UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒x			Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended ~~March 31,~~September 30, 2023


☐o			Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to _________

Commission File Number: 001-39095

BRP GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware

61-1937225

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

4211 W. Boy Scout Blvd., Suite 800, Tampa, Florida 33607

(Address of principal executive offices) (Zip Code)

(866) 279-0698

(Registrant’s telephone number, including area code)

Not Applicable

(Former Name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

BRP

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of ~~May 3,~~November 1, 2023, there were ~~63,736,990~~64,318,059 shares of Class A common stock outstanding and ~~53,064,504~~52,430,994 shares of Class B common stock outstanding.

BRP GROUP, INC.

INDEX

Page

PART I. FINANCIAL INFORMATION

ITEM 1.

Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of M ~~arch~~September 3 1 ~~, 202~~3 30, 2023 and December 31, 20 2 22022

Condensed Consolidated Statements of Comprehensive Income (Loss)for the Three and Nine Months Ended ~~March~~September 3 1 ~~, 202~~3 30, 2023 and ~~202~~22022

Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity for the Three and Nine Months Ended ~~March~~September 3 1 ~~, 202~~3 30, 2023 and 20 2 22022

Condensed Consolidated Statements of Cash Flows for the ~~Thr~~N eeine Months Ended ~~March~~September 3 1 ~~, 202~~3 30, 2023 and ~~202~~22022

Notes to Condensed Consolidated Financial Statements

1011

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2123

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

3539

ITEM 4.

Controls and Procedures

3639

PART II. OTHER INFORMATION

Unregistered Sales of Equity Securities ~~and~~, Use of ~~Proceeds~~Proceed s,and Issuer Purchases of Equity Securitie s

3640

ITEM 3.

Defaults Upon Senior Securities

3640

ITEM 4.

Mine Safety Disclosures

Note Regarding Forward-Looking Statements

We have made statements in this report, including matters discussed under Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Part II, Item 1. Legal Proceedings, Part II, Item 1A. Risk Factors and in other sections of this report, that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking ~~statements, including those factors discussed under Part II, Item 1A. Risk Factors.~~statements. You should specifically consider the numerous risks outlined under Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this report to conform our prior statements to actual results or revised expectations, except as required by law.

Commonly Used Defined Terms

The following terms have the following meanings throughout this Quarterly Report on Form 10-Q unless the context indicates or requires otherwise:


Amended LLC Agreement						Third Amended and Restated Limited Liability Company Agreement of BRP, as amended
API						Application programming interface
book of business						Insurance policies bound by us on behalf of our Clients
bps						Basis points
BRP						Baldwin Risk Partners, LLC, a wholly-owned subsidiary of BRP Group
BRP Group						BRP Group, Inc.
Clients						Our insureds
Colleagues						Our employees
Exchange Act						Securities Exchange Act of 1934, as amended
GAAP						Accounting principles generally accepted in the United States of America
Insurance Company Partners						Insurance companies with which we have a contractual relationship
JPM Credit Agreement						Credit Agreement, dated as of October 14, 2020, between Baldwin Risk Partners, LLC, as borrower, JPMorgan Chase Bank, N.A., as the Administrative Agent, the Guarantors party thereto, the Lenders party thereto and the Issuing Lenders party thereto, as amended by the Amendment No. 1 to Credit Agreement dated as of May 7, 2021, Amendment No. 2 to Credit Agreement dated as of June 2, 2021, Amendment No. 3 to Credit Agreement dated as of August 6, 2021, Amendment No. 4 to Credit Agreement dated as of December 16, 2021, ~~and~~ Amendment No. 5 to Credit Agreement dated as of March 28, 2022, Amendment No. 6 to Credit Agreement dated as of June 27, 2023 and Amendment No. 7 to Credit Agreement dated as of September 15, 2023
LIBOR						London Interbank Offered Rate
LLC Units						Membership interests of BRP
MGA						Managing General Agent
MIU conversion LLC Units						Non-voting units issued to certain senior management prior to October 2019, which were converted to restricted LLC Units (and corresponding shares of Class B common stock) with identical vesting conditions as the original issuances in connection with our initial public offering
Operating Groups						Our reportable segments
Partners						Companies that we have acquired, or in the case of asset acquisitions, the producers
Partnerships						Strategic acquisitions made by the Company
QBE						QBE Holdings, Inc., the prior owner of Westwood
Revolving Facility						Our revolving credit facility under the JPM Credit Agreement with commitments in an aggregate principal amount of $600.0 million, maturing April 1, 2027
Risk Advisors						Our producers
SEC						U.S. Securities and Exchange Commission
Securities Act						Securities Act of 1933, as amended
SOFR						Secured Overnight Financing Rate
Tax Receivable Agreement						Tax Receivable Agreement between BRP Group, Inc. and the holders of LLC Units in Baldwin Risk Partners, LLC entered into on October 28, 2019
Term Loan B						Our term loan facility under the JPM Credit Agreement with a principal amount of ~~$850.0 million,~~$1.02 billion, maturing October 14, 2027
Westwood						Westwood Insurance Agency, a 2022 Partner

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRP GROUP, INC.

Condensed Consolidated Balance Sheets

(Unaudited)


(in thousands, except share and per share data)	(in thousands, except share and per share data)	March 31, 2023		December 31, 2022		(in thousands, except share and per share data)	September 30, 2023		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	81,299	$	118,090	Cash and cash equivalents	$	78,965	$	118,090
Restricted cash	Restricted cash	105,520		112,381		Restricted cash	115,429		112,381
Premiums, commissions and fees receivable, net	Premiums, commissions and fees receivable, net	580,343		531,992		Premiums, commissions and fees receivable, net	595,359		531,992
Prepaid expenses and other current assets	Prepaid expenses and other current assets	13,199		9,823		Prepaid expenses and other current assets	12,370		9,936
Due from related parties		114		113
Total current assets	Total current assets	780,475		772,399		Total current assets	802,123		772,399
Property and equipment, net	Property and equipment, net	25,470		25,405		Property and equipment, net	24,378		25,405
Right-of-use assets	Right-of-use assets	95,316		96,465		Right-of-use assets	88,586		96,465
Other assets	Other assets	43,878		45,935		Other assets	41,738		45,935
Intangible assets, net	Intangible assets, net	1,081,074		1,099,918		Intangible assets, net	1,044,824		1,099,918
Goodwill	Goodwill	1,422,060		1,422,060		Goodwill	1,421,849		1,422,060
Total assets	Total assets	$	3,448,273	$	3,462,182	Total assets	$	3,423,498	$	3,462,182
Liabilities, Mezzanine Equity and Stockholders’ Equity	Liabilities, Mezzanine Equity and Stockholders’ Equity					Liabilities, Mezzanine Equity and Stockholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Premiums payable to insurance companies	Premiums payable to insurance companies	$	481,131	$	471,294	Premiums payable to insurance companies	$	502,081	$	471,294
Producer commissions payable	Producer commissions payable	62,954		53,927		Producer commissions payable	65,855		53,927
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	108,641		125,743		Accrued expenses and other current liabilities	131,418		125,743
Related party notes payable	Related party notes payable	1,525		1,525		Related party notes payable	1,525		1,525
Current portion of contingent earnout liabilities	Current portion of contingent earnout liabilities	118,569		46,717		Current portion of contingent earnout liabilities	97,620		46,717
Total current liabilities	Total current liabilities	772,820		699,206		Total current liabilities	798,499		699,206
Revolving line of credit	Revolving line of credit	485,000		505,000		Revolving line of credit	324,000		505,000
Long-term debt, less current portion	Long-term debt, less current portion	808,765		809,862		Long-term debt, less current portion	969,711		809,862
Contingent earnout liabilities, less current portion	Contingent earnout liabilities, less current portion	167,588		220,219		Contingent earnout liabilities, less current portion	175,657		220,219
Operating lease liabilities, less current portion	Operating lease liabilities, less current portion	86,739		87,692		Operating lease liabilities, less current portion	81,510		87,692
Other liabilities	Other liabilities	250		164		Other liabilities	241		164
Total liabilities	Total liabilities	2,321,162		2,322,143		Total liabilities	2,349,618		2,322,143
Commitments and contingencies (Note 12)	Commitments and contingencies (Note 12)					Commitments and contingencies (Note 12)
Mezzanine equity:	Mezzanine equity:					Mezzanine equity:
Redeemable noncontrolling interest	Redeemable noncontrolling interest	538		487		Redeemable noncontrolling interest	333		487
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Class A common stock, par value $0.01 per share, 300,000,000 shares authorized; 62,558,290 and 61,447,368 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		626		614
Class B common stock, par value $0.0001 per share, 100,000,000 shares authorized; 53,670,277 and 54,504,918 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		5		5
Class A common stock, par value $0.01 per share, 300,000,000 shares authorized; 64,229,313 and 61,447,368 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively						Class A common stock, par value $0.01 per share, 300,000,000 shares authorized; 64,229,313 and 61,447,368 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	642		614
Class B common stock, par value $0.0001 per share, 100,000,000 shares authorized; 52,486,094 and 54,504,918 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively						Class B common stock, par value $0.0001 per share, 100,000,000 shares authorized; 52,486,094 and 54,504,918 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively	5		5
Additional paid-in capital	Additional paid-in capital	716,645		704,291		Additional paid-in capital	742,553		704,291
Accumulated deficit	Accumulated deficit	(110,896)		(96,764)		Accumulated deficit	(152,422)		(96,764)
Stockholder notes receivable	Stockholder notes receivable	(21)		(42)		Stockholder notes receivable	—		(42)
Total stockholders’ equity attributable to BRP Group	Total stockholders’ equity attributable to BRP Group	606,359		608,104		Total stockholders’ equity attributable to BRP Group	590,778		608,104
Noncontrolling interest	Noncontrolling interest	520,214		531,448		Noncontrolling interest	482,769		531,448
Total stockholders’ equity	Total stockholders’ equity	1,126,573		1,139,552		Total stockholders’ equity	1,073,547		1,139,552
Total liabilities, mezzanine equity and stockholders’ equity	Total liabilities, mezzanine equity and stockholders’ equity	$	3,448,273	$	3,462,182	Total liabilities, mezzanine equity and stockholders’ equity	$	3,423,498	$	3,462,182

See accompanying Notes to Condensed Consolidated Financial Statements.

BRP GROUP, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)


		For the Three Months Ended March 31,					For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands, except share and per share data)	(in thousands, except share and per share data)		2023		2022			(in thousands, except share and per share data)	2023		2022		2023		2022
Revenues:	Revenues:							Revenues:
Commissions and fees	Commissions and fees		$	330,446	$	242,848		Commissions and fees	$	306,270	$	259,368	$	933,907	$	734,676

Operating expenses:	Operating expenses:							Operating expenses:
Commissions, employee compensation and benefits	Commissions, employee compensation and benefits		230,954		153,750			Commissions, employee compensation and benefits	220,469		195,920		676,659		522,518
Other operating expenses	Other operating expenses		46,604		36,442			Other operating expenses	47,165		47,212		141,254		124,424
Amortization expense	Amortization expense		23,163		17,562			Amortization expense	23,183		23,180		69,505		59,912
Change in fair value of contingent consideration	Change in fair value of contingent consideration		24,758		(5,632)			Change in fair value of contingent consideration	13,914		21,695		55,065		(10,809)
Depreciation expense	Depreciation expense		1,348		988			Depreciation expense	1,453		1,216		4,250		3,309
Total operating expenses	Total operating expenses		326,827		203,110			Total operating expenses	306,184		289,223		946,733		699,354

Operating income			3,619		39,738
Operating income (loss)								Operating income (loss)	86		(29,855)		(12,826)		35,322

Other income (expense):	Other income (expense):							Other income (expense):
Interest expense, net	Interest expense, net		(27,884)		(10,350)			Interest expense, net	(30,580)		(20,766)		(87,600)		(45,748)
Other income (expense), net	Other income (expense), net		(1,511)		15,451			Other income (expense), net	(1,351)		3,914		(193)		25,151
Total other income (expense)			(29,395)		5,101
Total other expense								Total other expense	(31,931)		(16,852)		(87,793)		(20,597)

Income (loss) before income taxes	Income (loss) before income taxes		(25,776)		44,839			Income (loss) before income taxes	(31,845)		(46,707)		(100,619)		14,725
Income tax expense	Income tax expense		78		—			Income tax expense	161		—		904		—
Net income (loss)	Net income (loss)		(25,854)		44,839			Net income (loss)	(32,006)		(46,707)		(101,523)		14,725
Less: net income (loss) attributable to noncontrolling interests	Less: net income (loss) attributable to noncontrolling interests		(11,722)		21,970			Less: net income (loss) attributable to noncontrolling interests	(14,377)		(21,914)		(45,865)		8,007
Net income (loss) attributable to BRP Group	Net income (loss) attributable to BRP Group		$	(14,132)	$	22,869		Net income (loss) attributable to BRP Group	$	(17,629)	$	(24,793)	$	(55,658)	$	6,718

Comprehensive income (loss)	Comprehensive income (loss)		$	(25,854)	$	44,839		Comprehensive income (loss)	$	(32,006)	$	(46,707)	$	(101,523)	$	14,725
Comprehensive income (loss) attributable to noncontrolling interests	Comprehensive income (loss) attributable to noncontrolling interests		(11,722)		21,970			Comprehensive income (loss) attributable to noncontrolling interests	(14,377)		(21,914)		(45,865)		8,007
Comprehensive income (loss) attributable to BRP Group	Comprehensive income (loss) attributable to BRP Group		(14,132)		22,869			Comprehensive income (loss) attributable to BRP Group	(17,629)		(24,793)		(55,658)		6,718

Basic earnings (loss) per share	Basic earnings (loss) per share		$	(0.24)	$	0.41		Basic earnings (loss) per share	$	(0.29)	$	(0.43)	$	(0.93)	$	0.12
Diluted earnings (loss) per share	Diluted earnings (loss) per share		$	(0.24)	$	0.39		Diluted earnings (loss) per share	$	(0.29)	$	(0.43)	$	(0.93)	$	0.11
Weighted-average shares of Class A common stock outstanding - basic	Weighted-average shares of Class A common stock outstanding - basic		58,711,798		55,719,803			Weighted-average shares of Class A common stock outstanding - basic	60,549,080		57,282,132		59,791,435		56,430,095
Weighted-average shares of Class A common stock outstanding - diluted	Weighted-average shares of Class A common stock outstanding - diluted		58,711,798		58,715,825			Weighted-average shares of Class A common stock outstanding - diluted	60,549,080		57,282,132		59,791,435		59,895,371

See accompanying Notes to Condensed Consolidated Financial Statements.

BRP GROUP, INC.

Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity

(Unaudited)


For the Three Months Ended March 31, 2023
For the Three Months Ended September 30, 2023																																For the Three Months Ended September 30, 2023
		Stockholders’ Equity																												Mezzanine Equity			Stockholders’ Equity																				Mezzanine Equity
		Class A Common Stock			Class B Common Stock			Additional Paid-in Capital				Accumulated Deficit				Stockholder Notes Receivable				Non-controlling Interest				Total						Redeemable Non-controlling Interest			Class A Common Stock				Class B Common Stock				Additional Paid-in Capital			Accumulated Deficit			Non-controlling Interest			Total			Redeemable Non-controlling Interest
(in thousands, except share data)	(in thousands, except share data)	Shares	Amount		Shares	Amount																						(in thousands, except share data)	Shares					Amount		Shares		Amount
Balance at December 31, 2022		61,447,368	$	614	54,504,918	$	5			$	704,291			$	(96,764)			$	(42)			$	531,448			$	1,139,552						$	487
Balance at June 30, 2023																																Balance at June 30, 2023	63,696,680		$	637	53,024,504		$	5		$	732,673		$	(134,793)		$	498,245		$	1,096,767		$	495
Net income (loss)	Net income (loss)	—	—		—	—		—				(14,132)				—				(11,773)				(25,905)						51		Net income (loss)	—		—		—		—		—			(17,629)			(14,459)			(32,088)			82
Share-based compensation, net of forfeitures	Share-based compensation, net of forfeitures	276,281	3		—	—		6,870				—				—				6,043				12,916						—		Share-based compensation, net of forfeitures	(5,777)		—		—		—		4,898			—			4,017			8,915			—
Redemption of Class B common stock	Redemption of Class B common stock	834,641	9		(834,641)	—		5,484				—				—				(5,493)				—						—		Redemption of Class B common stock	538,410		5		(538,410)		—		4,982			—			(4,987)			—			—
Tax distributions to BRP LLC members	Tax distributions to BRP LLC members	—	—		—	—		—				—				—				(11)				(11)						—		Tax distributions to BRP LLC members	—		—		—		—		—			—			(47)			(47)			—
Repayment of stockholder notes receivable		—	—		—	—		—				—				21				—				21						—
Balance at March 31, 2023		62,558,290	$	626	53,670,277	$	5	$	716,645			$	(110,896)			$	(21)			$	520,214			$	1,126,573					$	538
Distributions to VIEs																																Distributions to VIEs	—		—		—		—		—			—			—			—			(244)
Balance at September 30, 2023																																Balance at September 30, 2023	64,229,313		$	642	52,486,094		$	5	$	742,553		$	(152,422)		$	482,769		$	1,073,547		$	333


For the Three Months Ended March 31, 2022
For the Nine Months Ended September 30, 2023																																For the Nine Months Ended September 30, 2023
		Stockholders’ Equity																												Mezzanine Equity			Stockholders’ Equity																							Mezzanine Equity
		Class A Common Stock			Class B Common Stock			Additional Paid-in Capital				Accumulated Deficit				Stockholder Notes Receivable				Non-controlling Interest				Total						Redeemable Non-controlling Interest			Class A Common Stock				Class B Common Stock				Additional Paid-in Capital			Accumulated Deficit			Stockholder Notes Receivable			Non-controlling Interest			Total			Redeemable Non-controlling Interest
(in thousands, except share data)	(in thousands, except share data)	Shares	Amount		Shares	Amount																						(in thousands, except share data)	Shares					Amount		Shares		Amount
Balance at December 31, 2021		58,602,859	$	586	56,338,051	$	6			$	663,002			$	(54,992)			$	(219)			$	578,904			$	1,187,287						$	269
Net income		—	—		—	—		—				22,869				—				21,951				44,820						19
Balance at December 31, 2022																																Balance at December 31, 2022	61,447,368		$	614	54,504,918		$	5		$	704,291		$	(96,764)		$	(42)		$	531,448		$	1,139,552		$	487
Net income (loss)																																Net income (loss)	—		—		—		—		—			(55,658)			—			(46,096)			(101,754)			231
Share-based compensation, net of forfeitures	Share-based compensation, net of forfeitures	117,899	1		—	—		7,508				—				—				(913)				6,596						—		Share-based compensation, net of forfeitures	763,121		8		—		—		19,517			—			—			16,590			36,115			—
Redemption of Class B common stock	Redemption of Class B common stock	70,000	1		(70,000)	—		633				—				—				(634)				—						—		Redemption of Class B common stock	2,018,824		20		(2,018,824)		—		18,745			—			—			(18,765)			—			—
Tax distributions to BRP LLC members																																Tax distributions to BRP LLC members	—		—		—		—		—			—			—			(408)			(408)			—
Repayment of stockholder notes receivable	Repayment of stockholder notes receivable	—	—		—	—		—				—				44				—				44						—		Repayment of stockholder notes receivable	—		—		—		—		—			—			42			—			42			—
Balance at March 31, 2022		58,790,758	$	588	56,268,051	$	6	$	671,143			$	(32,123)			$	(175)			$	599,308			$	1,238,747					$	288
Distributions to VIEs																																Distributions to VIEs	—		—		—		—		—			—			—			—			—			(385)
Balance at September 30, 2023																																Balance at September 30, 2023	64,229,313		$	642	52,486,094		$	5	$	742,553		$	(152,422)		$	—		$	482,769		$	1,073,547		$	333

See accompanying Notes to Condensed Consolidated Financial Statements.

