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Today's Viewpoint: A MarshBerry Publication

BRP Group (NASDAQ: BRP) reported 2Q21 adjusted earnings per share of $0.14 on revenue of $119.7 million, above consensus estimates of $0.09 on $105.4 million. All segments in the second quarter saw organic growth in the double digits. BRP noted positive momentum across its business which it sees continuing into 3Q21 boosted by strategic partnerships and organic growth.

Below are notable takeaways from the second quarter:

  • Total revenue growth (including acquired revenue) was 133% for BRP in 2Q21 vs. 182% in 1Q21. Organic growth during 2Q21 was 32% year-over year (YoY) (vs. 14% YoY in 1Q21), which was the “best quarterly organic growth as a public company.” BRP’s impressive performance was driven by continued rapid expansion of BRP’s “MGA of the Future” business as well as contributions from new partnerships.
  • The MGA of the Future platform saw 2Q21 revenue growth of 54% YoY vs. in 56% 1Q21. This was boosted by strength in flood, homeowners, and multifamily. BRP expects momentum to continue as the pipeline for the business continues to trend positively.
  • BRP noted that its merger & acquisition (M&A) pipeline continues to be very strong. The company feels good about partnership activity with multiple signed letters of intent for deals across a range of sizes.
  • Embedded in the 32% YoY growth for the company in 2Q, was 7.5% growth from the combination of increased rates and increased exposure bases. In other words, BRP reported about 25% organic growth from new customers, new lines of coverage, etc. excluding rate and exposure unit increases. The company noted retention has been better, but only improved approximately 100bps YoY and thus did not have a significant impact on underlying organic growth.
  • The company’s partnership with RogersGray, announced in 2Q21, is its fourth top 100 partnership in eight months, and complements its homeowners’ efforts within the MGA of the Future. In August 2021, BRP completed four additional partnerships, including Founder Shield and The Capital Group.
  • The company took advantage of positive performance since October 2020 to improve pricing on a new $500 million Term Loan B in May. In August, BRP increased its revolving credit facility by $75 million to provide more flexibility and lending capacity to complete opportunistic acquisitions while decreasing its cost of capital.
  • BRP provided some updates on Key Performance Indicators (KPIs) for the MGA of the Future business including:
    • Increased in force renters’ policies by over 39,000 from March 31, 2021 to over 625,000 as of August 6.
    • Rental segment brought its total unit count to over nine million, which represents an additional 500,000 units since May 10.
  • Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) margin was 17% in 2Q21. This is above the 16% reported in the prior-year period mainly due to changes in seasonality related to M&A success. For 3Q21, BRP projects an adjusted EBITDA margin of 14% to 15% and expects full-year EBITDA margin to be at the high end of its prior guidance for a 150 to 200 basis point increase from last year’s 18%.
  • Looking forward, the company sees positive momentum going into 3Q21 supported by favorable macroeconomic tailwinds, contributions from new partnerships, and strong organic growth. CEO Trevor Baldwin said: “As a result of the strong momentum across our entire business, we currently expect high teens organic growth to the overall business in the third quarter, above our target 10% to 15% range.”

Overall, the company was confident around its growth in 2Q21. BRP noted that it is well positioned to achieve its Top 10 in 10 goal, which is to rank in the Top 10 of Business Insurance’s annual list of top 100 brokers. BRP currently ranks #19 on the list. Management remains focused on acquisitions and organic growth across all segments. The company was also optimistic about exceeding its long-term 10-15% organic growth rate in 3Q21 given partnership prospects, new products in MGA of the future and positive macroeconomic factors.

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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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