Highlights from the BRP earnings release and analyst call
BRP Group, Inc. (“BRP”) reported earnings after the close of the market yesterday (August 13, 2020). As a reminder, BRP Group is the entity that was formed as the vehicle for the public listing of Baldwin Risk Partners, LLC. Highlights from the company release and analyst call are below:
- BRP generated $51.3 million in commissions and fees in the second quarter, representing a 55% year-over-year increase, including 19% year-over-year organic revenue growth in the quarter.
- Organic revenue growth for the quarter included for the first time revenue related to BRP’s MGA of Future Platform, which represented $13.1 million in revenue in the quarter, and was up 39% year-over-year. The MGA of the Future Platform consists of a renter’s insurance product that is distributed through sub-agent partners and property management software providers. Excluding results from the MGA of the Future, organic revenue growth was approximately 11%.
- Management indicated that rate increases helped offset shrinkage in exposure units during the quarter, similar to what we have heard from other public brokers on recent earnings calls. In the Middle Market segment, rate increases were in the high-single digits. The combined impact of increased rate and decreased exposure units contributed 3% to revenue growth in the segment.
- Not unexpectedly, BRP called out its restaurant, hospitality, and lodging client base as a weak performer during the quarter. Through July, renewed revenue from this group was down approximately 24% with exposure decreases more than offsetting rate increases in this segment.
- BRP continued to be active in the merger & acquisition (“M&A”) space during the quarter by closing five partner acquisitions generating total annualized revenue of over $47 million in the 12-month period pre-acquisition. Two additional acquisitions have closed since July 30, which represent an additional $3 million in revenue for the 12-month period pre-acquisition.
- Year-to-date, BRP has added a total of 11 partnerships representing $82 million in annual revenue. Anecdotally, management noted that it believes its current partnership pipeline is the best it has been in the firm’s history. CEO Trevor Baldwin noted that the current pipeline contains a collection of the largest firms with which BRP has had dialogue.
- As it relates to the balance sheet, the firm ended the quarter with a leverage ratio slightly greater than 1.0x, a level at which management feels very comfortable. BRP brought on $135 million of additional equity capital through a follow-on offering of its Class A Common stock during the second quarter.
Despite unprecedented economic pressures as a result of the COVID-19 pandemic, BRP had a strong quarter, as evidenced by its robust top-line growth. Looking forward, management expects that the impact of the pandemic will continue to be felt into the third quarter. Organic revenue growth in the third quarter is expected to be below second quarter rates. Management is bracing for another quarter of economic uncertainty and instability - especially as businesses around the county exhaust the stimulus money that was provided by the government at the onset of the pandemic.
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This earnings summary has been prepared by Marsh, Berry & Co., Inc. and is not intended to provide investment recommendations on any company. It is not a research report, as such term is defined by applicable laws and regulations, and it does not contain sufficient information upon which to make an investment decision. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities, financial instruments or to participate in any particular trading strategy. These materials are based solely on information contained in publicly available documents and Marsh, Berry & Co., Inc. has not independently attempted to investigate or to verify such information.
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