- Earnings call transcript Q3 2022

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Operator

Greetings, and welcome to the BRP Group, Inc.

Third quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. A formal question-and-answer session will follow the presentation. [Operator Instructions] As a reminder, this conference is being recorded. to Executive conference Director like host to now Bishop, Bonnie Investor would turn over the your I Relations. Please go ahead.

Bonnie Bishop

Thank group's third call to the earnings Welcome Today's recorded. is you, call. being quarter operator. XXXX BRP

may assumptions, quarter company's include this and materially ir.baldwinriskpartners.com forward statements. subject earlier differ Please looking results are company's remarks actual that various on afternoon information Form statements are and Third contemplated XX-Q risks financial those made The issued by note the results available and uncertainties. website supplemental from today to may such

detailed all For periodic our subsequent regarding released which the on of most the please for more statements earnings XX-Q, and XX-K filings, discussion, are note available including refer to company's website. to recent BRP forward-looking our the this most and quarter, form in recent

call the During discuss also the may financial today, certain measures. non-GAAP company

non-GAAP announcement detailed BRP to company's please dot more earnings of at the discussion posted Chief the have IR information, I now call Baldwin, on the closely Baldwin of been turn a refer Executive comparable most to reconciliations group. company's over will For measures measures, website and of both GAAP Trevor these partners.com. Officer and which risk historical the supplemental to financial

Trevor Baldwin

followed questions. from business everyone. I and Brad you, XXXX and our remarks then third with who take for earnings start financial And quarter will quarter select highlights call. Good Thank by Bonnie. joining Brad, afternoon, few will a of you address thank us on the I Chris will

number our X the loss movement among has led slow response Ian I'd to The the storm much and I'm incredibly of significant costliest a live Florida in costliest to Hurricane of into likely a stakeholders event the have about proud scale the seen. the get community impact across to country been of Hurricane insurers and strength, colleagues for moment category insured will which and the that communities industry proportion results. of tirelessly and work. our make our facilitate we recovery take of severity of to who in rebuilding. the a and clients, I with from loss pace support sheer Ian, our Before to a like storm history and needed working talk

solve obvious challenges of of clients top expansion of all XX% by the relative were XX% communities, highlighted industry expertise, with EBITDA to the individuals, including organic impacts growth to results, or margin organic and of of show of will prior our a return. meaningful a investments This severe breadth terms can real capacity. evidencing line a the signs and early basis strong in that XXXX the segments MGA. our XXX% compared four organic made third result business, in Adjusted was nearly of best quarter top quarter of growth achieving It's record as to beginning our up the XXX quarter are our for ever. market Beyond of accelerating points record reverberations growth financial and in near growth we've share. we which was of year for strong to exceptionally cost there This positioning results, in solutions us prospects to excel third market our on the innovative depth families type insurance take availability is be across performance in access, and and quarter but demonstrated

talent remains capabilities the our and footprint. across segments and seeing pipeline partners MGA, new across investments and deployment of continue in continue financial quarter accelerate In go-to-market new In all the of a outsized our our as In distribution during of the wins performance the business. to sales expertise client and advisor positive to underlying the generated momentum encouraged by middle we've year-to-date, we're to be of market, the more result addition incredibly national we execution strong.

an Our enrollment result Mainstreet, organic and solid solid over in and quarter MGA the our into fourth increased results annual housing improved during over into erosion from two XXXX. we've results in yet fundamentals. driven course And made driving efficiency will of seeing quarter, organic the a results, to as we've has a and numbers meaningfully impact national XX% in we're revenue the XXXX. started fully the into in product rollout prudent organic while quarter model in start our growth durability to a a success early launched being should digital growth growth to in newer by our growth investments fourth in of excess factor despite strong enrollment of of meaningful early grew the and business our XX%. of organic rollout roll Medicare, In organic seen and our and October. partnered The result the business continues our the Westwood, period the of firm quarters of consecutive platform been be not results market in of our count, overall we home insurance that In have agent growth