BRP GROUP, INC.

Condensed Consolidated Statements of Stockholders’ Equity and Mezzanine Equity (Continued)

(Unaudited)


For the Three Months Ended September 30, 2022
	Stockholders’ Equity																Mezzanine Equity
	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Stockholder Notes Receivable		Non-controlling Interest		Total		Redeemable Non-controlling Interest
(in thousands, except share data)	Shares	Amount		Shares	Amount
Balance at June 30, 2022	60,122,842	$	601	55,442,435	$	6	$	683,331	$	(23,481)	$	(131)	$	599,209	$	1,259,535	$	350
Net income (loss)	—	—		—	—		—		(24,793)		—		(21,988)		(46,781)		74
Equity issued in business combinations	129,182	1		—	—		(66)		—		—		3,014		2,949		—
Share-based compensation, net of forfeitures	114,925	1		29,430	—		7,871		—		—		(3)		7,869		—
Redemption of Class B common stock	860,381	9		(860,381)	(1)		8,279		—		—		(8,287)		—		—
Repayment of stockholder notes receivable	—	—		—	—		—		—		68		—		68		—
Balance at September 30, 2022	61,227,330	$	612	54,611,484	$	5	$	699,415	$	(48,274)	$	(63)	$	571,945	$	1,223,640	$	424


For the Nine Months Ended September 30, 2022
	Stockholders’ Equity																Mezzanine Equity
	Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Stockholder Notes Receivable		Non-controlling Interest		Total		Redeemable Non-controlling Interest
(in thousands, except share data)	Shares	Amount		Shares	Amount
Balance at December 31, 2021	58,602,859	$	586	56,338,051	$	6	$	663,002	$	(54,992)	$	(219)	$	578,904	$	1,187,287	$	269
Net income	—	—		—	—		—		6,718		—		7,852		14,570		155
Equity issued in business combinations	226,338	2		—	—		(4,331)		—		—		9,148		4,819		—
Share-based compensation, net of forfeitures	663,565	6		29,430	—		22,488		—		—		(1,365)		21,129		—
Redemption and cancellation of Class B common stock	1,734,568	18		(1,755,997)	(1)		18,256		—		—		(18,273)		—		—
Tax distributions to BRP LLC members	—	—		—	—		—		—		—		(4,321)		(4,321)		—
Repayment of stockholder notes receivable	—	—		—	—		—		—		156		—		156		—
Balance at September 30, 2022	61,227,330	$	612	54,611,484	$	5	$	699,415	$	(48,274)	$	(63)	$	571,945	$	1,223,640	$	424

See accompanying Notes to Condensed Consolidated Financial Statements.

BRP GROUP, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


		For the Three Months Ended March 31,					For the Nine Months Ended September 30,
(in thousands)	(in thousands)	2023		2022		(in thousands)	2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)	Net income (loss)	$	(25,854)	$	44,839	Net income (loss)	$	(101,523)	$	14,725
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:						Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	24,511		18,550		Depreciation and amortization	73,755		63,221
Change in fair value of contingent consideration	Change in fair value of contingent consideration	24,758		(5,632)		Change in fair value of contingent consideration	55,065		(10,809)
Share-based compensation expense	Share-based compensation expense	13,281		7,564		Share-based compensation expense	46,637		26,065
(Gain) loss on interest rate caps	(Gain) loss on interest rate caps	1,407		(15,810)		(Gain) loss on interest rate caps	489		(25,420)
Payment of contingent earnout consideration in excess of purchase price accrual	Payment of contingent earnout consideration in excess of purchase price accrual	(857)		(11,117)		Payment of contingent earnout consideration in excess of purchase price accrual	(22,639)		(48,943)
Amortization of deferred financing costs	Amortization of deferred financing costs	1,239		1,286		Amortization of deferred financing costs	3,577		3,894
Other loss	Other loss	100		—		Other loss	797		369
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Premiums, commissions and fees receivable, net	Premiums, commissions and fees receivable, net	(48,351)		(35,359)		Premiums, commissions and fees receivable, net	(63,367)		(97,126)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(4,859)		(8,908)		Prepaid expenses and other current assets	(6,294)		(11,087)
Due to/from related parties		(1)		(89)
Right-of-use assets	Right-of-use assets	1,149		(1,368)		Right-of-use assets	7,671		(15,076)
Accounts payable, accrued expenses and other current liabilities	Accounts payable, accrued expenses and other current liabilities	(163)		627		Accounts payable, accrued expenses and other current liabilities	32,793		70,282
Operating lease liabilities	Operating lease liabilities	(468)		1,984		Operating lease liabilities	(4,162)		16,992
Other liabilities	Other liabilities	77		—		Other liabilities	—		(3,740)
Net cash used in operating activities		(14,031)		(3,433)
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	22,799		(16,653)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(3,499)		(1,793)		Capital expenditures	(14,157)		(15,400)
Cash consideration paid for asset acquisitions	Cash consideration paid for asset acquisitions	(1,500)		(700)		Cash consideration paid for asset acquisitions	(2,118)		(3,356)
Investment in business ventures	Investment in business ventures	(100)		(639)		Investment in business ventures	(673)		(791)
Cash consideration paid for business combinations, net of cash received						Cash consideration paid for business combinations, net of cash received	—		(387,919)
Net cash used in investing activities	Net cash used in investing activities	(5,099)		(3,132)		Net cash used in investing activities	(16,948)		(407,466)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Payment of contingent earnout consideration up to amount of purchase price accrual	Payment of contingent earnout consideration up to amount of purchase price accrual	(4,680)		(13,993)		Payment of contingent earnout consideration up to amount of purchase price accrual	(26,808)		(47,218)
Proceeds from revolving line of credit	Proceeds from revolving line of credit	50,000		40,000		Proceeds from revolving line of credit	88,000		512,000
Payments on revolving line of credit	Payments on revolving line of credit	(70,000)		—		Payments on revolving line of credit	(269,000)		(20,000)
Proceeds from issuance of long-term debt						Proceeds from issuance of long-term debt	170,000		—
Payments on long-term debt	Payments on long-term debt	(2,127)		(2,127)		Payments on long-term debt	(6,815)		(6,382)
Payments of debt issuance costs	Payments of debt issuance costs	—		(1,188)		Payments of debt issuance costs	(4,447)		(1,751)
Proceeds from settlements of interest rate caps		2,275		—
Proceeds from the sale and settlement of interest rate caps						Proceeds from the sale and settlement of interest rate caps	7,893		19,587
Tax distributions to BRP LLC members	Tax distributions to BRP LLC members	(11)		—		Tax distributions to BRP LLC members	(408)		(9,393)
Proceeds from repayment of stockholder notes receivable	Proceeds from repayment of stockholder notes receivable	21		44		Proceeds from repayment of stockholder notes receivable	42		156
Distributions to VIEs						Distributions to VIEs	(385)		—
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(24,522)		22,736		Net cash provided by (used in) financing activities	(41,928)		446,999
Net increase (decrease) in cash and cash equivalents and restricted cash	Net increase (decrease) in cash and cash equivalents and restricted cash	(43,652)		16,171		Net increase (decrease) in cash and cash equivalents and restricted cash	(36,077)		22,880
Cash and cash equivalents and restricted cash at beginning of period	Cash and cash equivalents and restricted cash at beginning of period	230,471		227,737		Cash and cash equivalents and restricted cash at beginning of period	230,471		227,737
Cash and cash equivalents and restricted cash at end of period	Cash and cash equivalents and restricted cash at end of period	$	186,819	$	243,908	Cash and cash equivalents and restricted cash at end of period	$	194,394	$	250,617

See accompanying Notes to Condensed Consolidated Financial Statements.8

BRP GROUP, INC.

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited)


		For the Three Months Ended March 31,					For the Nine Months Ended September 30,
(in thousands)	(in thousands)	2023		2022		(in thousands)	2023		2022
Supplemental schedule of cash flow information:	Supplemental schedule of cash flow information:					Supplemental schedule of cash flow information:
Cash paid during the period for interest	Cash paid during the period for interest	$	24,898	$	9,049	Cash paid during the period for interest	$	77,455	$	41,225
Cash paid during the period for income taxes						Cash paid during the period for income taxes	1,208		1,056
Disclosure of non-cash investing and financing activities:	Disclosure of non-cash investing and financing activities:					Disclosure of non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities	Right-of-use assets obtained in exchange for operating lease liabilities	$	3,071	$	5,336	Right-of-use assets obtained in exchange for operating lease liabilities	$	4,391	$	23,444
Contingent earnout liabilities recognized in business combinations and asset acquisitions						Contingent earnout liabilities recognized in business combinations and asset acquisitions	723		16,495
Capital expenditures incurred but not yet paid	Capital expenditures incurred but not yet paid	1,084		—		Capital expenditures incurred but not yet paid	699		1,198
Right-of-use assets increased through lease modifications and reassessments	Right-of-use assets increased through lease modifications and reassessments	61		—		Right-of-use assets increased through lease modifications and reassessments	697		4,732
Increase in goodwill resulting from measurement period adjustments for prior year business combinations		—		3,658
Noncash debt issuance costs incurred	Noncash debt issuance costs incurred	—		92		Noncash debt issuance costs incurred	245		—
Increase (decrease) in goodwill resulting from measurement period adjustments for prior year business combinations						Increase (decrease) in goodwill resulting from measurement period adjustments for prior year business combinations	(211)		3,455
Equity issued in business combinations						Equity issued in business combinations	—		4,819
Equity issued in satisfaction of a liability						Equity issued in satisfaction of a liability	—		711

See accompanying Notes to Condensed Consolidated Financial Statements.9

BRP GROUP, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Business and Basis of Presentation

BRP Group, Inc. (“BRP Group” or the “Company”) was incorporated in the state of Delaware on July 1, 2019. BRP Group is a diversified insurance agency and services organization that markets and sells insurance products and services to its customers throughout the U.S. A significant portion of the Company’s business is concentrated in the Southeastern U.S., with several other regional concentrations. BRP Group and its subsidiaries operate through three reportable segments (“Operating Groups”), including Insurance Advisory Solutions, Underwriting, Capacity & Technology Solutions and Mainstreet Insurance Solutions, which are discussed in more detail in Note 13.

Principles of Consolidation

The consolidated financial statements include the accounts of BRP Group and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

As the sole manager of Baldwin Risk Partners, LLC (“BRP”), BRP Group operates and controls all the business and affairs of BRP, and has the sole voting interest in, and controls the management of, BRP. Accordingly, BRP Group consolidates BRP in its consolidated financial statements, resulting in a noncontrolling interest related to the membership interests of BRP (the “LLC Units”) held by BRP’s members ~~(“BRP’s LLC Members”)~~ in its consolidated financial statements.

The Company has prepared these condensed consolidated financial statements in accordance with Accounting Standards Codification (“ASC”) Topic 810, Consolidation (“Topic 810”). Topic 810 requires that if an enterprise is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity should be included in the consolidated financial statements of the enterprise. The Company has recognized certain entities as variable interest entities of which the Company is the primary beneficiary and has included the accounts of these entities in the consolidated financial statements. Refer to Note 2 for additional information regarding the Company’s variable interest entities.

Topic 810 also requires that the equity of a noncontrolling interest shall be reported on the condensed consolidated balance sheets within total equity of the Company. Certain redeemable noncontrolling interests are reported on the condensed consolidated balance sheets as mezzanine equity. Topic 810 also requires revenues, expenses, gains, losses, net income or loss, and other comprehensive income or loss to be reported in the consolidated financial statements at consolidated amounts, which include amounts attributable to the owners of the parent and the noncontrolling interests.

Unaudited Interim Financial Reporting

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all the information and related notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting of recurring accruals, considered necessary for fair statement have been included. The accompanying balance sheet for the year ended December 31, 2022 was derived from audited financial statements, but does not include all disclosures required by GAAP. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2023 and the Company’s Current Report on Form 8-K (relating to the Company’s reclassification of historical segment information) filed with the SEC on May 9, 2023.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Significant accounting policies and estimates underlying the accompanying condensed consolidated financial statements include the application of guidance for revenue recognition; the valuation of acquired relationships and contingent consideration; impairment of long-lived assets and goodwill; share-based compensation related to performance-based restricted stock unit awards; and the valuation allowance for deferred tax assets.

1011

Changes in Presentation

As previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, beginning in January 2023, the Company’s MainStreet and Medicare businesses were combined under one Operating Group, Mainstreet Insurance Solutions. In addition, the Middle Market and Specialty Operating Groups were rebranded as Insurance Advisory Solutions and Underwriting, Capacity & Technology Solutions, respectively. Prior year segment reporting information in Note 13 has been recast to conform to the current organizational structure.

Certain prior period amounts have been reclassified to conform to current period presentation. The Company made ~~certain~~ changes to the classification of revenue in the disaggregated revenue table, including (i) the combination of direct bill revenue and agency bill revenue lines into one commission revenue line and (ii) the reclassification of certain revenue streams ~~previously classified as other income to~~between profit-sharing revenue, consulting and service fee revenue, or policy fee and installment fee ~~revenue.~~revenue, and other income. Prior ~~year~~period amounts in the disaggregated revenue table in Note 3 have been reclassified to conform to current ~~year~~period presentation. In addition, amounts due from related parties and the change therein has been combined with prepaid expenses and other current assets within the condensed consolidated balance sheets and the condensed consolidated statements of cash flows.

Recently Adopted Accounting Standards

In October 2021, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2021-08, Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”) to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to (i) the recognition of an acquired contract liability and (ii) payment terms and their effect on subsequent revenue recognized by the acquirer. ASU 2021-08 requires that, at the acquisition date, an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”) as if it had originated the contracts, while also taking into account how the acquiree applied Topic 606. The Company adopted ASU 2021-08 effective January 1, 2023. The adoption did not have any impact on our consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (“Topic 848”)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which established optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform to provide temporary relief during the transition period of Topic 848 and ease the potential burden of accounting for, or recognizing the effects of, reference rate reform on financial reporting. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 to defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024 as a result of the extension of the intended cessation of USD LIBOR to June 30, 2023. The Company has adopted the optional expedient within ASU 2020-04 to account for modifications of contracts within the scope of ASC Topic 470, Debt, including Amendment No. 6 to the JPM Credit Agreement dated June 27, 2023 discussed in Note 7. The adoption did not have any impact on our consolidated financial statements.

2. Variable Interest Entities

Topic 810 requires a reporting entity to consolidate a variable interest entity (“VIE”) when the reporting entity has a variable interest or combination of variable interests that provide the entity with a controlling financial interest in the VIE. The Company continually assesses whether it has a controlling financial interest in each of its VIEs to determine if it is the primary beneficiary of the VIE and should, therefore, consolidate each of the VIEs. A reporting entity is considered to have a controlling financial interest in a VIE if it has (i) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb the losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.

The Company determined that it is the primary beneficiary of its VIEs, which include Laureate Insurance Partners, LLC, BKS Smith, LLC, BKS MS, LLC and BKS Partners Galati Marine Solutions, LLC. The Company has consolidated its VIEs into the accompanying condensed consolidated financial statements.

Total revenues and expenses of the Company’s consolidated VIEs included in the condensed consolidated statements of comprehensive income (loss) were $0.4 million and $0.3 million, respectively, for the three months ended ~~March 31,~~September 30, 2023 and ~~$0.3~~$0.5 million and ~~$0.3~~$0.2 million, respectively, for the three months ended ~~March 31,~~September 30, 2022. Total revenues and expenses of the Company’s consolidated VIEs included in the condensed consolidated statements of comprehensive income (loss) were $1.4 million and $0.8 million, respectively, for the nine months ended September 30, 2023 and $1.3 million and $0.8 million, respectively, for the nine months ended September 30, 2022.

Total assets and liabilities of the Company's consolidated VIEs included on the condensed consolidated balance sheets were ~~$1.3~~$0.8 million and ~~$0.7~~$0.2 million, respectively, at ~~March 31,~~September 30, 2023 and $0.4 million and $0.1 million, respectively, at December 31, 2022. The assets of the consolidated VIEs can only be used to settle the obligations of the consolidated VIEs and the creditors of the liabilities of the consolidated VIEs do not have recourse to the Company.

3. Revenue

The following table provides disaggregated commissions and fees revenue by major source:


		For the Three Months Ended March 31,					For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	(in thousands)		2023		2022			(in thousands)	2023		2022		2023		2022
Commission revenue(1)	Commission revenue(1)		$	270,861	$	204,837		Commission revenue(1)	$	237,103	$	204,264	$	737,815	$	591,650
Profit-sharing revenue(2)	Profit-sharing revenue(2)		23,025		15,012			Profit-sharing revenue(2)	25,959		15,044		75,877		49,422
Consulting and service fee revenue(3)	Consulting and service fee revenue(3)		17,636		15,202			Consulting and service fee revenue(3)	21,735		19,084		57,947		47,417
Policy fee and installment fee revenue(4)	Policy fee and installment fee revenue(4)		15,832		5,850			Policy fee and installment fee revenue(4)	17,071		18,367		49,907		37,834
Other income(5)	Other income(5)		3,092		1,947			Other income(5)	4,402		2,609		12,361		8,353
Total commissions and fees	Total commissions and fees		$	330,446	$	242,848		Total commissions and fees	$	306,270	$	259,368	$	933,907	$	734,676

__________

(1) Commission revenue is earned by providing insurance placement services to Clients under direct bill and agency bill arrangements with Insurance Company Partners for private risk management, commercial risk management, wealth management, employee benefits and Medicare insurance types.

(2) Profit-sharing revenue represents bonus-type revenue that is earned by the Company as a sales incentive provided by certain Insurance Company Partners.

(3) Service fee revenue is earned ~~by receiving~~for providing insurance placement services to Clients for a negotiated ~~fees in lieu of a commission~~fee and consulting revenue is earned by providing specialty insurance consulting.

(4) Policy fee revenue represents revenue earned for acting in the capacity of an MGA on behalf of the Insurance Company Partner and fulfilling certain services including delivery of policy documents, processing payments and other administrative functions. Installment fee revenue represents revenue earned by the Company for providing payment processing services on behalf of the Insurance Company Partner related to policy premiums paid on an installment basis.

