating activities to net cash provided by (used in) operating activities, which we consider to be the most directly comparable GAAP financial measure:

 

 

For the Six Months

Ended June 30,

(in thousands)

 

2022

 

2021

Net cash provided by (used in) operating activities

 

$

(4,641

)

 

$

49,419

 

Adjustments to net cash provided by (used in) operating activities:

 

 

 

 

Change in premiums, commissions and fees receivable

 

 

78,365

 

 

 

52,357

 

Change in accounts payable, accrued expenses and other current liabilities

 

 

(63,763

)

 

 

(47,436

)

Payment of contingent earnout in excess of purchase price accrual

 

 

47,803

 

 

 

602

 

Adjusted net cash provided by operating activities

 

$

57,764

 

 

$

54,942

 

COMMONLY USED DEFINED TERMS

The following terms have the following meanings throughout this press release unless the context indicates or requires otherwise:

Amended LLC Agreement

Third Amended and Restated Limited Liability Company Agreement of Baldwin Risk Partners, LLC, as amended

 

Clients

Our insureds

 

Colleagues

Our employees

 

GAAP

Accounting principles generally accepted in the United States of America

 

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

 

Topic 842

Accounting Standards Codification Topic 842, Leases

 

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