well conditions certainly to mandatory nature and purchasing, future, positioned, insurance especially and footprint of challenged, While are foreseeable are the domestic continue our business base. incredibly likely client for remains so resilient of given our economic to global be largely and the

positions believe times volatility. we of breadth well earlier, market us and our share insurance unique of mentioned solutions economic approach take and to stress I during As

world. colleagues who to clients partners, particular, and advice, been to our solutions have And Brad. I with risk colleagues turn in propel outstanding growing exceptional delivering call and the the built now value our help navigate that, I'll and with want trading of changing thank our to outperformance. our continued to our over purpose ever complexity clients, counsel, Our environment today's

Brad Hale

afternoon, Thanks, Trevor. And good everyone.

XX% for We in $XXX compensation all making. growth. signs are net for million, quarter we can third time other the success third seeing one filed to in $XX.X partnership double holding quarter of or compared operating from of with the to expenses, The earn loss to operations segments was reconciling these And items XXXX For Organic costs tied fiduciary well XX% million diluted of growth SEC. compared million. $X.XX organic have income of results third were the fair change prior based strong period. to our which associated with flow cash the Adjusting $X.XX flowing net in EBITDA $XX.X recorded million of million on third and to to earnouts loss by one release, The time in million of largest cash loss revenue margin of amortization to per diluted achieving the a our fully highlights our found today. we quarter million, reconciling amortization quarter and quarter in and net rose million table digit the momentum and income been excludes quarter $XX accounts XX% free XX% growth in through we or year earnings in value receivable integration of partnership. related the million have was growth GAAP Adjusted integration $XX $XX $X.X share third significant the XX-Q per the $XX costs approximately the the A of was early year-to-date growing year our XXX% with EBITDA XX% of of to compared share. prior adjusted GAAP payable Adjusted third improved and of the business fully out in largely net share. $XX.X investments cash be Westwood Adjusted grew for XXXX, top four change XXXX. accounts XXXX. as flow, the organic as for strength

Next, a of quarter fourth the summarize the few for full expectations I'll year items regarding XXXX. and

to organic should of equate of growth in fourth we organic XXXX, XX%. the for to for which the the generate approximately full expect First, quarter growth year high-teens,

in to XXXX compensation levels. winds, revenue back we Note higher that At EBITDA for level deal provide an the to our adjusted of flat of $XX end to growth we $X.XX a million of of based XXXX. $X.XX year. will half addition, be expect want on XX% a revenue million, of $XXX and anticipated approximately normalize and do represents at million EPS not for comes roughly the preliminary quarter XXXX $X.XX organic QX clients growth million. range XXXX to million variable following now call. to of renew and We have fourth year to year We $XX which week, plan client better expect million new the regularly of we accretive give guidance margins the But advance in Day expect our fiscal at $XXX margin during look to billion than to next to this time, as the those for our acceleration at In to approximately that EBITDA of $XXX just inaugural which of high Investor XX% adjusted in to up adjusted $X.XX. of $XXX year billion seen with following XXXX, we

to also In our in negative to term end range slightly our revenue economic XXXX. flow these down GDP times resilience expectations note We'd ahead. acquired but cash We developing X.X free near bring X.X and expect anticipate our organic the expectations, net of long high through leverage growth we our the runway remain broader conservatively strong business in confident also economy, growth assume of for no for the that and generation.

our cost partners, we BRP. but of to combination wide, across market Day. of which given into outcomes still XX these the business look has fourth all its to you into private results with not buoyant that, November exceptional thank powers much carry continue your summary, prospective stakeholders. Investor our the has In again expectations. excellent of We and on and I way in capital, return with We in forward With are to to we our will enabled I entering pricing want performance at whose thank of year must colleagues for you and our higher strong measured speaking had engage worked us tenacity time your the quarter. models industry and with interest grit and for inaugural momentum deliver all valuations,

the Q&A operator? up open now will We for call

Operator

session. this the be question ahead. time, of Please conducting a line with question-and-answer At James. Raymond go a Instructions] [Operator We you. Greg from first we Thank have will Peters