(5) Other income includes other ancillary income, premium financing income and investment income, as well as marketing income that is based on agreed-upon cost reimbursement for fulfilling specific targeted Medicare marketing campaigns.

The application of Topic 606 requires the use of management judgment. The following are the areas of most significant judgment as it relates to Topic 606:

•The Company considers the policyholders as representative of its customers in the majority of contractual relationships, with the exception of Medicare contracts in its Mainstreet Insurance Solutions Operating Group, where the Insurance Company Partner is considered its customer.

•Medicare contracts in the Mainstreet Insurance Solutions Operating Group are multi-year arrangements in which the Company is entitled to renewal commissions. However, the Company has applied a constraint to renewal commissions that limits revenue recognized on new policies to the policy year in effect, and revenue recognized on renewed policies to the receipt of periodic cash, when a risk of significant reversals exists based on: (i) insufficient history; and (ii) the influence of external factors outside of the Company’s control, including policyholder discretion over plans and Insurance Company Partner relationship, political influence, and a contractual provision, which limits the Company’s right to receive renewal commissions to ongoing compliance and regulatory approval of the relevant Insurance Company Partner and compliance with the Centers for Medicare and Medicaid Services.

•The Company recognizes separately contracted commission revenue at the effective date of insurance placement and considers any ongoing interaction with the customer to be insignificant in the context of the obligations of the contract.

•Variable consideration includes estimates of direct bill commissions, reserves for policy cancellations and accruals for profit-sharing income.

•Costs to obtain a contract are deferred and recognized over five years, which represents management’s estimate of the average period over which a Client maintains its initial coverage relationship with the original Insurance Company Partner.

•Due to the relatively short time period between the information gathering phase and binding insurance coverage, the Company has determined that costs to fulfill contracts are not significant. Therefore, costs to fulfill a contract are expensed as incurred.

4. Contract Assets and Liabilities

Contract assets arise when the Company recognizes (i) revenue for amounts which have not yet been billed and (ii) receivables for premiums to be collected on behalf of Insurance Company Partners. Contract liabilities relate to payments received in advance of performance under the contract before the transfer of a good or service to the customer. Contract assets are included in premiums, commissions and fees receivable, net and contract liabilities are included in accrued expenses and other current liabilities on the condensed consolidated balance sheets. The balances of contract assets and liabilities arising from contracts with customers were as follows:


(in thousands)	(in thousands)	March 31, 2023		December 31, 2022		(in thousands)	September 30, 2023		December 31, 2022
Contract assets	Contract assets	$	346,824	$	278,023	Contract assets	$	327,999	$	278,023
Contract liabilities	Contract liabilities	26,033		30,981		Contract liabilities	27,094		30,981

During the ~~three~~nine months ended ~~March 31,~~September 30, 2023, the Company recognized revenue of ~~$26.2~~$30.6 million related to the contract liabilities balance at December 31, 2022.

5. Deferred Commission Expense

The Company pays an incremental amount of compensation in the form of producer commissions on new business. In accordance with ASC Topic 340, Other Assets and Deferred Costs, these incremental costs are deferred and amortized over five years, which represents management’s estimate of the average benefit period for new business. Deferred commission expense represents producer commissions that are capitalized and not yet expensed and are included in other assets on the condensed consolidated balance sheets. The table below provides a rollforward of deferred commission expense:


		For the Three Months Ended March 31,					For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	(in thousands)		2023		2022			(in thousands)	2023		2022		2023		2022
Balance at beginning of period	Balance at beginning of period		$	21,669	$	11,336		Balance at beginning of period	$	24,840	$	16,198	$	21,669	$	11,336
Costs capitalized	Costs capitalized		3,372		3,630			Costs capitalized	2,666		3,641		9,170		10,509
Amortization	Amortization		(1,597)		(927)			Amortization	(1,847)		(1,206)		(5,180)		(3,212)
Balance at end of period	Balance at end of period		$	23,444	$	14,039		Balance at end of period	$	25,659	$	18,633	$	25,659	$	18,633

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:


(in thousands)	(in thousands)	March 31, 2023		December 31, 2022		(in thousands)	September 30, 2023		December 31, 2022
Accrued compensation and benefits	Accrued compensation and benefits	$	34,437	$	44,903	Accrued compensation and benefits	$	48,782	$	44,903
Contract liabilities	Contract liabilities	26,033		30,981		Contract liabilities	27,094		30,981
Current portion of operating lease liabilities	Current portion of operating lease liabilities	14,527		14,043		Current portion of operating lease liabilities	16,064		14,043
Accrued expenses	Accrued expenses	11,029		13,101		Accrued expenses	13,070		13,101
Current portion of long-term debt	Current portion of long-term debt	8,509		8,509		Current portion of long-term debt	10,243		8,509
Deferred consideration payments	Deferred consideration payments	5,412		6,840		Deferred consideration payments	3,471		6,840
Other	Other	8,694		7,366		Other	12,694		7,366
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	$	108,641	$	125,743	Accrued expenses and other current liabilities	$	131,418	$	125,743

7. Long-Term Debt

~~The~~As of December 31, 2022, the JPM Credit Agreement, ~~provides~~as amended, provided for senior secured credit facilities in an aggregate principal amount of $1.45 billion, which ~~consists~~consisted of (i) a term loan facility in the principal amount of $850.0 million maturing in October 2027 (the “Term Loan B”) and (ii) a revolving credit facility with commitments in an aggregate principal amount of $600.0 million maturing in April 2027 (the “Revolving Facility”).

The Term Loan B ~~bears~~bore interest at LIBOR plus 350 bps, subject to a LIBOR floor of 50 bps. At ~~March~~December 31, 2022, the outstanding borrowings on the Term Loan B of $838.1 million, which are presented net of unamortized debt issuance costs of $19.7 million on the condensed consolidated balance sheet, had an applicable interest rate of 7.79%.

On June 27, 2023, the Company entered into Amendment No. 6 to the JPM Credit Agreement, under which, effective July 1, 2023, the interest rate on the Term Loan B changed to term SOFR plus a credit spread adjustment between 11 bps and 43 bps based on the term SOFR rate plus an applicable margin of 350 bps, subject to a term SOFR floor of 50 bps.

On September 15, 2023, the Company entered into Amendment No. 7 to the JPM Credit Agreement to provide for a new senior secured first lien incremental term loan facility in an aggregate principal amount of $170.0 million (the “Incremental Term Loan B”), which represents an increase in the aggregate principal amount of the Term Loan B from $850.0 million to $1.02 billion. The Company used a portion of the proceeds from the Incremental Term Loan B to partially repay outstanding amounts under the Revolving Facility. The Company incurred $4.7 million in debt issuance costs in connection with this amendment.

At September 30, 2023, the outstanding borrowings on the Term Loan B of ~~$836.0 million~~$1.0 billion had an applicable interest rate of ~~8.21%~~8.94%. The outstanding borrowings on the Term Loan B are ~~offset by~~presented net of unamortized debt ~~discount and~~ issuance costs of ~~$18.7~~$21.3 million on the condensed consolidated balance sheet at ~~March 31,~~September 30, 2023.

Future annual maturities of the Term Loan B are as follows as of September 30, 2023:


(in thousands)	Amount
Payments for the years ending December 31,
2023	$	2,561
2024	10,243
2025	10,243
2026	10,243
2027	968,008
Total long-term debt	1,001,298
Less: unamortized debt issuance costs	(21,344)
Net long-term debt	$	979,954

Borrowings under the Revolving Facility accrue interest at SOFR plus 210 bps to SOFR plus 310 bps based on total net leverage ratio. The outstanding borrowings on the Revolving Facility of ~~$485.0~~$324.0 million at September 30, 2023 had an applicable interest rate of ~~7.90%~~8.42%. Comparatively, the outstanding borrowings on the Revolving Facility of $505.0 million at ~~March~~December 31, ~~2023.~~2022 had an applicable interest rate of 7.41%. The Revolving Facility is also subject to a commitment fee of 0.40% on the unused capacity at ~~March 31,~~September 30, 2023.

The JPM Credit Agreement requires the Company to meet certain financial covenants and comply with customary affirmative and negative covenants as listed in the underlying agreement. The Company was in compliance with these covenants at ~~March 31,~~September 30, 2023.

Interest Rate Caps

The Company uses interest rate caps to mitigate its exposure to interest rate risk on its debt by limiting the impact of interest rate changes on cash flows. The interest rate caps limit the variability of the applicable base rate to the amount of the cap. The interest rate caps, ~~are recorded at an aggregate fair value of $11.5 million and $15.2 million at March 31, 2023 and December 31, 2022, respectively. The interest rate caps~~which are included as a component of other assets on the condensed consolidated balance ~~sheets.~~sheets, are recorded at an aggregate fair value of $6.8 million and $15.2 million at September 30, 2023 and December 31, 2022, respectively. The Company recognized a loss on interest rate caps of ~~$1.4~~$0.8 million and $0.5 million for the three and nine months ended ~~March 31,~~September 30, 2023, respectively, and a gain ~~on interest rate caps~~ of ~~$15.8~~$4.2 million and $25.4 million for the three and nine months ended ~~March 31, 2022.~~September 30, 2022, respectively. The gain or loss on interest rate caps is included as a component of other income, ~~(expense),~~ net in the condensed consolidated statements of comprehensive income (loss).

8. Related Party Transactions

Due to/from Related Parties

Due from related parties totaling $0.1 million at each March 31, 2023 and December 31, 2022 consists of receivables due from Partners for post-closing cash requirements in accordance with Partnership agreements.

Related party notes payable of $1.5 million at ~~March 31,~~September 30, 2023 and December 31, 2022 relate to the settlement of contingent earnout consideration for certain of the Company’s Partners.

Commission Revenue

The Company serves as a broker for Holding Company of the Villages, Inc. (“The Villages”), a significant shareholder, and certain affiliated entities. Commission revenue recorded ~~as a result of~~from transactions with The Villages and affiliated entities was ~~$1.5~~$0.4 millionand ~~$1.1~~$0.3 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, ~~respectively.~~respectively, and $2.0 million for each of the nine months ended September 30, 2023 and 2022.

The Company serves as a broker for certain entities in which a member of our board of directors has a material interest. Commission revenue recorded ~~as a result of~~from transactions with these ~~transactions~~entities was less than $0.1 million and $0.1 million for the three months ended ~~March 31, 2023.~~September 30, 2023 and 2022, respectively, and $0.2 million and $0.3 million for the nine months ended September 30, 2023 and 2022, respectively.

Commissions and Consulting Expense

~~A brother~~Two brothers of Lowry Baldwin, our Board Chair, received ~~approximately $0.1 million~~Risk Advisor commissions from the Company ~~in Risk Advisor commissions~~comprising approximately $0.2 million during each of the three months ended ~~March 31,~~September 30, 2023 and 2022 and $0.5 million during each of the nine months ended September 30, 2023 and 2022.

The Company has a consulting agreement with Accenture, with which an independent member of our board of directors holds an executive leadership position. Consulting expense recorded as a result of this transaction was $0.4 million for the ~~three~~nine months ended ~~March 31, 2023.~~September 30, 2023 and $0.7 million for each of the three and nine months ended September 30, 2022.

Rent Expense

The Company has various agreements to lease office space from wholly-owned subsidiaries of The Villages. Total rent expense incurred with respect to The Villages and its wholly-owned subsidiaries was approximately $0.1 million for each of the three months ended ~~March 31,~~September 30, 2023 and 2022, and $0.3 million for each of the nine months ended September 30, 2023 and 2022. Total right-of-use assets and operating lease liabilities included on the Company's condensed consolidated balance sheets ~~related~~relating to ~~The Villages~~these lease agreements were ~~$1.6~~$1.4 million ~~each~~and $1.5 million, respectively, at ~~March 31,~~September 30, 2023 and $1.7 million each at December 31, 2022.

The Company has various agreements to lease office space from other related parties. Total rent expense incurred with respect to other related parties was $1.0 million and $0.9 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively, and $2.9 million and $2.8 million for the nine months ended September 30, 2023 and 2022, respectively. Total right-of-use assets and operating lease liabilities included on the Company’s condensed consolidated balance sheets ~~related~~relating to these lease agreements were ~~$14.3~~$13.8 million and ~~$14.7~~$14.3 million, respectively, at ~~March 31,~~September 30, 2023 and $15.0 million and $15.4 million, respectively, at December 31, 2022.

9. Share-Based Compensation

The Company has an Omnibus Incentive Plan (the “Omnibus Plan”) and a Partnership Inducement Award Plan (the “Inducement Plan” and collectively with the Omnibus Plan, the “Plans”) to motivate and reward Colleagues and certain other individuals to perform at the highest level and contribute significantly to the Company’s success, thereby furthering the best interests of BRP Group’s shareholders. The total number of shares of Class A common stock authorized for issuance under the Omnibus Plan and the Inducement Plan was 8,461,907 and 3,000,000, respectively, at ~~March 31,~~September 30, 2023.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2023, the Company made awards of restricted stock awards (“RSAs”), performance-based restricted stock unit awards (“PSUs”), and fully vested shares under the Plans to its non-employee directors, officers, Colleagues and consultants. Fully-vested shares issued to directors, officers and Colleagues during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 were vested upon issuance and PSUs issued to officers vest in the quarter following the end of a performance period of 3 years, while RSAs issued to Colleagues, consultants and ~~consultants~~officers generally either cliff vest after 3 to 4 years or vest ratably over 3 to 5 years.

The following table summarizes the activity for non-vested awards granted by the Company under the Plans:


		Shares	Weighted-Average Grant-Date Fair Value Per Share			Shares	Weighted-Average Grant-Date Fair Value Per Share
Outstanding at December 31, 2022	Outstanding at December 31, 2022	3,595,303	$	28.26	Outstanding at December 31, 2022	3,595,303	$	28.26
Granted	Granted	491,466	27.10		Granted	1,585,820	29.95
Vested and settled	Vested and settled	(488,011)	28.12		Vested and settled	(1,145,017)	25.82
Forfeited	Forfeited	(44,855)	25.97		Forfeited	(156,054)	25.34
Outstanding at March 31, 2023		3,553,903	28.14
Outstanding at September 30, 2023					Outstanding at September 30, 2023	3,880,052	29.79

The total fair value of shares that vested and settled under the Plans was ~~$13.7~~$29.6 million and ~~$5.6~~$13.9 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, respectively.

Share-based compensation is recognized ratably over the vesting period of the respective awards and includes expense related to issuances under the Plans, MIU conversion LLC units and, prior to 2023, advisor incentive awards. Share-based compensation also includes the portion of annual bonuses that are payable in fully vested shares of Class A common stock. The Company recognizes share-based compensation expense for the Plans net of actual forfeitures. The Company recorded share-based compensation expense of ~~$13.3~~$14.6 million and ~~$7.6~~$8.4 million ~~in connection with the Plans~~ for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively, ~~which~~and $46.6 million and $26.1 million for the nine months ended September 30, 2023 and 2022, respectively. Share-based compensation expense is included in commissions, employee compensation and benefits expense in the condensed consolidated statements of comprehensive income (loss).

10. Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) attributable to BRP Group by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings (loss) per share is computed giving effect to all potentially dilutive shares of common stock.

1517

~~During~~The following table sets forth the ~~periods presented, potentially~~computation of basic and diluted earnings (loss) per share:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands, except per share data)	2023		2022		2023		2022
Basic earnings (loss) per share:
Net income (loss) attributable to BRP Group	$	(17,629)	$	(24,793)	$	(55,658)	$	6,718
Shares used for basic earnings (loss) per share:
Weighted-average shares of Class A common stock outstanding - basic	60,549		57,282		59,791		56,430
Basic earnings (loss) per share	$	(0.29)	$	(0.43)	$	(0.93)	$	0.12

Diluted earnings (loss) per share:
Net income (loss) attributable to BRP Group	$	(17,629)	$	(24,793)	$	(55,658)	$	6,718
Shares used for diluted earnings (loss) per share:
Weighted-average shares of Class A common stock outstanding - basic	60,549		57,282		59,791		56,430
Dilutive effect of unvested stock awards	—		—		—		3,465
Weighted-average shares of Class A common stock outstanding - diluted	60,549		57,282		59,791		59,895
Diluted earnings (loss) per share	$	(0.29)	$	(0.43)	$	(0.93)	$	0.11

Potentially dilutive securities ~~include~~consist of unvested ~~restricted~~ stock awards, including RSAs and PSUs, in addition to shares of Class B common stock, which can be exchanged (together with a corresponding number of LLC Units) for shares of Class A common stock on a one-for-one basis. The following potentially dilutive securities were excluded from the Company's diluted weighted-average number of shares outstanding calculation for the periods presented as their inclusion would have been anti-dilutive.


		For the Three Months Ended March 31,			For the Three Months Ended September 30,			For the Nine Months Ended September 30,
			2023	2022			2023	2022	2023	2022
Unvested restricted shares of Class A common stock			3,265,880	—
Unvested RSAs and PSUs						Unvested RSAs and PSUs	3,880,052	3,626,931	3,880,052	—
Shares of Class B common stock	Shares of Class B common stock		53,670,277	56,268,051		Shares of Class B common stock	52,486,094	54,611,484	52,486,094	54,611,484

The shares of Class B common stock do not share in the earnings or losses attributable to BRP Group, and therefore, are not participating securities. Accordingly, a separate presentation of basic and diluted earnings (loss) per share of Class B common stock under the two-class method has not been included.

The following is a calculation of the basic and diluted weighted-average number of shares of Class A common stock outstanding and basic and diluted earnings (loss) per share for the three months ended March 31, 2023 and 2022:

For the Three Months
Ended March 31,
(in thousands, except per share data) 2023 2022
Basic earnings (loss) per share:
Net income (loss) attributable to BRP Group $ (14,132) $ 22,869
Shares used for basic earnings (loss) per share:
Weighted-average shares of Class A common stock outstanding - basic 58,712 55,720
Basic earnings (loss) per share $ (0.24) $ 0.41
Diluted earnings (loss) per share:
Net income (loss) attributable to BRP Group $ (14,132) $ 22,869
Shares used for diluted earnings (loss) per share:
Weighted-average shares of Class A common stock outstanding 58,712 55,720
Dilutive effect of unvested restricted shares of Class A common stock — 2,996
Weighted-average shares of Class A common stock outstanding - diluted 58,712 58,716
Diluted earnings (loss) per share $ (0.24) $ 0.39

11. Fair Value Measurements

ASC Topic 820, Fair Value Measurement (“Topic 820”) established a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy under Topic 820 are described below:

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2: Inputs to the valuation methodology are quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The fair value measurement level for assets and liabilities within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

1618

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the Company’s assets and liabilities measured at fair value on a recurring basis within each level of the fair value hierarchy:


(in thousands)	(in thousands)	March 31, 2023		December 31, 2022		(in thousands)	September 30, 2023		December 31, 2022
Level 2	Level 2					Level 2
Interest rate caps	Interest rate caps	$	11,468	$	15,150	Interest rate caps	$	6,768	$	15,150
Level 2 Assets	Level 2 Assets	$	11,468	$	15,150	Level 2 Assets	$	6,768	$	15,150
Level 3	Level 3					Level 3
Contingent earnout liabilities	Contingent earnout liabilities	$	286,157	$	266,936	Contingent earnout liabilities	$	273,277	$	266,936
Level 3 Liabilities	Level 3 Liabilities	$	286,157	$	266,936	Level 3 Liabilities	$	273,277	$	266,936

~~The fair value of interest rate caps was $11.5 million at March 31, 2023.~~ The fair value of interest rate caps is determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the ~~cap~~caps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.

