Today's Viewpoint: A MarshBerry Publication



Highlights from the BRP earnings release and analyst call.

BRP Group (BRP) reported earnings for first quarter 2021 on May 10, 2021, after the market close. The company reported 1Q21 adjusted earnings of $0.44 per share, above consensus expectations of $0.40 per share, driven by margin outperformance.

Below are highlights from the conference call:

  • Total revenue growth (including acquired revenue) was 182% for BRP in 1Q21, as total revenue nearly tripled year-over-year (YoY). BRP attributed the strong revenue growth to a combination of outsized organic revenue growth and contributions from new partnerships.
    • Organic growth during 1Q21 was 14% YoY which was boosted by continued rapid expansion of BRP’s “MGA of the Future” business as well as acceleration in most business segments.
    • The MGA of the Future platform outperformed projections with a 56% growth in revenue YoY. This was primarily driven by growth in renters supplemented by the master tenant liability product launched in 4Q20. BRP expects momentum to continue as they head into the seasonally strong period for the segment.
    • BRP noted that while merger & acquisition (M&A) activity was lighter during the quarter activity has picked up meaningfully with a robust pipeline and multiple letters of intent (LOIs). The company expects to close on many of the LOIs in the third quarter and remains committed to being a partner of choice for quality firms with strong organic growth prospects.
    • The company “took advantage of recent strength” to increase its leverage covenant to 6x EBITDA from 5x to give it more flexibility and lending capacity to complete larger, opportunistic acquisitions, while still planning to operate the business between 3.5-4.0x leverage
  • The MGA of the Future business was highlighted, particularly the success within the rental segment, driven by new products. The company launched a new flood product, which it believes will contribute to revenue in 2022. BRP noted it increased its policies in force by over 41,000 to 566,000 during 1Q21, vs. an increase of 27,000 during the same period last year.
  • Looking forward, the company sees positive momentum continuing into 2Q21, supported by favorable macroeconomic tailwinds including a favorable insurance rate environment, the economy reopening and changes in tax legislation that are prompting potential partners to want to sell. The impact of rate and exposure units was 1.4% positive during the quarter with rate being up and exposure units being down through February, where exposure units also turned positive as the company began to lap the first months of the COVID-19 impact from 2020.
  • BRP commented that March’s double-digit organic growth of core commission revenue across all four of its operating groups should support its organic growth projection of high teens for 2Q21 (the highest expectation BRP has set as a public company).
  • Adjusted EBITDA margin was 35% in 1Q21, above the 26% reported in the prior-year period. While 1Q21 is typically the company’s seasonally strongest margin quarter, BRP expects to see 150-200 bp of margin expansion for the full year adjusted EBITDA margin vs. 2020.

Overall, the company was confident around how 2Q21 is trending, noting that it’s likely to be one of its best quarters. Management remains focused on acquisitions and the MGA segment growth. The company was also optimistic about reaching its long term 10-15% organic growth rate in all its segments, given partnership prospects, new products in MGA of the future, and positive macroeconomic factors in 1Q21 and the start of 2Q21.Subscribe to MarshBerry’s Today’s ViewPoint blog for the latest news and updates and follow us on social media.

EBITDA: Earnings Before Interest, Taxes, Depreciation & Amortization; MGA: Managing General Agent

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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