Greg Peters

everyone. Hey, good afternoon,

revenue in specialty. specifically will markets on results question on be first organic growth middle The and

property specialty. organic or the and the you And you the I'm group wins. on going some you strong the middle I'm reporting to that how talked unpack with might And headwinds challenges Trevor, mentioned going we that client result. compared itself that detail the Maybe that's as in then For think about markets, can some that to of market intrigued of in forward. manifest relatively you're Florida. about peer results curious just

Trevor Baldwin

and Greg, the question. afternoon, Good Yeah. appreciate

us product footprint. and showing enable of our best capabilities, it's the investments showcases That's start that of matter the day. value depth result of wins, industry clients, building it to sector in with thoughts. they and clients So to that's And to we're driven broad showing reality and client to that results middle are how believe proud bring exceptionally the we and newer centers every our access a that strength of new no being the of in larger an incline our one, And the they national where through making reside, up across excellence is market, by resources, our and been base colleagues wins. our risk we've those wins, results. new are organization that acceleration And up and showing delivering of

know, expertise, anticipating type of dislocation mentioned, we think as the us more to market about take for the property we're of in breadth of solutions the a hasn't industry and ultimately where access, period market share. enter market seen bring positioning that excel clients, we As enable we're depth us I solve that's our you business, our But our real the going that that to uniqueness specialty to in market of the and is of decades. where the developing particular problems to

what marketplace, and more than at that that in results is bring position capacity, Specifically setting able capacity managing reinsurance of capacity to clients. in nimbly, up market the many us difficult believe underwriting and access and to providers, the specialty capacity more very delivering our we'll for done to to a profitable responsible be to job be we've our going scale our competitors business, we uniquely

Greg Peters

the talk, I year year. then take and to guidance guidance EBITDA I'm right. your And about that to going I'll to probably you All full guidance next the implied with wondering that a a that for and pretty crunch but for for and is what lot with could numbers what minute if adjusted offline. this compares going unpack full trying There's pivot year. EBITDA how adjusted the quickly, to I'm that the Brad is to guidance the offline. year. take for the guidance revenue was I'm margin for the answer

Brad Hale

Yeah. Good afternoon, Greg.

in of next in in margin light takes range years to tune said roll But funding and the QX that, So amount to here, results. our if it forth we're it will relatively work basis three you provided look why that We've the a made budgeting in be we approximately note and, through the sort expansion and at fine points would years. the about that continuing I XXX as range. is put which those in process that's And at of absorbing of before, broad we year. investments we still last business finish fully look significant to, two a we've of for

see really organic you again in continuing impact the that saw the you're that we're QX, numbers QX. to growth, in you saw So seeing,

have We in to absorb the investments they expect But we continuing even XXXX. that impact mature business. more to those as are in

Greg Peters

Thanks it. clarification. for Got the

Brad Hale

Thanks, Greg.

Operator

Thank you.

the have Shields next with question line We Meyer KBW. ahead. of go Please from

Meyer Shields

contraction, the just guess that more wondering, talk, about Thanks. going a consideration Trevor, talked less terms in of real clients GDP or on attrition? the expectations. maybe nominal of forward. that guidance I'm there's to are to is Two questions, And I whether inclined in addition distracted specifically, you

Trevor Baldwin

Mayor. Hey,

Brad let add commentary in but question I'll around client the then the distraction. So I'll some GDP, on take

are to just to be limit securing the general opportunity of type real the as is it's difficulty of of relative us marketplace. of anticipating pick for kind that securing result in the to a year up anticipating we're that clients share buying insurance what going seeking. and next behavior So terms dislocation a of And client we're the conditions

out, breadth of type to deliver for share depth solutions so really our mentioned like that need As we clients, for from existing enable feel the expertise tend to to look stand and take earlier, that's where of outcomes and excel us also to and I market where others. capabilities and really don't they for, fantastic advice they

Brad Hale

Meyer. real And that's GDP,

Meyer Shields

any the And Okay, there question side? I can. thanks. that Is That's just explicit final if in pay leverage on then helpful. debt debt one down

Brad Hale

Yeah, if free number. cash it Meyer, so a million million We generate, you $XXX let's conservatively call adjusted EBITDA step million through million on $XXX if that, you $XXX in or $XXX flow.

cash that generating, assuming our a So amount to net we again, flow down. are free contribute leverage to conservative we'll of be coming

Meyer Shields

All so right, perfect. Thanks much.