Methodologies used for liabilities measured at fair value on a recurring basis within Level 3 of the fair value hierarchy at ~~March 31,~~September 30, 2023 and December 31, 2022 are based on limited unobservable inputs. These methods may produce a fair value calculation that may not be indicative of the net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The fair value of contingent earnout liabilities is based on sales projections for the acquired entities, which are reassessed each reporting period. Based on the Company’s ongoing assessment of the fair value of its contingent earnout liabilities, the Company recorded a net increase in the estimated fair value of such liabilities of ~~$24.8~~$13.9 million and $55.1 million for the three and nine months ended ~~March 31, 2023.~~September 30, 2023, respectively. The Company has assessed the maximum estimated exposure to the contingent earnout liabilities to be ~~$944.2~~$847.1 million at ~~March 31,~~September 30, 2023.

The Company measures contingent earnout liabilities at fair value at each reporting period using significant unobservable inputs classified within Level 3 of the fair value hierarchy. The Company uses a probability weighted value analysis as a valuation technique to convert future estimated cash flows to a single present value amount. The significant unobservable inputs used in the fair value measurements are sales projections over the earnout period, and the probability outcome percentages assigned to each scenario. Significant increases or decreases to either of these inputs would result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent earnout liabilities. Ultimately, the liability will be equivalent to the amount settled, and the difference between the fair value estimate and amount settled will be recorded in earnings for business combinations, or as a ~~reduction of~~change in the cost of the assets acquired for asset acquisitions.

The fair value of the contingent earnout liabilities is based on Monte Carlo simulations that measure the present value of the expected future payments to be made to Partners in accordance with the provisions outlined in the respective purchase agreements, which is a Level 3 fair value measurement. In determining fair value, the Company estimates the Partner’s future performance using financial projections developed by management for the Partner and market participant assumptions that were derived for revenue growth, the number of rental units tracked or the insured value of sourced homeowners insurance. Revenue growth rates generally ranged from ~~10%~~9% to 35% at ~~March 31,~~September 30, 2023 and from 8% to 35% at December 31, 2022. The Company estimates future payments using the earnout formula and performance targets specified in each purchase agreement and these financial projections. These payments are discounted to present value using a risk-adjusted rate that takes into consideration market-based rates of return that reflect the ability of the Partner to achieve the targets. These discount rates generally ranged from ~~7.25%~~8.25% to ~~18.00%~~14.50% at ~~March 31,~~September 30, 2023 and from 6.50% to 18.00% at December 31, 2022. Changes in financial projections, market participant assumptions for revenue growth, ~~and profitability,~~ or the risk-adjusted discount rate, would result in a change in the fair value of contingent consideration.

1719

The following table sets forth a summary of the changes in the fair value of the Company’s contingent earnout liabilities, which are measured at fair value on a recurring basis utilizing Level 3 assumptions in their valuation:


		For the Three Months Ended March 31,					For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	(in thousands)		2023		2022			(in thousands)	2023		2022		2023		2022
Balance at beginning of period	Balance at beginning of period		$	266,936	$	258,589		Balance at beginning of period	$	294,312	$	209,996	$	266,936	$	258,589
Change in fair value of contingent consideration	Change in fair value of contingent consideration		24,758		(5,632)			Change in fair value of contingent consideration	13,914		21,695		55,065		(10,809)
Settlement of contingent consideration			(5,537)		(25,110)
Fair value of contingent consideration issuances								Fair value of contingent consideration issuances	723		3,097		723		16,495
Settlement of contingent consideration(1)								Settlement of contingent consideration(1)	(35,672)		(5,174)		(49,447)		(34,661)
Balance at end of period	Balance at end of period		$	286,157	$	227,847		Balance at end of period	$	273,277	$	229,614	$	273,277	$	229,614

__________

(1) During 2021, the Company settled $61.5 million of its contingent earnout liabilities through the issuance of related party notes payable, which was subsequently paid in April 2022 and included as payments of contingent earnout consideration in the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022. This amount has been excluded from the settlement of contingent consideration in the table above for the nine months ended September 30, 2022.

Fair Value of Other Financial Instruments

The fair value of long-term debt and the revolving line of credit is based on an estimate using a discounted cash flow analysis and current borrowing rates for similar types of borrowing arrangements. The carrying amount and estimated fair value of long-term debt and the revolving line of credit were as follows:


		Fair Value Hierarchy		March 31, 2023						December 31, 2022						Fair Value Hierarchy			September 30, 2023						December 31, 2022
			Carrying Amount		Estimated Fair Value			Carrying Amount			Estimated Fair Value
(in thousands)														(in thousands)				Fair Value Hierarchy		Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value
Long-term debt(1)	Long-term debt(1)		Level 2		$	835,987		$	816,174		$	838,114		$	816,155		Long-term debt(1)			$	1,001,298		$	991,286		$	838,114		$	816,155
Revolving line of credit	Revolving line of credit	Level 2		485,000			462,111			505,000			476,304	Revolving line of credit		Level 2			324,000			314,966			505,000			476,304

__________

(1) The carrying amount of ~~the~~ long-term debt ~~does not reflect~~reflects outstanding borrowings on the Term Loan B, which are presented net of unamortized debt ~~discount and~~ issuance costs of ~~$18.7~~$21.3 million and $19.7 million at ~~March 31,~~September 30, 2023 and December 31, 2022, respectively, ~~which are netted against long-term debt~~ on the condensed consolidated balance sheets.

12. Commitments and Contingencies

As of ~~March 31,~~September 30, 2023, BRP has a remaining commitment to the University of South Florida (“USF”) to donate ~~an aggregate~~ $4.7 million through October 2028. The gift will provide support for the School of Risk Management and Insurance in the USF Muma College of Business. It is currently anticipated that Lowry Baldwin, our Board Chair, will fund half of the amounts to be donated by BRP.

The Company is involved in various claims and legal actions arising in the ordinary course of business. A liability is recorded when a loss is considered probable and is reasonably estimable in accordance with GAAP. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

13. Segment Information

The Company completed a strategic review of its organizational structure in January 2023 and determined that the chief operating decision maker, the chief executive officer, would change the way he manages and operates the Company’s MainStreet and Medicare businesses. Effective in the first quarter of 2023, the chief executive officer reviews the Medicare and Mainstreet businesses on a combined basis as one operating segment, also determined to be an Operating Group, Mainstreet Insurance Solutions, which is used by the chief executive officer to make decisions about the resources to be allocated to the Operating Group and to assess its performance. In addition, the Middle Market and Specialty Operating Groups were rebranded as Insurance Advisory Solutions and Underwriting, Capacity & Technology Solutions, respectively, effective in the first quarter of 2023.

Effective in the first quarter of 2023, BRP Group’s business is divided into three Operating Groups: Insurance Advisory Solutions, Underwriting, Capacity & Technology Solutions, and Mainstreet Insurance Solutions.

•The Insurance Advisory Solutions Operating Group provides expertly-designed commercial risk management, employee benefits solutions and private risk management for mid-to-large size businesses and high net worth individuals, as well as their families.

•The Underwriting, Capacity & Technology Solutions (“UCTS”) Operating Group consists of two distinct businesses. Our specialty wholesale broker ~~businesses deliver~~business delivers specialty insurers, professionals, individuals and niche industry businesses expanded access to exclusive specialty markets, capabilities and programs requiring complex underwriting and placement. UCTS also houses our MGA of the Future platform, in which we manufacture proprietary, technology-enabled insurance products that are then distributed (in many instances via technology and/or API integrations) internally via our Risk Advisors across our other Operating Groups and externally via select distribution partners, with a focus on sheltered channels where our products deliver speed, ease of use and certainty of execution, an example of which is our national embedded renters insurance product sold at point of lease via integrations with property management software providers.

•The Mainstreet Insurance Solutions Operating Group offers personal insurance, commercial insurance and life and health solutions to individuals and businesses in their communities. The Mainstreet Insurance Solutions Operating Group also offers consultations for government assistance programs and solutions, including traditional Medicare, Medicare Advantage and Affordable Care Act, to seniors and eligible individuals, through a network of primarily independent contractor agents.

In all ~~of our~~its Operating Groups, the Company generates commissions ~~and fees~~ from insurance placement under both agency bill and direct bill arrangements, and ~~profit sharing~~profit-sharing income based on either the underlying book of business or performance, such as loss ratios. All Operating Groups also generate other ancillary income and premium financing income.

In the Insurance Advisory Solutions and UCTS Operating Groups, the Company generates fees from service fee and consulting arrangements. Service fee arrangements are in place with certain ~~customers in lieu of commission arrangements.~~Clients for providing insurance placement services.

In the UCTS Operating Group, the Company generates fees from policy fee and installment fee arrangements. Policy fee revenue is earned for acting in the capacity of an MGA and providing payment processing ~~and~~ services and other administrative functions on behalf of Insurance Company Partners.

In the Mainstreet Insurance Solutions Operating Group, the Company generates commissions and fees from marketing income, which is earned through co-branded Medicare marketing campaigns with the Company’s Insurance Company Partners.

In addition, the Company generates investment income in the Insurance Advisory Solutions and UCTS Operating Groups and the Corporate and Other non-reportable ~~segment, the Company generates investment income.~~segment.

The Company’s chief operating decision maker, the chief executive officer, uses net income (loss) and net income (loss) before interest, taxes, depreciation, amortization, and one-time transactional-related expenses or non-recurring items to manage resources and make decisions about the business.

Summarized financial information ~~concerning~~regarding the Company’s Operating Groups is shown in the following tables. The Corporate and Other non-reportable segment includes any expenses not allocated to the Operating Groups and corporate-related items, including ~~related party and third-party~~ interest expense. Intersegment revenue and expenses are eliminated through the Corporate and Other column. Service center expenses and other overhead are allocated to the Company’s Operating Groups based on either revenue or headcount as applicable to each expense.

For the Three Months Ended March 31, 2023
(in thousands) Insurance Advisory Solutions Underwriting, Capacity & Technology Solutions Mainstreet Insurance Solutions Corporate
and Other Total
Commissions and fees(1)
$ 195,713 $ 90,069 $ 58,140 $ (13,476) $ 330,446
Net income (loss) 23,814 2,087 7,834 (59,589) (25,854)


		For the Three Months Ended March 31, 2022											For the Three Months Ended September 30, 2023
(in thousands)	(in thousands)	Insurance Advisory Solutions		Underwriting, Capacity & Technology Solutions		Mainstreet Insurance Solutions		Corporate and Other		Total		(in thousands)	Insurance Advisory Solutions		Underwriting, Capacity & Technology Solutions		Mainstreet Insurance Solutions		Corporate and Other		Total
Commissions and fees~~(2)~~(1)	Commissions and fees~~(2)~~(1)	$	171,403	$	49,523	$	22,958	$	(1,036)	$	242,848	Commissions and fees~~(2)~~(1)	$	144,409	$	118,413	$	62,297	$	(18,849)	$	306,270
Net income (loss)	Net income (loss)	54,887		5,318		2,442		(17,808)		44,839		Net income (loss)	3,756		11,205		10,763		(57,730)		(32,006)

1921


	For the Three Months Ended September 30, 2022
(in thousands)	Insurance Advisory Solutions		Underwriting, Capacity & Technology Solutions		Mainstreet Insurance Solutions		Corporate and Other		Total
Commissions and fees(2)	$	130,216	$	97,929	$	47,784	$	(16,561)	$	259,368
Net income (loss)	(25,050)		14,734		6,781		(43,172)		(46,707)


	For the Nine Months Ended September 30, 2023
(in thousands)	Insurance Advisory Solutions		Underwriting, Capacity & Technology Solutions		Mainstreet Insurance Solutions		Corporate and Other		Total
Commissions and fees(1)	$	493,367	$	314,791	$	174,114	$	(48,365)	$	933,907
Net income (loss)	31,807		22,830		22,775		(178,935)		(101,523)


	For the Nine Months Ended September 30, 2022
(in thousands)	Insurance Advisory Solutions		Underwriting, Capacity & Technology Solutions		Mainstreet Insurance Solutions		Corporate and Other		Total
Commissions and fees(2)	$	433,151	$	221,753	$	106,767	$	(26,995)	$	734,676
Net income (loss)	63,296		31,060		14,868		(94,499)		14,725

__________

(1) During the three and nine months ended ~~March 31,~~September 30, 2023, ~~the Insurance Advisory Solutions Operating Group recorded intercompany commissions and fees from activity with the UCTS Operating Group of $0.4 million;~~ the UCTS Operating Group recorded intercompany commissions and fees from activity with the Mainstreet Insurance Solutions Operating Group and itself of ~~$12.6 million;~~$18.6 million and $47.7 million, respectively, and the Mainstreet Insurance Solutions Operating Group recorded intercompany commissions and fees from activity with all Operating Groups of ~~$0.9 million.~~$0.3 million and $1.4 million, respectively. These intercompany commissions and fees are eliminated through Corporate and Other.

(2) During the three and nine months ended ~~March 31,~~September 30, 2022, the Insurance Advisory Solutions Operating Group recorded intercompany commissions and fees from activity with the UCTS Operating Group of ~~$0.3 million;~~$0.4 million and $1.1 million, respectively; the UCTS Operating Group recorded intercompany commissions and fees from activity with the Mainstreet Insurance Solutions Operating Group and itself of ~~$0.1 million;~~$15.8 million and $24.5 million, respectively; and the Mainstreet Insurance Solutions Operating Group recorded intercompany commissions and fees from activity with all Operating Groups of ~~$0.6 million.~~$0.4 million and $1.4 million, respectively. These intercompany commissions and fees are eliminated through Corporate and Other.


(in thousands)	(in thousands)	Insurance Advisory Solutions		Underwriting, Capacity & Technology Solutions		Mainstreet Insurance Solutions		Corporate and Other		Total		(in thousands)	Insurance Advisory Solutions		Underwriting, Capacity & Technology Solutions		Mainstreet Insurance Solutions		Corporate and Other		Total
Total assets at March 31, 2023		$	2,237,415	$	615,879	$	519,446	$	75,533	$	3,448,273
Total assets at September 30, 2023												Total assets at September 30, 2023	$	2,234,244	$	628,549	$	517,088	$	43,617	$	3,423,498
Total assets at December 31, 2022	Total assets at December 31, 2022	2,240,483		616,117		530,504		75,078		3,462,182		Total assets at December 31, 2022	2,240,483		616,117		530,504		75,078		3,462,182

14. Subsequent Events

On November 7, 2023, the Company announced its mutual agreement with Kris Wiebeck and John Valentine for each to retire from their respective positions as Chief Strategy Officer and Chief Partnership Officer effective at the end of the Company’s 2023 fiscal year. The Company expects to incur one-time costs of approximately $8.0 million during the fourth quarter of 2023, $5.1 million of which represents severance compensation and $2.9 million of which represents early payment of the 2023 bonus otherwise payable to the retiring executives under the Company’s 2023 annual incentive plan in respect of 2023 performance.

2022

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q, ~~and~~ in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023 and in our Current Report on Form 8-K (relating to the Company’s reclassification of historical segment information) filed with the SEC on May 9, 2023. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in Part ~~II, Item 1A. Risk Factors and Note Regarding Forward-Looking Statements included elsewhere in this Quarterly Report on Form 10-Q and under Part~~ I, Item 1A. Risk Factors in our Annual Report on Form 10-K ~~filed with~~for the ~~SEC on February 28, 2023.~~year ended December 31, 2022.

THE COMPANY

BRP Group, Inc. (“BRP Group,” the “Company,” “we,” “us” or “our”) 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 support our Clients, Colleagues, Insurance Company Partners and communities through the deployment of vanguard resources, technology and capital to drive both organic and inorganic growth. When we consistently execute for these key stakeholders, we believe that the outcome is an increase in value for our fifth stakeholder, our shareholders. We are innovating the industry by taking a holistic and tailored approach to risk management, insurance and employee benefits. Our growth plan includes continuing to recruit, train and develop industry leading talent, continuing to add geographic representation, insurance product expertise and end-client industry expertise via our Partnership strategy, and continuing to build out our MGA of the Future platform, which delivers proprietary, technology-enabled insurance solutions to our internal Risk Advisors as well as to a growing channel of external distribution partners. We are a destination employer supported by an award-winning culture, powered by exceptional people and fueled by industry-leading growth and innovation.

We represent over ~~1.3~~two million Clients across the United States and internationally. Our more than ~~3,800~~3,900 Colleagues include ~~over~~approximately 700 Risk Advisors, who are fiercely independent, relentlessly competitive and “insurance geeks.” We have approximately 125 offices in 2325 states, all of which are equipped to provide diversified products and services to empower our Clients at every stage through our three Operating Groups.

•Insurance Advisory Solutions provides expertly-designed commercial risk management, employee benefits solutions and private risk management for mid-to-large-size businesses and high net worth individuals, as well as their families.

•Underwriting, Capacity & Technology Solutions (“UCTS”) consists of two distinct businesses—our specialty wholesale broker ~~businesses~~business and our MGA of the Future platform. Our specialty wholesale broker ~~businesses deliver~~business delivers specialty insurers, professionals, individuals and niche industry businesses expanded access to exclusive specialty markets, capabilities and programs requiring complex underwriting and placement. Through our MGA of the Future platform (representing approximately 90% of UCTS' revenue during the first ~~quarter~~nine months of 2023), we manufacture proprietary, technology-enabled insurance products that are then distributed (in many instances via technology and/or ~~application programming interface (“API”)~~API integrations) internally via our Risk Advisors across our other Operating Groups and externally via select distribution partners, with a focus on sheltered channels where our products deliver speed, ease of use and certainty of execution, an example of which is our national embedded renters insurance product sold at point of lease via integrations with property management software providers.

•Mainstreet Insurance Solutions offers personal insurance, commercial insurance and life and health solutions to individuals and businesses in their communities, with a focus on accessing clients via sheltered distribution channels, which include, but are not limited to, new home builders, realtors, mortgage originators/lenders, master planned communities, and various other community centers of influence. Mainstreet Insurance Solutions also offers consultation for government assistance programs and solutions, including traditional Medicare, Medicare Advantage and Affordable Care Act, to seniors and eligible individuals through a network of primarily independent contractor agents.

