Today's Viewpoint: A MarshBerry Publication

BRP Group (NASDAQ: BRP) reported 3Q21 adjusted earnings per share of $0.11 on revenue of $135.6 million, above consensus estimates of $0.11 on $130.4 million. The company reported strong organic growth of 26% and total revenue growth of 106%. All segments of the business drove the positive results, with the ‘MGA of the Future’ platform growing rapidly. BRP also noted that the Specialty segment performed well in the quarter.

Below are notable takeaways from the quarter.

  • Total revenue growth (including acquired revenue) was 106% in 3Q21 vs. 133% in 2Q21. Organic growth was 26%, vs. 32% in 2Q21. The company mentioned that the continued execution of its deep pipeline of partnership opportunities, with two acquisitions of Top 100 U.S. brokers in the past few months, contributed to the overall results.
  • The MGA of the Future platform saw 3Q21 revenue growth of 48%, vs. 2Q21’s 54%, driven by execution in multifamily and strength in both flood and homeowners.
  • BRP believes that it is well positioned to execute on its Merger & Acquisition (M&A) pipeline, as it raised $281 million in capital during the quarter. This will assist the company in meeting its target of $100 million to $150 million in acquired revenue next year.
  • The company announced in September partnerships with Jacobson, Goldfarb & Scott, its fifth Top 100 partnership since fourth quarter 2020; and K&S Insurance, which adds to BRP’s presence in Texas. In November, BRP announced the addition of Wood Gutmann & Bogart, the sixth Top 100 partnership which expands the firm’s Property & Casualty expertise.
  • With the 13 partnerships announced year-to-date, the total annual revenue from 2021 announced partnerships is $165 million. BRP projects acquired revenue towards the upper end of the $175 million to $200 million range that was projected for the full year 2021. BRP noted its M&A activity this year is not related to a pull forward of 2022 opportunities but rather reflective of the strong market and its position as a “partner of choice.”
  • In terms of the full year guidance, BRP expects to be at the high end of its previously announced 150 to 200 basis point increase in adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) margin vs. last year’s 18%. For the fourth quarter, organic growth is projected to be in the mid-teens. Because of timing of contract execution, and accounting related to the master product in the MGA of the Future in late 2020, BRP effectively recorded two quarters’ worth of master revenue in Q420. Because of the higher Q420 comp, BRP sees a onetime deceleration in the organic growth of the MGA of the Future to about 20% year-over-year.

In sum, BRP is confident that it can continue to execute on its goal (stated at the time of its Initial Public Offering) of generating organic growth of 10-15% and higher over the long-term while increasing profitability and increasing free cash flow. The company believes that its ability to hire the right talent and partner with top independent firms will boost growth.

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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.