Brad Hale

Thanks, Meyer.

Operator

Thank you.

Greenspan We Fargo. have ahead. next question from the line Wells of with Elyse Please go

Elyse Greenspan

first guide by guys, question next where Hi, of string really right, periods, of high thanks. in My XXXX. but in environment been the range, like you XX% it sounds better organic lines strong your pricing said you could Good end And XX% is coming on Right, a for you've that expectations. get than had evening. a the we have year, to especially impacted the Ian.

in a a chance of is target? guy like, So sense support what to And us that XX% you're expectations the above baseline maybe there can you range? that pricing XX% you to give conservatively that trying the could come

Trevor Baldwin

Hey, afternoon. Elyse, good

of and So the year. anticipating there's to next takes puts a an environment insurance lot of type we're

and property, also so contemplated buying so behaviors, particularly in organic cap of pretty to them What change is we're all deductibles. meaningful tends see in tell And expecting is larger you rate, guide. I clients that take that the while would you'll

limit. less by them see You'll

wouldn't a so the we're of expect overall. into pass and you through organic And growth of expecting or the rate kind from level correlation a straight

all the how feel we're, of positioned outcomes we appropriately like thinking we're expectations year, drive so well our continue fantastic feel next about results and to to and and to stakeholders. for we're And conservative

Elyse Greenspan

see new that right, also that within this fully another I those you guide, years impact of starting quarter. you three made guess talked you and question, to about organic an investments Also, said, in. the hires to takes about it the right, for roll then But

from the for year that impact to assuming you're guide that hires what's within the next full year? embedded XX%, revenue what on So XX% new

Trevor Baldwin

a what so both And show in the our tell making be versus can to meaningful we've is, going of business. being hires investments the growth result and of break business quarter-over-quarter for couple to earn our up And been I But to you meaningful the specifics, in beginning results continue over you year. success Yeah, and we years next relative contributor actual to new ongoing the expect that part from through quarter. I'm results and not that past a to an is acceleration year-over-year acceleration out Elyse, come to client and saw third wins.

the the model, us relatively is marketplace clients, business really So to enable deliver execution in economic And strong to of somewhat how and expecting positioned. to we're insurance what we're despite business feeling be volatile consistency for about and our environment. a going difficult strength is our good

Brad Hale

add it's the I'd to XX% clarify, XX%. high least At in just to end of

Elyse Greenspan

and high color range? XX% to will Yes, give that of of to within can then XX%, the be do you any on all segments segments guide? you your well, us Or within the that relative expect end

Trevor Baldwin

to at going this during around investor day, into segment week. segments but not more next our color Elyse, that provide we'll point, plan level get some We're to performance

Elyse Greenspan

last one Okay, and on then M&A the side. one

to there's just put out that a you up ramp guide? you conservative So get of to just What sidelines trying work your not going next what's you to is just of deals revenue start assuming if range? year, you that the could any or I you're acquired said I'm get mean, sense a until leverage acquired debt to within that determine acquisitions the or along, as you the trying down? not cause within get revenue, to on could kind come there's guide you? when again. whether Are your

Trevor Baldwin

for not result is out year input the One, two that. as Elyse, expectations so things. sets, it's overwhelmingly of M&A a broader next where leverage pulling Yeah, than a

team, conjunction our that, on into as changed be cost to I has the we're and to the the overall view So capital. making capital. in increase management with reflect of investments would allocating business. the And we role tremendous a environment been environment And you results is in in not the we've part the we of having success fantastic pricing external assess today, what tell as

said, of today a And that's what we're balance prioritizing sheet so With volatility. from that a allocation on period strengthening remain focusing capital our opportunistic. perspective, and during we

We the will responsibly and number today's of get continue year, on to evolve. we look with done, don't for right a but We to high-quality can that that opportunities, backdrop. dialogue opportunities next have things based expect

Elyse Greenspan

Thank you,

Trevor Baldwin

Thanks, Elyse.