2123

In 2011, we adopted the “Azimuth” as our corporate and cultural constitution. Named after a historical navigation tool used to find “true north,” the Azimuth asserts our core values, business basics and stakeholder promises. The ideals encompassed by the Azimuth support our mission to deliver indispensable, tailored insurance and risk management insights and solutions to our Clients. We strive to be regarded as the preeminent insurance advisory firm—fueled by relationships, powered by people and exemplified by client adoption and loyalty. This type of environment is upheld by the distinct vernacular we use to describe our services and culture. We are a Firm, instead of an agency; we have Colleagues, instead of employees; and we have Risk Advisors, instead of producers/agents. We serve Clients instead of customers and we refer to our strategic acquisitions as Partnerships. We refer to insurance brokerages that we have acquired, or in the case of asset acquisitions, the producers, as Partners.

Seasonality

The insurance brokerage market is seasonal and our results of operations are somewhat affected by seasonal trends. Our Adjusted EBITDA and Adjusted EBITDA Margins are typically highest in the first quarter and lowest in the fourth quarter. This variation is primarily due to fluctuations in our revenues, while overhead remains consistent throughout the year. Our revenues are generally highest in the first quarter due to a higher degree of first quarter policy commencements and renewals in certain Insurance Advisory Solutions and Mainstreet Insurance Solutions lines of business such as employee benefits, commercial and Medicare. In addition, a higher proportion of our first quarter revenue is derived from our highest margin businesses.

Partnerships can significantly impact Adjusted EBITDA and Adjusted EBITDA Margins in a given year and may increase the amount of seasonality within the business, especially results attributable to Partnerships that have not been fully integrated into our business or owned by us for a full year.

PARTNERSHIPS

We utilize ~~strategic acquisitions, which we refer to as~~ Partnerships to complement and expand our business. We source Partnerships through proprietary deal flow, competitive auctions and cultivated industry relationships. We are currently considering Partnership opportunities in all of our Operating Groups, including businesses to complement or expand our MGA of the Future.

The financial impact of Partnerships may affect the comparability of our results from period to period. Our acquisition strategy also entails certain risks, including the risks that we may not be able to successfully source, value, close, integrate and effectively manage businesses that we acquire. To mitigate that risk, we have a professional team focused on finding new Partners and integrating new Partnerships. Executing on Partnership opportunities is a key pillar in our long-term growth strategy.

We completed three Partnerships for an aggregate purchase price of $415.4 million during the nine months ended September 30, 2022. We did not complete any Partnerships during the ~~three~~nine months ended ~~March 31, 2023 or 2022.~~September 30, 2023.

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED ~~MARCH 31,~~SEPTEMBER 30, 2023 AND 2022

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements for the three and nine months ended ~~March 31,~~September 30, 2023 and the related notes and other financial information included elsewhere in this report.

In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K ~~filed with~~for the ~~SEC on February 28, 2023.~~year ended December 31, 2022.

2224

The following is a discussion of our consolidated results of operations for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022.


		For the Three Months Ended March 31,					For the Three Months Ended September 30,								For the Nine Months Ended September 30,
(in thousands)	(in thousands)		2023		2022			Variance		(in thousands)	2023		2022		Variance		2023		2022		Variance
Revenues:	Revenues:									Revenues:
Commissions and fees	Commissions and fees		$	330,446	$	242,848		$	87,598	Commissions and fees	$	306,270	$	259,368	$	46,902	$	933,907	$	734,676	$	199,231

Operating expenses:	Operating expenses:									Operating expenses:
Commissions, employee compensation and benefits	Commissions, employee compensation and benefits		230,954		153,750			77,204		Commissions, employee compensation and benefits	220,469		195,920		24,549		676,659		522,518		154,141
Other operating expenses	Other operating expenses		46,604		36,442			10,162		Other operating expenses	47,165		47,212		(47)		141,254		124,424		16,830
Amortization expense	Amortization expense		23,163		17,562			5,601		Amortization expense	23,183		23,180		3		69,505		59,912		9,593
Change in fair value of contingent consideration	Change in fair value of contingent consideration		24,758		(5,632)			30,390		Change in fair value of contingent consideration	13,914		21,695		(7,781)		55,065		(10,809)		65,874
Depreciation expense	Depreciation expense		1,348		988			360		Depreciation expense	1,453		1,216		237		4,250		3,309		941
Total operating expenses	Total operating expenses		326,827		203,110			123,717		Total operating expenses	306,184		289,223		16,961		946,733		699,354		247,379

Operating income			3,619		39,738			(36,119)
Operating income (loss)										Operating income (loss)	86		(29,855)		29,941		(12,826)		35,322		(48,148)

Other income (expense):	Other income (expense):									Other income (expense):
Interest expense, net	Interest expense, net		(27,884)		(10,350)			(17,534)		Interest expense, net	(30,580)		(20,766)		(9,814)		(87,600)		(45,748)		(41,852)
Other income (expense), net	Other income (expense), net		(1,511)		15,451			(16,962)		Other income (expense), net	(1,351)		3,914		(5,265)		(193)		25,151		(25,344)
Total other income (expense)			(29,395)		5,101			(34,496)
Total other expense										Total other expense	(31,931)		(16,852)		(15,079)		(87,793)		(20,597)		(67,196)

Income (loss) before income taxes	Income (loss) before income taxes		(25,776)		44,839			(70,615)		Income (loss) before income taxes	(31,845)		(46,707)		14,862		(100,619)		14,725		(115,344)
Income tax expense	Income tax expense		78		—			78		Income tax expense	161		—		161		904		—		904
Net income (loss)	Net income (loss)		(25,854)		44,839			(70,693)		Net income (loss)	(32,006)		(46,707)		14,701		(101,523)		14,725		(116,248)
Less: net income (loss) attributable to noncontrolling interests	Less: net income (loss) attributable to noncontrolling interests		(11,722)		21,970			(33,692)		Less: net income (loss) attributable to noncontrolling interests	(14,377)		(21,914)		7,537		(45,865)		8,007		(53,872)
Net income (loss) attributable to BRP Group	Net income (loss) attributable to BRP Group		$	(14,132)	$	22,869		$	(37,001)	Net income (loss) attributable to BRP Group	$	(17,629)	$	(24,793)	$	7,164	$	(55,658)	$	6,718	$	(62,376)

Commissions and Fees

We earn commissions and fees by facilitating the arrangement between Insurance Company Partners and individuals or businesses for the carrier to provide insurance to the insured party. Our commissions ~~and fees~~ are usually a percentage of the premium paid by the insured and generally depends on the type of insurance, the particular Insurance Company Partner and the nature of the services provided. Under certain arrangements with Clients, we earn pre-negotiated service fees ~~in lieu of commissions.~~for insurance placement services. Additionally, we earn policy fees for acting in the capacity of an MGA and fulfilling certain administrative functions on behalf of Insurance Company Partners. We may also receive profit-sharing commissions, or straight overrides, which represent forms of variable consideration from Insurance Company Partners associated with the placement of coverage based primarily on underwriting results, but may also contain considerations for volume, growth or retention.

Commissions and fees increased ~~$87.6~~$46.9 million ~~year over year. The increase~~ for the third quarter of 2023 as compared to the same period ~~relates~~of 2022 primarily due to organic growth. Commissions and fees increased $199.2 million for the first nine months of 2023 as compared to the same period of 2022 due to organic growth of $150.5 million, and amounts attributable to Partners acquired during 2022 prior to their having reached the twelve-month owned mark (such amounts, the “Partnership Contribution”)~~. Organic growth accounted for $55.8 million~~ of ~~the increase to revenues and the Partnership Contribution accounted for $30.9~~$44.7 million.

2325

Major Sources of Commissions and Fees

The following table sets forth our commissions and fees by major source for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022:


		For the Three Months Ended March 31,					For the Three Months Ended September 30,								For the Nine Months Ended September 30,
(in thousands)	(in thousands)		2023		2022			Variance		(in thousands)	2023		2022		Variance		2023		2022		Variance
Commission revenue	Commission revenue		$	270,861	$	204,837		$	66,024	Commission revenue	$	237,103	$	204,264	$	32,839	$	737,815	$	591,650	$	146,165
Profit-sharing revenue	Profit-sharing revenue		23,025		15,012			8,013		Profit-sharing revenue	25,959		15,044		10,915		75,877		49,422		26,455
Consulting and service fee revenue	Consulting and service fee revenue		17,636		15,202			2,434		Consulting and service fee revenue	21,735		19,084		2,651		57,947		47,417		10,530
Policy fee and installment fee revenue	Policy fee and installment fee revenue		15,832		5,850			9,982		Policy fee and installment fee revenue	17,071		18,367		(1,296)		49,907		37,834		12,073
Other income	Other income		3,092		1,947			1,145		Other income	4,402		2,609		1,793		12,361		8,353		4,008
Total commissions and fees	Total commissions and fees		$	330,446	$	242,848		$	87,598	Total commissions and fees	$	306,270	$	259,368	$	46,902	$	933,907	$	734,676	$	199,231

Commission revenue represents ~~commission revenue~~commissions earned by providing insurance placement services to Clients. Commission revenue increased ~~by $66.0~~$32.8 million ~~year over year~~for the third quarter of 2023 as ~~a result~~compared to the same period of 2022 primarily due to organic growth. Commission revenue increased $146.2 million for the first nine months of 2023 as compared to the same period of 2022 due to organic growth of ~~$36.5~~$105.4 million and the Partnership Contribution of ~~$29.5~~$40.7 million.

Profit-sharing revenue represents bonus-type revenue that is earned by us as a sales incentive provided by certain Insurance Company Partners. Profit-sharing revenue increased ~~by $8.0~~$10.9 million ~~year over year~~and $26.5 million for the three and nine months ended September 30, 2023 as compared to the same periods of 2022, respectively, primarily due to organic growth.

Consulting and service fee revenue represents negotiated fees ~~received in lieu of a commission~~earned for providing insurance placement services to Clients and specialty insurance consulting revenue. Consulting and service fee revenue increased ~~$2.4 million year over year as a result of organic growth of $1.9~~$2.7 million and $10.5 million for the ~~Partnership Contribution~~three and nine months ended September 30, 2023 as compared to the same periods of ~~$0.5 million.~~2022, respectively, primarily due to organic growth.

Policy fee and installment fee revenue represents revenue earned by our UCTS Operating Group for acting in the capacity of an MGA and providing payment processing ~~and~~ services and other administrative functions on behalf of Insurance Company Partners. Policy fee and installment fee revenue decreased $1.3 million for the third quarter of 2023 as compared to the same period of 2022 due to Clients from QBE’s builder-sourced homeowners book transitioning from the QBE Program Administrator Agreement and onto our agency management system.

Policy fee and installment fee revenue increased ~~$10.0~~$12.1 million ~~year over year~~for the first nine months of 2023 as compared to the same period of 2022 due to organic growth.

Other income consists of other ~~fee~~ancillary income, premium financing income and investment income, ~~generated across all Operating Groups~~ as well as marketing income that is based on agreed-upon cost reimbursement for fulfilling specific targeted Medicare marketing campaigns. Other income increased ~~$1.1~~$1.8 million ~~year over year~~and $4.0 million for the three and nine months ended September 30, 2023 as compared to the same periods of 2022, respectively, primarily due to investment income, which is excluded from the organic growth calculation.

Commissions, Employee Compensation and Benefits

Commissions, employee compensation and benefits is our largest expense. It consists of (i) base compensation comprising salary, bonuses and benefits paid and payable to Colleagues, commissions paid to Colleagues and outside commissions paid to others; and (ii) equity-based compensation associated with the grants of restricted and unrestricted stock awards to senior management, Colleagues, Risk Advisors and directors. We expect to continue to experience a general rise in commissions, employee compensation and benefits expense commensurate with expected revenue growth inas our ~~revenue~~compensation arrangements with our Colleagues and ~~headcount. We~~Risk Advisors contain significant bonus or commission components driven by the results of our operations. In addition, we operate in competitive markets for human capital and need to maintain competitive compensation levels as we expand geographically and create new products and services. Our Colleague-related costs have risen as a result of the increasingly competitive market and the inflationary environment. In addition, our compensation arrangements with our Colleagues contain significant bonus or commission components driven by the results of our operations. Therefore, as we grow commissions and fees, we expect compensation costs to rise.

Commissions, employee compensation and benefits expenses increased ~~$77.2~~$24.5 million ~~year over year.~~and $154.1 million for the three and nine months ended September 30, 2023 as compared to the same periods of 2022, respectively, in part from the correlation of compensation to our revenue growth, as well as the inflationary environment. The Partnership Contribution accounted for ~~$17.2~~$0.7 million and $25.1 million of the increase to commissions, employee compensation and ~~benefits.~~benefits for the quarter and year-to-date periods, respectively. Share-based compensation expense increased ~~$5.7~~$6.2 million and $20.6 million for the quarter and year-to-date periods, respectively, as a result of equity grants awarded to all newly hired Colleagues, ~~and~~ grants to reward Colleagues, including members of senior ~~management. The remaining~~management, and an increase in ~~commissions,~~the portion of annual bonuses that are expected to be paid via fully vested shares of common stock. Commissions, employee compensation and benefits ~~expense can be attributed~~expenses have also increased as a result of investing in our future as we continue to ~~higher commissions expense relating to~~launch new products in our ~~organic growth, higher compensation~~MGA of the Future product suite and ~~benefits related to hiring to support~~expand the distribution footprint of our ~~growth,~~national mortgage and real estate channel. We successfully launched two new MGA of the ~~inflationary environment, which has resulted in increases~~Future products in the ~~cost~~third quarter of ~~human capital.~~

2023, including a High Net Worth homeowners product targeted at homes with replacement values up to $10.0 million, and a habitational-focused Commercial Property product.

Other Operating Expenses

Other operating expenses include travel, accounting, legal and other professional fees, placement fees, rent, office expenses and other costs associated with our operations. Our occupancy-related costs and professional services expenses, in particular, generally increase or decrease in relative proportion to the number of our Colleagues and the overall size and scale of our business operations.

Other operating expenses ~~increased $10.2 million year over year related~~was relatively flat for the three months ended September 30, 2023 as compared to ~~increases in dues and subscriptions~~the same period of ~~$8.7 million from integration~~2022. During the third quarter of 2023, we had higher costs ~~and~~for investment in technology to support our growth of $3.3 million, lead generation fees relating to the expansion of our national mortgage and real estate channel of $1.2 million and payment processing fees for our MGA business of $0.4 million. These increases were offset by lower costs for travel and entertainment of ~~$3.6~~$1.6 million, ~~relating to integration of our Partnerships,~~ advertising and marketing of ~~$2.6~~$1.3 million, repairs and maintenance of $1.1 million and professional fees of $0.8 million.

Other operating expenses increased $16.8 million for the nine months ended September 30, 2023 as compared to the same period of 2022, driven by higher costs for investment in technology to support our growth of $16.7 million, lead generation fees relating to the expansion of our national mortgage and real estate channel of $5.0 million, travel and entertainment of $1.9 million and rent expense of ~~$0.8 million relating to expansion of our operating locations.~~$1.5 million. These increases were partially offset by lower costs for ~~professional fees of $4.2 million, Colleague education and welfare of $1.0 million and~~ repairs and maintenance of ~~$0.8~~$3.2 million, licenses and taxes of $2.2 million, professional fees of $2.1 million and recruiting expense of $1.8 million.

Amortization Expense

Amortization expense was relatively flat for the three months ended September 30, 2023 as compared to the same period of 2022. Amortization expense increased ~~$5.6~~$9.6 million ~~year over year~~for the nine months ended September 30, 2023 as compared to the same period of 2022, driven by amortization of intangible assets recorded in connection with ~~Partnerships over the past twelve months.~~our 2022 Partnerships.

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration was a ~~$24.8~~$13.9 million loss for the three months ended ~~March 31,~~September 30, 2023 as compared to a ~~$5.6~~$21.7 million loss for the same period of 2022. Change in fair value of contingent consideration was a $55.1 million loss for the nine months ended September 30, 2023 as compared to a $10.8 million gain for the same period of 2022. The fair value ~~loss~~losses related to contingent consideration for 2023 ~~was~~were impacted by changes in growth trends of certain partners and ~~lower discount rates,~~approaching the measurement date for many of the contingent earnout obligations, which resulted in an overall higher contingent earnout liability value.

Interest Expense, Net

Interest expense, net increased ~~$17.5~~$9.8 million ~~year over year~~for the three months ended September 30, 2023 as compared to the same period of 2022 due to the higher interest rate environment. Interest expense, net increased $41.9 million for the nine months ended September 30, 2023 as compared to the same period of 2022, resulting primarily from the ~~high~~higher interest rate environment and, to a lesser extent, higher average borrowings outstanding ~~under~~on our Revolving Facility. We expect interest expense to ~~continue to~~ increase during the remainder of 2023 and into 2024 as ~~a result of recent unprecedented~~ interest ~~rate hikes from~~rates are expected to remain high in the ~~Federal Reserve, which directly affect our variable rate debt.~~near-term.

Refer to Item 3. Quantitative and Qualitative Disclosures About Market Risk for further discussion of the impact of rising interest rates on our results of operations, financial condition and cash flows.

Other Income, ~~(Expense),~~ Net

Other income, ~~(expense),~~ net decreased ~~$17.0~~$5.3 million ~~year over year,~~for the three months ended September 30, 2023 as compared to the same period of 2022. We recognized a loss on our interest rate caps of $0.8 million during the third quarter of 2023, which included an unrealized fair value loss of $3.8 million, offset in part by a realized gain related to settlements received of $3.0 million. The unrealized fair value loss for the third quarter of 2023 primarily ~~as a result~~relates to one of our interest rate caps approaching maturity. The value of our $300.0 million notional, 1.50% interest rate cap will continue to decline through maturity in March 2024. Comparatively, we recognized a gain on interest rate caps of ~~$15.8~~$4.2 million ~~recognized~~ during the ~~first~~third quarter of 2022 in connection with rising interest rates and market estimates for future rate increases.

Other income, net decreased $25.3 million for the nine months ended September 30, 2023 as compared to the same period of 2022. We recognized a loss on our interest rate caps of $0.5 million year to date for 2023, which included an unrealized fair value loss of $8.4 million, offset in part by a realized gain related to settlements received of $7.9 million. The unrealized fair value loss year to date for 2023 relates to changes in the interest rate curve and one of our interest rate caps approaching maturity. Comparatively, we ~~had~~recognized a ~~loss~~gain on interest rate caps of ~~$1.4~~$25.4 million ~~during the first quarter of 2023 relating~~year to ~~a decrease~~date for 2022 in ~~the~~connection with rising interest rates and market estimates for future rate ~~curve.~~increases.