Operator

Thank you.

We have with ahead. next Bank line America. question of Shanker go of from the Please Josh

Josh Shanker

XX% for I you about talk of would significant, MGA how in the you much my courts, Westwood, with you future noise QB imagine but one third Thank little generated a given taking revenue Yeah. nature. some picked the the don't this from in obviously question. some most can but kind I give was of quarter, that you growth growth in the detail assume of relationship up is is time

Brad Hale

great Yeah, Josh. question,

One, So, clarify. MGA a administrator program agreement sands the QBE the to growth things few XX%. was

in a business the of that still administrator the contribution that the built you necessarily to has one somewhat as time the to So while into from and kind organic the for see. quarter, into QBE that thing is MGA's that's program characterize agreement, overall XX% program it's the results that growth is you're nature, And reoccurring XX% results, incredibly other strong. rolling in that of I because one wouldn't time growth clarify book uplift it seeing our and growth

it driving something that. the the start at agreement, expect had the been But you just we're a have that to would seeing been book, flat results, of would growth we the And than line we're wouldn't taken less of that program, so into if of accelerated because have that and contribution XX%, administrator program continue. the

Trevor Baldwin

PA -- elimination organic know, Hey, in the growth. provide and with some consolidate interplay Westwood Josh, we additional between disclosure, add, you to the with organic the I'd also tried and growth MSI intercompany, and calculating on

that And, out it's intercompany I because clearly think the I we think organic walk been backing calculation, So growth. you calculating there's through some were transactions supplement, confusion. of can Page X and

Josh Shanker

that XX%. That's not did great. growth general, along you And is what the my give was Westwood, past any lot there? then relationship. given us XX started within growth you can over in the sort of In organic color you and the a months? the QBE efforts XX% acquisitions

Brad Hale

see of our team play of Yeah, that look growth with if the businesses of and of allocation seeing that businesses sense as actually you XX% partnered you with the our partnering not testament of at are as for everything that than help including you'll bottom is supplement us saw it's growth, the better including which higher can X as you that out. the business the the the we I that to very from Page Josh, capital last actually than make owned was to businesses we a growing whole, yet a better, there, XX/XX/XXXX. the fact the a make acquired the And And line organic that gives that proxy revenue XX%, growth parts faster for which and business so you highlights certainly it's at you're that the contributing total year calculation. that of last well. last a BRP business, year, business today for overall see it those can acquired And focus think on year, the organic

Josh Shanker

the answer. I've greater should how been than to information have out? very always please. And MGA giving an It be and BRP three how about be out? future. out And into could four not years far number, a talks many will is Is about MGA maybe that get the look the about I you careful futures in down thinking? future years one be the you Is margin exact but when years the whole. EBITDA may the that of But we as margin doesn't it think out more, out

Brad Hale

that on day. some next at light investor shed the will being think I Josh, week

Josh Shanker

that. much. All you right, very take I'll Thank

Trevor Baldwin

Josh. Thanks,

Operator

you. Thank

Please We question go Weston Bloomer with line ahead. the UBS. from have next of

Weston Bloomer

Hi, I get as thanks. are may missed $XX you on well? expectations your My a the disclose much put making question your to investments how work in of comps sense of have year-to-date? for And margin kind and business. of on to did year-over-year but is million the I'm what just investments. you're then has those been this, the XXXX trying

Brad Hale

Yeah, Weston.

So yeah, can we update. did But is investments as not as we're year. that into this far of you give basically the rolling making year, ratably think the those

on with was So the year. I to were we it are pace commitment we going made earlier million in believe $XX make we year. this the

to As we've specifying described next investment I are investments say you made over But is to rollover business. I for outside course any we of not look currently last continue business. years, as of that would before what year, significant in impact sort the of matures other get denovo the two we the normal the

Weston Bloomer

you that the of in it. will half be of you most the for Or first the technology you'd you of to that kind well? hires last year. And Got hires have be nature? do And said and things move of as forward as Do investments XXX I new quarter, other the number expect in XQ? think investments

Trevor Baldwin

Yeah, Weston. hey,

XXX a quarter. approximately so people And in we third the hired

to in into So into be even come is for And tell half business. of would our build investments the They the the tend are technology what investments related, on and largely our technologists talent basically first that with in are technology who business you trend I oriented. the year.

Weston Bloomer

questions. taking Great, my thanks for

Trevor Baldwin

Weston. Thanks,

Operator

you. Thank

with next have from the of Singzon question ahead. a Please go line JPMorgan. in Pablo We

Pablo Singzon

debt. your you're just was afternoon, rates I are good if expectations interest hoping you your Hi, could pay given planning where provide in for next the perspective guess, I year, down and for Thanks. expense

Brad Hale

Yeah.

into pretty are of do in interest like, We here And year. what cash cash interest. free We effectively increase look in outline the today, supplement the we're even significant debt expectation were increases. So, already will as paying debt Pablo, in rate to we XXX% able our increase we build what experiencing flow, use cash our next our in exact forward to curve going earning variable outstanding. to light

Trevor Baldwin

next from earlier as free million we interest guide that flow can EBITDA and we cash provided. paying get $XXX $XXX about, And probably Brad about talked million after of think year we

significant closer range to still debt created to we've X.X X.X that about. to our long capital term near the So levels down manage talked

Pablo Singzon

add then Got of is, free we where it. so just we are guy's far to cash and and second my from guess, see your want I perspective, the question flow XXX negative the in as at XXX actually done year, you've to million, think was cash next I fourth of Because $XX year, trajectory I I year-to-date XX% right? And about what bridge get EBITDA. going that's adjusted last look quarter. the And to

So just what to I with next you for regard good pretty how think about guess results to year. a see

from pattern You're what the year, have getting year? just last guys and, next you planned for Thanks.

Brad Hale

our a XXX. the high XXXX bridge thinking the to problem. continuing we're through But budgets. provided of way to finalization about Yeah, is, I if you I take high level XXX on And can give EBITDA you adjusted range work level again, really a our we're

our flow. cash of and integration into two That's you $XX those a how at on year, we've backing range, flow million elements. $XXX If million rate calculate million for EBITDA us of are interest next we partnership Because run cash bridging costs. to adjusted well related provided free been somewhere from about of we're million range of in $XX the to the adjustments cash as to main as free in $XXX

Trevor Baldwin

QX Westwood big a in with whereas mismatch to much cash between weighted. comparing whereas year, Pablo, year, add expenses last front and there's you're the I this year very flow partnership year, partnership when year pretty this free loaded was to date the they're prior timing last it also very much

perfect And so there's comparison there. not a kind year-over-year of

QBE time in are being integration one the year, In are that Transition or bucket over. to because absorbed Westwood partnership significant of -- in QBE addition we that nature out because this of the there's to that, pretty expect expenses expenses Services and businesses reoccur not which would

Pablo Singzon

sense. it. That Thank you. Got makes

Trevor Baldwin

Thanks, Pablo.

Operator

back to call session. of Trevor you, for the closing reached we Over to have like remarks. Thank I gentlemen, the and end sir. the question-and-answer turn you And CEO ladies Baldwin, to

Trevor Baldwin

call. Thank at 'XX look for us you for third to our And forward next joining care. Day quarter earnings presentation. all inaugural you Investor our Take week we with speaking

Operator

Thank this gentlemen, concludes you. Ladies and today's conference.

may lines participation. you You this disconnect your your Thank for time. at

The Baldwin Insurance Group, Inc. (BWIN) 8 Nov 222022 Q3 Earnings call transcript