NON-GAAP FINANCIAL MEASURES

Adjusted EBITDA, Adjusted EBITDA Margin, Organic Revenue, Organic Revenue Growth, Adjusted Net Income and Adjusted Diluted Earnings Per Share (“EPS”), are not measures of financial performance under GAAP and should not be considered substitutes for GAAP measures, including commissions and fees (for Organic Revenue and Organic Revenue Growth), net income (loss) (for Adjusted EBITDA and Adjusted EBITDA Margin), net income (loss) attributable to BRP Group (for Adjusted Net Income) or diluted earnings (loss) per share (for Adjusted Diluted EPS), 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, diluted earnings (loss) per share 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 Partnership and integration expenses, severance, and certain non-recurring items, including those related to raising capital. We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of income and 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 income and 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.

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 based on commissions and fees for the relevant period by excluding investment income and 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 to include commissions and fees 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, 2022 are excluded from Organic Revenue for 2022. However, after June 1, 2023, results from June 1, 2022 to December 31, 2022 for such Partners are compared to results from June 1, 2023 to December 31, 2023 for purposes of calculating Organic Revenue Growth in 2023. 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.

We define Adjusted Net Income as net income (loss) attributable to BRP Group 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 Partnership and integration expenses, 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.~~stock on a one-for-one basis. Adjusted Diluted EPS is calculated as Adjusted Net Income divided by adjusted ~~dilutive~~diluted 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.

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 March 31,						For the Three Months Ended September 30,					For the Nine Months Ended September 30,
(in thousands, except percentages)	(in thousands, except percentages)		2023			2022			(in thousands, except percentages)	2023			2022			2023			2022
Commissions and fees	Commissions and fees		$	330,446		$	242,848		Commissions and fees	$	306,270		$	259,368		$	933,907		$	734,676

Net income (loss)	Net income (loss)		$	(25,854)		$	44,839		Net income (loss)	$	(32,006)		$	(46,707)		$	(101,523)		$	14,725
Adjustments to net income (loss):	Adjustments to net income (loss):								Adjustments to net income (loss):
Interest expense, net	Interest expense, net		27,884			10,350			Interest expense, net	30,580			20,766			87,600			45,748
Amortization expense									Amortization expense	23,183			23,180			69,505			59,912
Change in fair value of contingent consideration	Change in fair value of contingent consideration		24,758			(5,632)			Change in fair value of contingent consideration	13,914			21,695			55,065			(10,809)
Amortization expense			23,163			17,562
Share-based compensation	Share-based compensation		13,281			7,564			Share-based compensation	14,598			8,388			46,637			26,065
Transaction-related Partnership and integration expenses	Transaction-related Partnership and integration expenses		5,432			8,216			Transaction-related Partnership and integration expenses	3,774			12,128			18,007			29,552
(Gain) loss on interest rate caps			1,407			(15,810)
Depreciation expense	Depreciation expense		1,348			988			Depreciation expense	1,453			1,216			4,250			3,309
Severance	Severance		167			222			Severance	875			260			3,373			1,135
Income tax provision	Income tax provision		78			—			Income tax provision	161			—			904			—
(Gain) loss on interest rate caps									(Gain) loss on interest rate caps	818			(4,151)			489			(25,420)
Other(1)	Other(1)		7,342			4,633			Other(1)	6,659			5,109			20,289			13,083
Adjusted EBITDA	Adjusted EBITDA		$	79,006		$	72,932		Adjusted EBITDA	$	64,009		$	41,884		$	204,596		$	157,300
Adjusted EBITDA Margin	Adjusted EBITDA Margin		24		%	30		%	Adjusted EBITDA Margin	21		%	16		%	22		%	21		%

__________

(1) Other addbacks to Adjusted EBITDA include certain expenses that are considered to be non-recurring or non-operational, including certain recruiting costs, professional fees, litigation costs and bonuses. In 2022, these addbacks also included certain expenses related to remediation efforts.

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 March 31,						For the Three Months Ended September 30,					For the Nine Months Ended September 30,
(in thousands, except percentages)	(in thousands, except percentages)		2023			2022			(in thousands, except percentages)	2023			2022			2023			2022
Commissions and fees	Commissions and fees		$	330,446		$	242,848		Commissions and fees	$	306,270		$	259,368		$	933,907		$	734,676
Partnership commissions and fees(1)	Partnership commissions and fees(1)		(30,871)			(64,777)			Partnership commissions and fees(1)	(985)			(85,638)			(44,696)			(234,601)
Investment income	Investment income		(923)			—			Investment income	(2,038)			—			(4,601)			—
Organic Revenue	Organic Revenue		$	298,652		$	178,071		Organic Revenue	$	303,247		$	173,730		$	884,610		$	500,075
Organic Revenue Growth(2)	Organic Revenue Growth(2)		$	55,804		$	25,181		Organic Revenue Growth(2)	$	47,523		$	38,014		$	150,471		$	91,825
Organic Revenue Growth %(2)	Organic Revenue Growth %(2)		23		%	16		%	Organic Revenue Growth %(2)	19		%	28		%	20		%	22		%

__________

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

(2) Organic Revenue for the three and nine months ended ~~March 31,~~September 30, 2022 used to calculate Organic Revenue Growth for the three and nine months ended ~~March 31,~~September 30, 2023 was ~~$242.8~~$255.7 million and $734.1 million, respectively, which is adjusted to reflect revenues from Partnerships that reached the twelve-month owned mark during the three and nine months ended ~~March 31,~~September 30, 2023.

2730

Adjusted Net Income and Adjusted Diluted EPS

The following table reconciles Adjusted Net Income to net income (loss) attributable to BRP Group 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 March 31,					For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands, except per share data)	(in thousands, except per share data)		2023		2022			(in thousands, except per share data)	2023		2022		2023		2022
Net income (loss) attributable to BRP Group	Net income (loss) attributable to BRP Group		$	(14,132)	$	22,869		Net income (loss) attributable to BRP Group	$	(17,629)	$	(24,793)	$	(55,658)	$	6,718
Net income (loss) attributable to noncontrolling interests	Net income (loss) attributable to noncontrolling interests		(11,722)		21,970			Net income (loss) attributable to noncontrolling interests	(14,377)		(21,914)		(45,865)		8,007
Amortization expense								Amortization expense	23,183		23,180		69,505		59,912
Change in fair value of contingent consideration	Change in fair value of contingent consideration		24,758		(5,632)			Change in fair value of contingent consideration	13,914		21,695		55,065		(10,809)
Amortization expense			23,163		17,562
Share-based compensation	Share-based compensation		13,281		7,564			Share-based compensation	14,598		8,388		46,637		26,065
Transaction-related Partnership and integration expenses	Transaction-related Partnership and integration expenses		5,432		8,216			Transaction-related Partnership and integration expenses	3,774		12,128		18,007		29,552
(Gain) loss on interest rate caps, net of cash settlements	(Gain) loss on interest rate caps, net of cash settlements		3,682		(15,810)			(Gain) loss on interest rate caps, net of cash settlements	3,771		(3,602)		8,382		(24,871)
Depreciation	Depreciation		1,348		988			Depreciation	1,453		1,216		4,250		3,309
Amortization of deferred financing costs	Amortization of deferred financing costs		1,239		1,286			Amortization of deferred financing costs	1,244		1,420		3,577		3,894
Severance	Severance		167		222			Severance	875		260		3,373		1,135
Other(1)	Other(1)		7,342		4,633			Other(1)	6,659		5,109		20,289		13,083
Adjusted pre-tax income	Adjusted pre-tax income		54,558		63,868			Adjusted pre-tax income	37,465		23,087		127,562		115,995
Adjusted income taxes(2)	Adjusted income taxes(2)		5,401		6,323			Adjusted income taxes(2)	3,709		2,286		12,629		11,484
Adjusted Net Income	Adjusted Net Income		$	49,157	$	57,545		Adjusted Net Income	$	33,756	$	20,801	$	114,933	$	104,511

Weighted-average shares of Class A common stock outstanding - diluted	Weighted-average shares of Class A common stock outstanding - diluted		58,712		58,716			Weighted-average shares of Class A common stock outstanding - diluted	60,549		57,282		59,791		59,895
Dilutive effect of non-vested restricted shares of Class A common stock			3,603		—
Dilutive effect of unvested stock awards								Dilutive effect of unvested stock awards	3,941		3,675		3,931		—
Exchange of Class B common stock(3)	Exchange of Class B common stock(3)		54,094		56,269			Exchange of Class B common stock(3)	52,862		55,151		53,367		55,743
Adjusted dilutive weighted-average shares outstanding			116,409		114,985
Adjusted diluted weighted-average shares outstanding								Adjusted diluted weighted-average shares outstanding	117,352		116,108		117,089		115,638

Adjusted Diluted EPS	Adjusted Diluted EPS		$	0.42	$	0.50		Adjusted Diluted EPS	$	0.29	$	0.18	$	0.98	$	0.90

Diluted earnings (loss) per share	Diluted earnings (loss) per share		$	(0.24)	$	0.39		Diluted earnings (loss) per share	$	(0.29)	$	(0.43)	$	(0.93)	$	0.11
Effect of exchange of Class B common stock and net income (loss) attributable to noncontrolling interests per share	Effect of exchange of Class B common stock and net income (loss) attributable to noncontrolling interests per share		0.02		—			Effect of exchange of Class B common stock and net income (loss) attributable to noncontrolling interests per share	0.02		0.03		0.06		0.02
Other adjustments to earnings (loss) per share	Other adjustments to earnings (loss) per share		0.69		0.16			Other adjustments to earnings (loss) per share	0.59		0.60		1.96		0.87
Adjusted income taxes per share	Adjusted income taxes per share		(0.05)		(0.05)			Adjusted income taxes per share	(0.03)		(0.02)		(0.11)		(0.10)
Adjusted Diluted EPS	Adjusted Diluted EPS		$	0.42	$	0.50		Adjusted Diluted EPS	$	0.29	$	0.18	$	0.98	$	0.90

___________

(1) Other addbacks to Adjusted Net Income include certain expenses that are considered to be non-recurring or non-operational, including certain recruiting costs, professional fees, litigation costs and bonuses. In 2022, these addbacks also included certain expenses related to remediation efforts.

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

(3) Assumes the full exchange of Class B common stock for Class A common stock pursuant to the Amended LLC Agreement.

2831

OPERATING GROUP RESULTS

Commissions and Fees

In all of our Operating Groups, we generate commissions ~~and fees~~ from insurance placement under both agency bill and direct bill arrangements, and profit-sharing income based on either the underlying book of business or performance, such as loss ratios. ~~In these~~All Operating Groups we also generate other ancillary income and premium financing income.

In the Insurance Advisory Solutions and UCTS Operating Groups, we generate fees from service fee and consulting arrangements. Service fee arrangements are in place with certain ~~customers in lieu of commission arrangements.~~Clients for providing insurance placement services.

In the UCTS Operating Group, we generate fees from policy fee and installment fee arrangements. Policy fee revenue is earned for acting in the capacity of an MGA and providing payment processing ~~and~~ services and other administrative functions on behalf of Insurance Company Partners.

In the Mainstreet Insurance Solutions Operating Group, we generate commissions and fees in the form of marketing income, which is earned through co-branded Medicare marketing campaigns with our Insurance Company Partners.

In addition, we generate investment income in the Insurance Advisory Solutions and UCTS Operating Groups and the Corporate and Other non-reportable ~~segment, we generate investment income.~~segment.

The following table sets forth our commissions and fees by Operating Group and for Corporate and Other by amount and as a percentage of our commissions and fees:

Commissions and Fees by Operating Group (in thousands, except percentages)
For the Three Months Ended March 31,
2023 2022 Variance
Operating Group Amount Percent of Business Amount Percent of Business Amount %
Insurance Advisory Solutions $ 195,713 59 % $ 171,403 71 % $ 24,310 14 %
Underwriting, Capacity & Technology Solutions 90,069 27 % 49,523 20 % 40,546 82 %
Mainstreet Insurance Solutions 58,140 18 % 22,958 9 % 35,182 153 %
Corporate and Other (13,476) (4) % (1,036) — % (12,440) n/m
$ 330,446 $ 242,848 $ 87,598

~~__________~~

~~n/m not meaningful~~


Commissions and Fees by Operating Group (in thousands, except percentages)
	For the Three Months Ended September 30,												For the Nine Months Ended September 30,
	2023				2022				Variance				2023				2022				Variance
Operating Group	Amount		Percent of Business		Amount		Percent of Business		Amount		%		Amount		Percent of Business		Amount		Percent of Business		Amount		%
Insurance Advisory Solutions	$	144,409	47	%	$	130,216	50	%	$	14,193	11	%	$	493,367	52	%	$	433,151	59	%	$	60,216	14	%
Underwriting, Capacity & Technology Solutions	118,413		39	%	97,929		38	%	20,484		21	%	314,791		34	%	221,753		30	%	93,038		42	%
Mainstreet Insurance Solutions	62,297		20	%	47,784		18	%	14,513		30	%	174,114		19	%	106,767		15	%	67,347		63	%
Corporate and Other	(18,849)		(6)	%	(16,561)		(6)	%	(2,288)		14	%	(48,365)		(5)	%	(26,995)		(4)	%	(21,370)		79	%
	$	306,270			$	259,368			$	46,902			$	933,907			$	734,676			$	199,231

Commissions and fees for our Insurance Advisory Solutions Operating Group increased ~~$24.3~~$14.2 million ~~year over year~~and $60.2 million for the three and nine months ended September 30, 2023 as compared to the same periods of 2022, respectively, primarily as a result of organic growth related to base commissions and fees.

Commissions and fees for our UCTS Operating Group increased $20.5 million for the third quarter of 2023 as compared to the same period of 2022 primarily as a result of organic growth. Organic growth included ~~$22.2~~$15.8 million ~~related~~attributable to ~~base commissions~~our renter’s and ~~fees~~homeowner’s insurance products and ~~$1.6~~$4.2 million related to contingent and other revenue.

Commissions and fees for our UCTS Operating Group increased ~~$40.5~~$93.0 million ~~year over year~~for the first nine months of 2023 as compared to the same period of 2022 primarily as a result of organic growth of ~~$27.4~~$68.1 million and higher intercompany revenue of ~~$12.5 million and the Partnership Contribution of $0.5~~$23.2 million. Organic growth included ~~$24.1~~$55.2 million attributable to our renter’s and homeowner’s insurance products, of which ~~$8.4~~$10.5 million is related to the QBE Program Administrator Agreement, and ~~$3.3~~$12.8 million related to contingent and other revenue. The QBE Program Administrator Agreement was entered into in connection with the Westwood Partnership with an affiliate of QBE, ~~Holdings, Inc. (“QBE”),~~ the prior owner of Westwood. Under the QBE Program Administrator Agreement, our MGA of the Future business assumed operations of QBE’s builder-sourced homeowners book, including all MGA functions associated with the book of business.

Commissions and fees for our Mainstreet Insurance Solutions Operating Group increased ~~$35.2~~$14.5 million ~~year over year~~for the third quarter of 2023 as compared to the same period of 2022 due to organic growth related primarily to core commissions and fees of $13.6 million and the Partnership Contribution of $1.0 million. Commissions and fees increased $67.3 million for the first nine months of 2023 as compared to the same period of 2022 as a result of the Partnership Contribution of ~~$30.3~~$42.2 million and organic growth ~~of $4.6 million. Organic growth included $3.8 million~~ related primarily to core commissions and fees ~~and $0.8 million related to contingent and other revenue.~~of $25.1 million.

The amount reported for Corporate and Other primarily relates to the elimination of intercompany revenue. During the ~~first quarter of~~three and nine months ended September 30, 2023, ~~the Insurance Advisory Solutions Operating Group recorded intercompany commissions and fees from activity with the UCTS Operating Group of $0.4 million;~~ the UCTS Operating Group recorded intercompany commissions and fees from activity with the Mainstreet Insurance Solutions Operating Group and itself of ~~$12.6 million;~~$18.6 million and $47.7 million, respectively, and the Mainstreet Insurance Solutions Operating Group recorded intercompany commissions and fees from activity with all Operating Groups of ~~$0.9 million.~~$0.3 million and $1.4 million, respectively. These amounts were eliminated through Corporate and Other.

The substantial increase in intercompany commissions and fees for the first ~~quarter~~nine months of 2023 is related to the QBE Program Administrator Agreement, which was effective May 1, 2022. A portion of the revenue recognized by the UCTS Operating Group related to this agreement is passed through to the Mainstreet Insurance Solutions Operating Group ~~who serves~~for serving as the retail agent. We expect that revenue relating to this agreement will continue to grow as we serve as the MGA on more intersegment revenue such as homeowners insurance sold through the Mainstreet Insurance Solutions Operating Group.

Commissions, Employee Compensation and Benefits

The following table sets forth our commissions, employee compensation and benefits by Operating Group and for Corporate and Other by amount and as a percentage of our commissions, employee compensation and benefits:

Commissions, Employee Compensation and Benefits by Operating Group (in thousands, except percentages)
For the Three Months Ended March 31,
2023 2022 Variance
Operating Group Amount Percent of Business Amount Percent of Business Amount %
Insurance Advisory Solutions $ 119,802 52 % $ 94,790 62 % $ 25,012 26 %
Underwriting, Capacity & Technology Solutions 67,595 29 % 34,676 22 % 32,919 95 %
Mainstreet Insurance Solutions 35,227 15 % 14,873 10 % 20,354 137 %
Corporate and Other 8,330 4 % 9,411 6 % (1,081) (11) %
$ 230,954 $ 153,750 $ 77,204


Commissions, Employee Compensation and Benefits by Operating Group (in thousands, except percentages)
	For the Three Months Ended September 30,												For the Nine Months Ended September 30,
	2023				2022				Variance				2023				2022				Variance
Operating Group	Amount		Percent of Expense		Amount		Percent of Expense		Amount		%		Amount		Percent of Expense		Amount		Percent of Expense		Amount		%
Insurance Advisory Solutions	$	100,254	45	%	$	97,417	50	%	$	2,837	3	%	$	324,692	48	%	$	284,605	54	%	$	40,087	14	%
Underwriting, Capacity & Technology Solutions	85,978		39	%	73,293		37	%	12,685		17	%	231,596		34	%	160,830		31	%	70,766		44	%
Mainstreet Insurance Solutions	37,536		17	%	28,684		15	%	8,852		31	%	109,257		16	%	65,538		13	%	43,719		67	%
Corporate and Other	(3,299)		(1)	%	(3,474)		(2)	%	175		(5)	%	11,114		2	%	11,545		2	%	(431)		(4)	%
	$	220,469			$	195,920			$	24,549			$	676,659			$	522,518			$	154,141

Commissions, employee compensation and benefits expenses increased across all Operating Groups ~~year over year. The~~for each of the three and nine months ended September 30, 2023 as compared to the same periods of 2022 resulting, in part, from the correlation of compensation to our revenue growth, as well as the inflationary environment. Commissions, employee compensation and benefits expenses have also increased as a result of investing in our future as we continue to launch new products in our MGA of the Future product suite, for our UCTS Operating Group, and expand the distribution footprint of our national mortgage and real estate channel, for our Mainstreet Insurance Solutions Operating Group. We successfully launched two new MGA of the Future products in the third quarter of 2023, including a High Net Worth homeowners product targeted at homes with replacement values up to $10.0 million, and a habitational-focused Commercial Property product. In addition, the Partnership Contribution accounted for ~~$16.9~~$24.5 million of the year-to-date increase to commissions, employee compensation and benefits expenses infor the Mainstreet Insurance Solutions Operating Group. The remaining increase in commissions, employee compensation and benefits expenses across all Operating Groups can be attributed to higher commissions expense relating to our organic growth, which are primarily allocated among the Operating Groups. In addition, there have been recent increases in the cost of human capital as a result of the increasingly competitive market and the inflationary environment, which has impacted employee compensation and benefits costs.

Commissions, employee compensation and benefits expenses for Corporate and Other ~~decreased year over year primarily~~were relatively flat for each of the three and nine months ended September 30, 2023 as ~~a result~~compared to the same periods of 2022. During the third quarter of 2023, we had additional share-based compensation expense of $4.6 million, offset in part by an increase ~~of $12.9 million~~ in the elimination of intercompany expense ~~offset in part by $7.2 million~~ of ~~additional expense due, in part, to~~$2.3 million. During the ~~aforementioned increases~~first nine months of 2023, we had an increase in the ~~cost~~elimination of ~~human capital and $4.6~~intercompany expense of $22.2 million, ofpartially offset by additional share-based compensation ~~expense.~~expense of $15.9 million.

The substantial increase in intercompany commissions, employee compensation and benefits expense for the first ~~quarter~~nine months of 2023 is related to the QBE Program Administrator Agreement, which was effective May 1, 2022. We expect that commissions, employee compensation and benefits expense relating to this agreement will continue to grow as we serve as the MGA on more intersegment revenue such as homeowners insurance sold through the Mainstreet Insurance Solutions Operating Group.

Other Operating Expenses

The following table sets forth our other operating expenses by Operating Group and for Corporate and Other by amount and as a percentage of our other operating expenses:


Other Operating Expenses by Operating Group (in thousands, except percentages)	Other Operating Expenses by Operating Group (in thousands, except percentages)		Other Operating Expenses by Operating Group (in thousands, except percentages)
		For the Three Months Ended March 31,									For the Three Months Ended September 30,														For the Nine Months Ended September 30,
		2023	2022			Variance					2023				2022				Variance						2023				2022			Variance
Operating Group	Operating Group			Amount		Percent of Expense		Amount		Percent of Expense		Amount		%		Operating Group	Amount		Percent of Expense		Amount		Percent of Expense		Amount		%			Amount		Percent of Expense		Amount		Percent of Expense		Amount		%
Insurance Advisory Solutions	Insurance Advisory Solutions			$	20,040	43	%	$	14,509	40	%	$	5,531	38	%	Insurance Advisory Solutions	$	19,246	41	%	$	20,130	43	%	$	(884)	(4)	%		$	57,805	41	%	$	52,703	42	%	$	5,102	10	%
Underwriting, Capacity & Technology Solutions	Underwriting, Capacity & Technology Solutions			10,831		23	%	5,380		15	%	5,451		101	%	Underwriting, Capacity & Technology Solutions	10,929		23	%	8,031		17	%	2,898		36	%		32,541		23	%	21,184		17	%	11,357		54	%
Mainstreet Insurance Solutions	Mainstreet Insurance Solutions			8,170		18	%	4,148		11	%	4,022		97	%	Mainstreet Insurance Solutions	7,769		16	%	6,200		13	%	1,569		25	%		23,243		16	%	16,466		14	%	6,777		41	%
Corporate and Other	Corporate and Other			7,563		16	%	12,405		34	%	(4,842)		(39)	%	Corporate and Other	9,221		20	%	12,851		27	%	(3,630)		(28)	%		27,665		20	%	34,071		27	%	(6,406)		(19)	%
				$	46,604			$	36,442			$	10,162				$	47,165			$	47,212			$	(47)				$	141,254			$	124,424			$	16,830

Other operating expenses for our Insurance Advisory Solutions Operating Group decreased $0.9 million for the third quarter of 2023 as compared to the same period of 2022, driven by lower costs for professional fees and software and internet expenses of $0.5 million each, consulting fees of $0.4 million, repairs and maintenance of $0.3 million and recruiting expense of $0.2 million. These decreases were partially offset by higher costs for investment in technology to support our growth of $1.2 million.

Other operating expenses for our Insurance Advisory Solutions Operating Group increased ~~$5.5~~$5.1 million ~~year over year~~for the first nine months of 2023 as compared to the same period of 2022, driven by higher costs for ~~dues and subscriptions of $3.8 million from Partnership integration costs and our~~ investment in technology to support our growth and integration activity of $5.9 million and travel and entertainment costs of $3.2 million. These increases were partially offset by lower costs for professional fees and software and internet expenses of $1.2 million each, repairs and maintenance of $0.9 million and consulting fees of $0.7 million.

Other operating expenses for our UCTS Operating Group increased $2.9 million for the third quarter of 2023 as compared to the same period of 2022, driven by higher costs for investment in technology to support our growth, primarily associated with the QBE Program Administrator Agreement, of $1.8 million, professional fees of $0.8 million, payment processing fees for our MGA business of $0.4 million and insurance expense of $0.3 million. These increases were partially offset by lower costs for travel and entertainment of ~~$1.9~~$0.9 million.

Other operating expenses for our UCTS Operating Group increased $11.4 million for the first nine months of 2023 as compared to the same period of 2022, driven by higher costs for investment in technology to support our growth, primarily associated with the QBE Program Administrator Agreement, of $9.2 million, payment processing fees for our MGA business of $0.9 million and consulting fees and insurance expense of $0.4 million each.

Other operating expenses for our Mainstreet Insurance Solutions Operating Group increased $1.6 million for the third quarter of 2023 as compared to the same period of 2022, driven by higher lead generation fees relating to ~~integration~~the expansion of our ~~Partnerships, recruiting expense~~national mortgage and real estate channel of ~~$0.3~~$1.2 million, investment in technology to support our growth of $0.6 million and rent expense of ~~$0.2 million relating to expansion of our operating locations.~~$0.3 million. These increases were partially offset by lower costs for advertising and marketing ~~professional fees and repairs and maintenance~~ of ~~$0.4 million each.~~

Other operating expenses for our UCTS Operating Group increased $5.5 million year over year driven by higher costs for dues and subscriptions of $4.7 million from Partnership integration costs, primarily associated with the QBE Program Administrator Agreement, travel and entertainment of $0.6 million relating to integration of our Partnerships, bank charges of $0.3 million, and consulting fees and software and internet expenses of $0.2 million each. These increases were partially offset by lower costs for professional fees of $0.3 million and licenses and taxes of $0.2$0.7 million.

Other operating expenses for our Mainstreet Insurance Solutions Operating Group increased ~~$4.0~~$6.8 million ~~year over year~~for the first nine months of 2023 as compared to the same period of 2022, driven by higher ~~advertising~~lead generation fees relating to the expansion of our national mortgage and ~~marketing~~real estate channel of ~~$3.0~~$5.0 million, ~~dues and subscriptions of $0.9 million from Partnership integration costs and our~~ investment in technology to support our growth ~~rent expense~~ of ~~$0.7~~$2.1 million, ~~relating to expansion of our operating locations, and~~ travel and entertainment of ~~$0.4~~$1.1 million ~~relating to integration~~and rent expense of ~~our Partnerships.~~$0.9 million. These increases were partially offset by lower costs for professional fees of ~~$1.2~~$1.8 million and recruiting expense of $0.7 million.

Other operating expenses in Corporate and Other decreased $3.6 million for the third quarter of 2023 as compared to the same period of 2022 due to lower costs for travel and entertainment of $1.8 million, professional fees of $1.0 million and advertising and marketing of $0.8 million.

Other operating expenses in Corporate and Other decreased ~~$4.8~~$6.4 million ~~year over year~~for the first nine months of 2023 as compared to the same period of 2022 due to lower costs for professional fees of $2.2 million, licenses and taxes of $1.0 million, dues and subscriptions of $0.7 million and recruiting expense and consulting fees of $0.6 million each. These decreases were partially offset by higher costs for travel and entertainment of ~~$0.8~~$2.4 million, repairs and maintenance of $1.9 million, licenses and taxes of $1.5 million and consulting fees of $0.9 million.

Amortization Expense

The following table sets forth our amortization by Operating Group and for Corporate and Other by amount and as a percentage of our amortization:


Amortization Expense by Operating Group (in thousands, except percentages)	Amortization Expense by Operating Group (in thousands, except percentages)		Amortization Expense by Operating Group (in thousands, except percentages)
		For the Three Months Ended March 31,									For the Three Months Ended September 30,														For the Nine Months Ended September 30,
		2023	2022			Variance					2023				2022				Variance						2023				2022			Variance
Operating Group	Operating Group			Amount		Percent of Expense		Amount		Percent of Expense		Amount		%		Operating Group	Amount		Percent of Expense		Amount		Percent of Expense		Amount		%			Amount		Percent of Expense		Amount		Percent of Expense		Amount		%
Insurance Advisory Solutions	Insurance Advisory Solutions			$	12,902	55	%	$	12,548	71	%	$	354	3	%	Insurance Advisory Solutions	$	12,882	55	%	$	12,576	55	%	$	306	2	%		$	38,669	55	%	$	37,660	63	%	$	1,009	3	%
Underwriting, Capacity & Technology Solutions	Underwriting, Capacity & Technology Solutions			4,528		20	%	4,193		24	%	335		8	%	Underwriting, Capacity & Technology Solutions	4,564		20	%	4,275		18	%	289		7	%		13,634		20	%	12,689		21	%	945		7	%
Mainstreet Insurance Solutions	Mainstreet Insurance Solutions			5,732		25	%	820		5	%	4,912		n/m		Mainstreet Insurance Solutions	5,701		25	%	6,328		27	%	(627)		(10)	%		17,160		25	%	9,559		16	%	7,601		80	%
Corporate and Other	Corporate and Other			1		—	%	1		—	%	—		—	%	Corporate and Other	36		—	%	1		—	%	35		n/m			42		—	%	4		—	%	38		n/m
				$	23,163			$	17,562			$	5,601				$	23,183			$	23,180			$	3				$	69,505			$	59,912			$	9,593

__________

n/m not meaningful

Amortization expense ~~increased~~was relatively flat in all our Operating Groups for the third quarter of 2023 as compared to the same period of 2022. Amortization expense in our Mainstreet Insurance Solutions Operating Group ~~year over year, primarily~~increased for the first nine months of 2023 as compared to the same period of 2022, driven by the amortization of intangible assets recorded in connection with our Westwood Partnership. ~~Amortization expense for the Insurance Advisory Solutions and UCTS Operating Groups was relatively flat.~~

Change in Fair Value of Contingent Consideration

The following table sets forth our change in fair value of contingent consideration by Operating Group by amount and as a percentage of our change in fair value of contingent consideration:


Change in Fair Value of Contingent Consideration by Operating Group (in thousands, except percentages)	Change in Fair Value of Contingent Consideration by Operating Group (in thousands, except percentages)		Change in Fair Value of Contingent Consideration by Operating Group (in thousands, except percentages)
		For the Three Months Ended March 31,									For the Three Months Ended September 30,														For the Nine Months Ended September 30,
		2023	2022			Variance					2023				2022				Variance						2023				2022			Variance
Operating Group	Operating Group			Amount		Percent of Expense		Amount		Percent of Expense		Amount		%		Operating Group	Amount		Percent of Expense		Amount		Percent of Expense		Amount		%			Amount		Percent of Expense		Amount		Percent of Expense		Amount		%
Insurance Advisory Solutions	Insurance Advisory Solutions			$	18,795	76	%	$	(6,055)	108	%	$	24,850	n/m		Insurance Advisory Solutions	$	7,863	56	%	$	24,897	115	%	$	(17,034)	68	%		$	39,167	71	%	$	(6,115)	56	%	$	45,282	n/m
Underwriting, Capacity & Technology Solutions	Underwriting, Capacity & Technology Solutions			4,859		20	%	(183)		3	%	5,042		n/m		Underwriting, Capacity & Technology Solutions	5,557		40	%	(2,931)		(14)	%	8,488		n/m			14,609		27	%	(4,828)		45	%	19,437		n/m
Mainstreet Insurance Solutions	Mainstreet Insurance Solutions			1,104		4	%	606		(11)	%	498		82	%	Mainstreet Insurance Solutions	494		4	%	(271)		(1)	%	765		n/m			1,289		2	%	134		(1)	%	1,155		n/m
				$	24,758			$	(5,632)			$	30,390				$	13,914			$	21,695			$	(7,781)				$	55,065			$	(10,809)			$	65,874

__________

n/m not meaningful

We had fair value losses related to contingent consideration across all our Operating Groups for each of the ~~first~~ quarter and year-to-date periods of 2023. These losses were impacted by changes in growth trends of certain partners and ~~lower discount rates,~~approaching the measurement date for many of the contingent earnout obligations, which resulted in an overall higher contingent earnout liability value.

LIQUIDITY AND CAPITAL RESOURCES

Our primary liquidity needs for the foreseeable future will include cash to (i) provide capital to facilitate the organic growth of our business and to fund future Partnerships, (ii) pay operating expenses, including cash compensation to our employees and expenses related to being a public company, (iii) make payments under the Tax Receivable Agreement, (iv) pay interest and principal due on borrowings under the JPM Credit Agreement, (v) pay contingent earnout liabilities, (vi) pay income taxes, and (vii) fund potential investments in third party businesses that support the growth of our business, which may include the sponsorship of, and a minority, non-controlling interest in, an investment fund, the purpose of which may include facilitating the establishment of additional and alternative capacity that supports the growth of our MGA of the Future business.

We have historically financed our operations and funded our debt service through the sale of our insurance products and services, and we have financed significant cash needs to fund growth through the acquisition of Partners through debt and equity financing.

In the near term, we intend to fund our earnout obligations with cash and cash equivalents, cash flow from operations and available borrowings. During the third quarter of 2023, we increased our borrowings under the Term Loan B by $170.0 million and we used $165.0 million of the proceeds to partially repay outstanding amounts under the Revolving Facility, which increased our available borrowing capacity to pay our future earnout obligations. From time to time, we will consider raising additional debt or equity financing if and as necessary to support our growth, including in connection with the exploration of Partnership opportunities or to refinance existing obligations on an opportunistic basis.

At ~~March 31,~~September 30, 2023, our cash and cash equivalents were ~~$81.3~~$79.0 million, and we had ~~$115.0~~$276.0 million of available borrowing capacity on the Revolving Facility under the JPM Credit Agreement. We believe that our cash and cash equivalents, cash flow from operations and available borrowings will be sufficient to fund our working capital and meet our commitments for the next twelve months and beyond.

In the near term, we intend to fund our earnout obligations with cash and cash equivalents, cash flow from operations and available borrowings. In connection with our continuous exploration of Partnership opportunities, we will consider raising additional debt or equity financing if and as necessary to support our growth.

JPM Credit Agreement

~~Our~~As of September 30, 2023, our JPM Credit Agreement provides for senior secured credit facilities in an aggregate principal amount of ~~$1.45~~$1.62 billion, which consists of (i) a term loan facility in the principal amount of ~~$850.0 million~~$1.02 billion maturing in October 2027 (the “Term Loan B”) and (ii) a revolving credit facility with commitments in an aggregate principal amount of $600.0 million maturing in April 2027 (the “Revolving Facility”).

The Term Loan B ~~bears~~accrues interest at ~~LIBOR~~term SOFR plus a credit spread adjustment between 11 bps and 43 bps based on the term SOFR rate plus an applicable margin of 350 bps, subject to a ~~LIBOR~~term SOFR floor of 50 bps. ~~The applicable interest rate~~At September 30, 2023, the outstanding borrowings on the Term Loan B ~~at March 31, 2023 was 8.21%~~of $1.0 billion had an applicable interest rate of 8.94%.

Borrowings under the Revolving Facility accrue interest at SOFR plus 210 bps to SOFR plus 310 bps based on total net leverage ratio. BRP will pay a letter of credit fee equal to the margin then in effect with respect to SOFR loans under the Revolving Facility multiplied by the daily amount available to be drawn under any letter of credit, a fronting fee and any customary documentary and processing charges for any letter of credit issued under the JPM Credit Agreement. The outstanding borrowings on the Revolving Facility of ~~$485.0~~$324.0 million had an applicable interest rate of ~~7.90%~~8.42% at ~~March 31,~~September 30, 2023. The Revolving Facility is also subject to a commitment fee of 0.40% on the unused capacity at ~~March 31,~~September 30, 2023.

We have entered into interest rate cap agreements to limit the potential impact of interest rate changes on cash flows. The interest rate caps limit the variability of the base rate to the amount of the cap. The interest rate cap agreements in place at ~~March 31,~~September 30, 2023 mitigate the interest rate volatility on $300.0 million of debt to a maximum base rate of 1.50% through March 2024 and mitigate the interest rate volatility on $1.2 billion of debt to a maximum base rate of 7.00%. through November 2025.

The Revolving Facility and the Term Loan B are collateralized by a first priority lien on substantially all the assets of BRP, including a pledge of all equity securities of certain of its subsidiaries. The JPM Credit Agreement contains covenants that, among other things, restrict our ability to make certain restricted payments, incur additional debt, engage in certain asset sales, mergers, acquisitions or similar transactions, create liens on assets, engage in certain transactions with affiliates, change our business, make certain investments or restrict BRP’s ability to make dividends or other distributions to BRP Group. In addition, the JPM Credit Agreement contains financial covenants requiring us to maintain our Total First Lien Net Leverage Ratio (as defined in the JPM Credit Agreement) at or below 7.00 to 1.00.

Contractual Obligations and Commitments

The following table represents our contractual obligations and commitments, aggregated by type, at ~~March 31,~~September 30, 2023:


		Payments Due by Period													Payments Due by Period
(in thousands)	(in thousands)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		(in thousands)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Operating leases(1)	Operating leases(1)	$	119,101	$	19,274	$	38,816	$	33,791	$	27,220	Operating leases(1)	$	113,401	$	20,662	$	39,344	$	33,010	$	20,385
Debt obligations payable(2)	Debt obligations payable(2)	1,778,511		115,076		228,057		1,435,378		—		Debt obligations payable(2)	1,774,749		126,556		250,364		1,397,829		—
Undiscounted estimated contingent earnout obligation(3)	Undiscounted estimated contingent earnout obligation(3)	376,821		135,697		237,386		3,738		—		Undiscounted estimated contingent earnout obligation(3)	332,018		105,568		226,450		—		—
Maximum future contingent payment obligation, less undiscounted estimated contingent earnout obligation		567,395		281,816		279,317		6,262		—
USF Grant	USF Grant	4,740		540		1,704		1,696		800		USF Grant	4,740		540		1,704		1,696		800
Total	Total	$	2,846,568	$	552,403	$	785,280	$	1,480,865	$	28,020	Total	$	2,224,908	$	253,326	$	517,862	$	1,432,535	$	21,185

__________

(1) Represents noncancelable operating leases for our facilities. Operating lease expense was ~~$5.5~~$16.8 million and ~~$4.7~~$14.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, respectively.

(2) Represents scheduled debt obligations and estimated interest payments under the JPM Credit Agreement.

(3) Represents the ~~undiscounted estimated contingent earnout obligation~~total expected future payments to be made to Partners at ~~March 31, 2023~~.September 30, 2023.

Our contractual obligations and commitments are comprised of operating lease obligations, principal and interest payments on our borrowings under the JPM Credit Agreement, potential payments of contingent earnout liabilities and our commitment to the University of South Florida (“USF”).

Our operating lease obligations represent noncancelable agreements for our corporate headquarters and office space for our insurance brokerage business. Our operating lease agreements expire through December 2030. These obligations do not include leases with an initial term of twelve months or less, which are expensed as incurred. We may extend, terminate or otherwise modify or sub-lease facilities as needed to best suit the needs of our business. The lease term is the non-cancelable period of the lease and includes options to extend or terminate the lease when it is reasonably certain that an option will be exercised.

Borrowings under our JPM Credit Agreement include ~~$836.0 million~~$1.0 billion under the Term Loan B and ~~$485.0~~$324.0 million on the Revolving Facility. Interest payable on outstanding borrowings on the Term Loan B and Revolving Facility in the table above was calculated based on applicable interest rates at ~~March 31,~~September 30, 2023 of ~~8.21%~~8.94% and ~~7.90%~~8.42%, respectively, through their respective expiration dates of October 2027 and April 2027.

Substantially all of our Partnerships and certain acquisitions of select books of business that do not constitute a complete business enterprise include contractual earnout provisions. We record an estimation of the fair value of the contingent earnout obligations at the Partnership date as a component of the consideration paid. Our contingent earnout obligations are measured at fair value at each reporting period based on the present value of the expected future payments to be made to Partners in accordance with the provisions outlined in the respective purchase agreements. The recorded obligations are based on estimates of the Partners’ future performance using financial projections for the earnout period. The aggregate estimated contingent earnout liabilities included on our condensed consolidated balance sheet at ~~March 31,~~September 30, 2023 was ~~$286.2~~$273.3 million, of which ~~$24.9~~$12.5 million must be settled in cash and the remaining ~~$261.3~~$260.8 million can be settled in cash or stock at our option. The undiscounted estimated contingent earnout obligation presented in the table above represents the fair value of the total expected future payments to be made to the Partners. The undiscounted estimated contingent earnout obligation at September 30, 2023 was $332.0 million, of which $14.4 million must be settled in cash and the remaining $317.6 million can be settled in cash or stock at our option. The maximum ~~future~~estimated exposure to the contingent ~~payment obligation~~earnout liabilities was $847.1 million at ~~March 31, 2023 was $944.2 million, of which $63.1 million must be settled in cash and the remaining $881.1 million can be settled in cash or stock at our option.~~September 30, 2023.

As of ~~March 31,~~September 30, 2023, we have a remaining commitment to USF to donate ~~an aggregate~~ $4.7 million through October 2028. The gift will provide support for the School of Risk Management and Insurance in the USF Muma College of Business. It is currently anticipated that Lowry Baldwin, our Board Chair, will fund half of this commitment.

Tax Receivable Agreement

We expect to obtain an increase in our share of our tax basis of the assets when BRP’s LLC Units are redeemed or exchanged for shares of BRP Group’s Class A common stock. This increase in tax basis may have the effect of reducing the future amounts paid to various tax authorities. The increase in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

We have a Tax Receivable Agreement that provides for the payment by us to the parties to the Tax Receivable Agreement of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of (i) any increase in tax basis in BRP Group’s assets and (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the tax receivable agreement.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2023, we redeemed ~~834,641~~2,018,824 LLC Units of BRP on a one-for-one basis for shares of Class A common stock and cancelled the corresponding shares of Class B common stock. We receive an increase in our share of the tax basis in the net assets of BRP due to the interests being redeemed. We have assessed the realizability of the net deferred tax assets and in that analysis have considered the relevant positive and negative evidence available to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. We have recorded a full valuation allowance against the deferred tax assets at BRP Group as of ~~March 31,~~September 30, 2023, which will be maintained until there is sufficient evidence to support the reversal of all or some portion of these allowances.

SOURCES AND USES OF CASH

The following table summarizes our cash flows from operating, investing and financing activities for the periods indicated:


		For the Three Months Ended March 31,							For the Nine Months Ended September 30,
(in thousands)	(in thousands)	2023		2022		Variance		(in thousands)	2023		2022		Variance
Net cash used in operating activities		$	(14,031)	$	(3,433)	$	(10,598)
Net cash provided by (used in) operating activities								Net cash provided by (used in) operating activities	$	22,799	$	(16,653)	$	39,452
Net cash used in investing activities	Net cash used in investing activities	(5,099)		(3,132)		(1,967)		Net cash used in investing activities	(16,948)		(407,466)		390,518
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(24,522)		22,736		(47,258)		Net cash provided by (used in) financing activities	(41,928)		446,999		(488,927)
Net increase (decrease) in cash and cash equivalents and restricted cash	Net increase (decrease) in cash and cash equivalents and restricted cash	(43,652)		16,171		(59,823)		Net increase (decrease) in cash and cash equivalents and restricted cash	(36,077)		22,880		(58,957)
Cash and cash equivalents and restricted cash at beginning of period	Cash and cash equivalents and restricted cash at beginning of period	230,471		227,737		2,734		Cash and cash equivalents and restricted cash at beginning of period	230,471		227,737		2,734
Cash and cash equivalents and restricted cash at end of period	Cash and cash equivalents and restricted cash at end of period	$	186,819	$	243,908	$	(57,089)	Cash and cash equivalents and restricted cash at end of period	$	194,394	$	250,617	$	(56,223)

Operating Activities

The primary sources and uses of cash for operating activities are net income (loss) adjusted for non-cash items and changes in assets and liabilities, or operating working capital, and payment of contingent earnout consideration. Net cash ~~used in~~provided by operating activities increased ~~$10.6~~$39.5 million year over year, driven by decreases in cash of $11.4 million relating to net income (loss) adjusted for non-cash items and $13.0 million relating to a higher balance in premiums, commissions and fees receivable resulting from revenue growth and the timing of revenue recognition under direct bill policies in employee benefits for which payment is received monthly through the duration of the year. We also had an increase in cash relating to ~~a decrease in~~lower contingent earnout consideration payments in excess of the liability recognized at the acquisition date of ~~$10.3 million.~~

$26.3 million and better operating leverage year over year.

Investing Activities

The primary sources and uses of cash for investing activities relate to cash consideration paid to fund Partnerships and other investments to grow our business. Net cash used in investing activities ~~increased $2.0~~decreased $390.5 million year over year, driven by ~~an increase~~a decrease in ~~capital expenditures~~cash consideration paid for Partnership activity of ~~$1.7~~$389.2 million as a result of ~~software development projects for infrastructure to support our business, including key customer relationship management software, and other purchases to support our growth.~~an overall decrease in Partnership activity during 2023.

Financing Activities

The primary sources and uses of cash for financing activities relate to the issuance of our Class A common stock; debt servicing costs in connection with the JPM Credit Agreement, as well as purchases, sales and settlements of interest rate caps to mitigate interest rate volatility on that debt; payment of contingent earnout consideration; and other equity transactions. Net cash provided by financing activities decreased ~~$47.3~~$488.9 million year over year to net cash used in financing activities of $41.9 million, driven by a decrease in net proceeds from borrowings on our credit facilities of ~~$60.0~~$503.4 million, offset in part by an increase in cash from fewer payments of contingent earnout consideration up to the amount of purchase price accrual of ~~$9.3~~$20.4 million.

CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements are prepared in accordance with GAAP, which requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our estimates, judgments and assumptions are continually evaluated based on historical experience, known or expected trends, independent valuations and other factors we believe to be reasonable under the circumstances. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

There have been no material changes in our critical accounting policies during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 as compared to those disclosed in the Critical Accounting Policies and Estimates section under Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K filed with the SEC on February 28, 2023.

RECENT ACCOUNTING PRONOUNCEMENTS

Please refer to Note 1 to our condensed consolidated financial statements included in Item 1. Financial Statements of this report for a discussion of recent accounting pronouncements that may impact us.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential loss arising from adverse changes in market rates and prices, such as premium amounts, interest rates and equity prices. We are exposed to market risk through our investments and borrowings under the JPM Credit Agreement. We use derivative instruments to mitigate our risk related to the effect of rising interest rates on our cash flows. However, we do not use derivative instruments for trading or speculative purposes.

Our invested assets are held primarily as cash and cash equivalents and restricted cash. To a lesser extent, we may also utilize certificates of deposit, U.S. treasury securities and professionally managed short duration fixed income funds. These investments are subject to market risk. The fair values of our invested assets at ~~March 31,~~September 30, 2023 and December 31, 2022 approximated their respective carrying values due to their short-term duration and therefore, such market risk is not considered to be material.

At ~~March 31,~~September 30, 2023, we had ~~$836.0 million~~$1.0 billion and ~~$485.0~~$324.0 million of borrowings outstanding under the Term Loan B and the Revolving Facility, respectively. These borrowings bear interest on a floating basis tied to either the prime rate or one of various other variable rates as defined in the JPM Credit Agreement. The ~~variable rate currently in effect for the~~ Term Loan B accrues interest at term SOFR plus a credit spread adjustment between 11 bps and 43 bps based on the term SOFR rate plus an applicable margin of 350 bps, subject to a term SOFR floor of 50 bps. Borrowings under the Revolving Facility ~~is LIBOR and~~accrue interest at SOFR ~~respectively.~~plus 210 bps to SOFR plus 310 bps based on total net leverage ratio.

We have entered into interest rate cap agreements to limit the potential impact of interest rate changes on cash flows. The interest rate caps limit the variability of the applicable base rate to the amount of the cap. The interest rate cap agreements in place at ~~March 31,~~September 30, 2023 mitigate the interest rate volatility on $300.0 million of debt to a maximum base rate of 1.50% through March 2024 and mitigate the interest rate volatility on $1.2 billion of debt to a maximum base rate of 7.00%. through November 2025. Taking the interest rate cap agreements into consideration, an increase of 100 basis points on the variable interest rates in effect at ~~March 31,~~September 30, 2023 would ~~increase~~have increased our annual interest expense for the JPM Credit Agreement by ~~$10.2~~$10.3 million.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2023 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our senior management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~March 31,~~September 30, 2023, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity.

ITEM 1A. RISK FACTORS

See the risk factors outlined under Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, ~~AND~~ USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

The following table provides information about our repurchase of shares of our Class A common stock during the three months ended ~~March 31,~~September 30, 2023:

Total Number of Shares Purchased(1)
Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Value that may yet be Purchased under the Plans or Programs
January 1, 2023 to January 31, 2023 63,534 $ 25.14 — $ —
February 1, 2023 to February 28, 2023 143 31.05 — —
March 1, 2023 to March 31, 2023 106,563 26.32 — —
Total 170,240 $ 25.88 — $ —


	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Value that may yet be Purchased under the Plans or Programs
July 1, 2023 to July 31, 2023	26,949	$	24.79	—	$	—
August 1, 2023 to August 31, 2023	21,547	24.82		—	—
September 1, 2023 to September 30, 2023	3,246	26.62		—	—
Total	51,742	$	24.92	—	$	—

__________

(1) We purchased ~~170,240~~51,742 shares during the three months ended ~~March 31,~~September 30, 2023, which were acquired from our employees to cover required tax withholding on the vesting of shares granted under our Omnibus Incentive Plan or Partnership Inducement Award Plan.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~As previously reported, we are a party~~On November 7, 2023, the Company announced its mutual agreement with Kris Wiebeck and John Valentine for each to retire from their respective positions as Chief Strategy Officer and Chief Partnership Officer effective at the end of the Company’s 2023 fiscal year. In connection with his exit, Mr. Wiebeck has also resigned from his position on the Company’s Board of Directors and all Committees on which he served, and the Company’s Board and such Committees will be reduced by one member, effective at the end of the Company’s 2023 fiscal year.

Pursuant to a ~~Stockholders Agreement executed~~retirement agreement and general release, in consideration of each executive’s agreement to (a) permanently retire from the insurance industry, (b) release the Company and its affiliates from all releasable claims and (c) adhere to an enhanced set of restrictive covenants, the Company has agreed to (i) pay each retiring executive $4,000,000 in cash ($2,560,000 of which represents severance compensation and $1,440,000 of which represents early payment of the 2023 bonus otherwise payable to each retiring executive under the Company’s 2023 annual incentive plan in respect of 2023 performance), (ii) provide COBRA contribution at comparable levels for up to 12 months following the retirement date and (iii) permit the continued vesting of all outstanding restricted stock and performance-based restricted stock unit awards held by each departing executive subject to all conditions of the applicable award agreements, aside from the conditions relating to continued employment. The payment and other severance obligations will be made in lieu of any other compensation payable to either departing executive under the Company’s 2023 annual incentive plan in respect of 2023 performance. A copy of the retirement agreement and general release will be filed with the Company’s 2023 Annual Report on Form 10-K.

In connection with ~~our initial public offering (~~“~~IPO~~”) ~~with~~each executive’s departure, the ~~persons who were members of BRP prior to our IPO. Pursuant to the terms of the Stockholders~~Voting Agreement ~~so long as the pre-IPO members of BRP~~by and their permitted transferees (collectively, the “Holders”) beneficially own at least 10% of the aggregate number of outstanding shares of our common stock (the “Substantial Ownership Requirement”), the Holders, acting through approval of the Holders holding a majority of the shares of our Class B common stock held by all of the Holders, have (i) approval rights (the “Consent Requirement”) over certain transactions and actions taken by us and BRP (the “Specified Matters”) and (ii) nomination rights with respect to certain members of our board of directors (the ~~“Board” or the~~“~~Board of Directors~~”)~~, in each case as set forth more fully in the Stockholders Agreement.~~

On February 8, 2023, a complaint was filed in the Court of Chancery of the State of Delaware (the “Complaint”) alleging that the Consent Requirement with respect to three of the Specified Matters violates Delaware law and our governing documents. We and the Holders disagree with the assertions in the Complaint.

~~Nevertheless, to reaffirm its commitment to sound corporate governance and potentially spur resolution of the pending litigation, at the request of our Board of Directors,~~among Lowry Baldwin, Baldwin Insurance Group Holdings, LLC, an entity controlled by Lowry Baldwin, Elizabeth Krystyn, Laura Sherman, Trevor Baldwin, Kris Wiebeck, John Valentine, Dan Galbraith, and Brad Hale, and certain trusts established by such individuals, will be amended to remove Kris Wiebeck and John Valentine, and their related trusts, as parties effective December 31, 2023.

Insider Trading Arrangements and Policies

During the ~~Chairman~~quarter ended September 30, 2023, none of our ~~Board of Directors and~~directors or officers adopted or terminated any contract, instruction or written plan for the ~~Holder of~~ ~~a majority of the shares~~purchase or sale of our ~~Class B common stock held by all~~securities intended to satisfy the affirmative defense conditions of the Holders (the “Majority Holder”), and the Company have entered into a consent and defense agreement (the “Agreement”). Pursuant to the Agreement, Majority Holder has irrevocably consented to and approved, ~~on behalf of itself and the other Holders,~~Rule 10b5-1(c) or any ~~Specified Matter that the Independent Committee~~non-Rule 10b5-1 trading arrangement (as defined ~~below) determines~~ in ~~good faith is in the best interests~~Item 408(c) of our Company and its stockholders in their capacity as such, in satisfaction of the Consent Requirement with respect to such Specific Matter. Further, Majority Holder irrevocably agreed, on behalf of itself and the other Holders, not to designate any nominee for election to service on our Board of Directors if the Independent Committee determines in good faith that action by the Board of Directors in furtherance of the nomination of such person to the Board of Directors would not be in the best interests of our Company and its stockholders in their capacity as such.

The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreement, attached hereto as Exhibit 10.1, which is incorporated herein by reference.

~~In connection with the Agreement, our Board of Directors, with the consent of the Majority Holder under the Stockholders Agreement, has amended our Amended and Restated By-Laws to, among other things:~~

•Create a committee of the Board, composed of all Directors then in office who the Board determines both (i) qualifies as an independent director under the corporate governance standards of Nasdaq and (ii) has no relationship with the Corporation or any Holder that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director (such committee, the “Independent Committee”);

•~~Empower the Independent Committee, acting unanimously, to make any and all determinations contemplated or required by the Agreement;~~

•~~Make certain conforming and clarifying amendments in connection with the foregoing.~~

The foregoing description of the amendment to our Amended and Restated By-Laws does not purport to be complete and is qualified in its entirety by reference to the full text of the amendment, attached hereto as Exhibit 3.4, which is incorporated herein by reference.Regulation S-K).

3741

ITEM 6. EXHIBITS

The following exhibits are filed as a part of this Quarterly Report on Form 10-Q:


Exhibit No.						Description of Exhibit
3.1						Amended and Restated Certificate of Incorporation of BRP Group, Inc. (incorporated herein by reference to Exhibit 3.1 of the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 31, 2019).
3.2						Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 of the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 15, 2020).
3.3						Amended and Restated By-Laws of BRP Group, Inc. (incorporated herein by reference to Exhibit 3.2 of the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 31, 2019).
3.4*3.4						First Amendment to Amended and Restated By-Laws of BRP Group, Inc. (incorporated herein by reference to Exhibit 3.4 of the registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 9, 2023).
10.1*10.1						~~Consent~~Amendment No. 7 to Credit Agreement, dated as of September 15 , 2023, by and ~~Defense Agreement~~among Baldwin Risk Partners, LLC, a Delaware limited liability company, JPMorgan Chase Bank, N.A., as the Administrative Agent, the Guarantors party thereto, the Lenders party thereto and the Issuing Lenders party thereto (incor porated herein by reference to Exhibit 10.1 of the registrant ’s Current Report on Form 8-K filed with the Securities and Exchange Commissions on September 19 , 2023).
31.1*						Certification of the Registrant’s Chief Executive Officer pursuant to Rule ~~13a-14~~13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of the Registrant’s Chief Financial Officer pursuant to Rule ~~13a-14~~13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32**						Certification of the Registrant’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*						XBRL Instance Document
101.SCH*						XBRL Taxonomy Extension Schema Document
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*						XBRL Taxonomy Extension Label Linkbase Document
101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document
104*						Cover Page Interactive Data File (formatted in inline XBRL and included in Exhibit 101)

__________

* Filed herewith

** Furnished herewith and as such are deemed not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

3842

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		BRP GROUP, INC.

Date: ~~May 9,~~November 7, 2023	By:	/s/ Trevor L. Baldwin
		Trevor L. Baldwin
		Chief Executive Officer

Date: ~~May 9,~~November 7, 2023	By:	/s/ Bradford L. Hale
		Bradford L. Hale
		Chief Financial Officer

3943