Earnings call transcript Q1 2023

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Operator

Greetings, and welcome to the BRP Group, Inc.

First Quarter 2023 Earnings Call. [Operator Instructions].

It is now my pleasure to introduce your host, Bonnie Bishop, Executive Director of Investor Relations. Please go ahead, ma'am.

Bonnie Bishop

operator. you, Thank BRP the Quarter XXXX of Welcome Group's Call. Earnings to First being is call recorded. Today's

results, Form company's First earlier information quarter supplemental financial and and available ir.baldwinriskpartners.com. this are XX-Q on at the website afternoon issued were

note statements. various risks may to differ remarks statements actual those from The assumptions, today include and may Please forward-looking that contemplated subject materially company's uncertainties. results made by such

Form in to please more to the website. recent statements detailed our forward-looking and release discussion, BRP refer both are the a which earnings For regarding company's the of available XX-Q, most note on

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

For both most detailed on closely of posted on which measures release website to financial the measures, a GAAP earnings more refer have ir.baldwinriskpartners.com. please been these historical non-GAAP company's comparable the the to information, discussion at supplemental reconciliations company's and and

Also, X, like Medicare reported for with merged January Mainstreet we the Solutions. everyone XXXX, our Insurance segment into that quarter, X and X BRP I effective reporting to our legacy in operates historically, as now versus the reflected would was remind segments on as have

Additionally, legacy our been segment segment legacy to to been Solutions. rebranded Technology Capacity Specialty Underwriting, & has and Solutions, Middle Insurance Advisory rebranded Market our has

Chief turn over now the I will of to Executive Trevor call BRP Baldwin, Officer Group.

Trevor Baldwin

business and Thanks, Brad the by from followed will our first select Bonnie. who will questions. I Chris for highlights you a Brad, will everyone, Good remarks, and few quarter financial start afternoon, answer joining thank quarter, earnings with and call. address then I

of organic revenue by in and We our across highest showcasing the growth EBITDA in Adjusted driven across of achieved our XX% advice since year, client million, strong platform. expectations. line XXXX growth by performance year-over-year, quarter growth organic outstanding was solutions demand for building to with our business. of our continued $XX the total IPO, XX%, on the start strong first the growth XX% first and representing a highlighted had We quarter the organic

Insurance first benefiting well. build-out lift suite, Solutions, organic continued from business umbrella formerly fully growth our acceleration business the homeowners exceptionally And growth our product via multifamily again, formerly Mainstreet included that of XX%, Capacity and Solutions, in our our the Advisory strong Standouts exceeded grew Specialty our exposure & in now the in XXXX and Solutions, had JGS XX%, that Underwriting, new organic outsized platform, robust with joined of Future rate from of focused MGA growth performed growth outstanding partnership and expectations. flows Middle we our segment, MSI quarter. Market, and of program commercial that saw organic through Insurance growth. habitational XX% Technology

real joined largest continues in BRP, of BRP, April, market. residential end acquisition headwinds up to $XXX XXXX of the in history estate a despite the the Westwood, Westwood the closing May Additionally, Westwood built. U.S. ahead. perform first bright of the that generated significant Westwood in partnership team has the strength have Through success We the annualized franchise, revenue, of gross year. represents of last XX% which as with their well year $XX run and we at a been million is Year his team underwrote to X the has future time from very believe testament the and Alan a rate million the exceptionally of which the full approximately of

year. these our investments, colleagues net approximately Over doubled years, significant build-out we and colleagues over a generation. growth the new organic adding the the power more capabilities X,XXX flow digital that the heavily of cash frame of than size a position us the and addition of long-term in many will X building for talented technology years, investments X free the and included invested tech-enabled to significance future. base per of past colleague To past more scale These we've

As I shortly, headcount absorbed in and have this concluded our shared the reinvestment fully cycle have our in business year we from we'll growth. prior major February, run call during rate payroll

see organic seeing beginning over these these growth, will profile just structural revenue investments benefits are to the have efficiency and into investments term. begin the our and this and expect in believe to we of investments long margin sustainable these our growth year advantages yield that we operational the While earnings earning enabled

sustain the we XX our sufficient of XXXX, through new a is first more our growth growth line a next total growth top XX that you months. momentum of a necessary headcount XX which represents added to give for normalized approximately colleagues, support sense current the rate we believe rate the for X top To of months in line to trajectory net to

see. remain Additionally, not soften we expect to partnerships committed as continue environment to XXXX, but to of with to transparency we that respect can it we expect we over is balance we that work. which marketplace reaffirm current to will currently Price the we shareholder into and a and starting we are the see time, continue opportunistic put any trend M&A market better to a deleveraging XXXX patient, remain our execute in the to do to material if belief takes are capital

growth, strong colleagues like thank and allow certain to continues stress organic for we for our trust that clients and insurance I'd day marketplace, continued driving in the to again outcomes their our of to our us and the our and in summary, positive our model clients client to areas are tirelessly execute In confidence, direct stakeholders. who once in all our value performance. deliver result delivered diversified resilient result a colleagues the day business Despite out. high of

our will Brad With results. detail financial that,

Bradford Hale

good Trevor, Thanks, everyone. and afternoon,

We of revenue X by $XX generated we down organic of XX% to double-digit paid in first For organic all million. generating the generated $XXX the growth In segments first reporting growth QX, with quarter, quarter. the quarter in growth the we million. XX%, revolver

our X.Xx less leverage within back of expect Looking organic long-term stated combination our of the growth continued generation range. reduce flow balance the cash and through or to the free we will year,

expenses, $XX.X We for GAAP share-based of income table diluted the be share. found onetime recorded or loss per of compensation, net which our release quarter amortization first reconciling excludes or million a our quarter can XX-Q share. per fully $X.XX other and Adjusted loss $XX.X first for net A the GAAP in income million diluted and net with adjusted SEC. earnings was $X.XX net to the filed fully XXXX,

X% the was $XX business to proportion million not the period. EBITDA significant prior change incremental first due was prior year growth quarter the in and compared in for fully of to absorbed. This million had that compared margin the approximately annualized margin $XX a $XX rose the XX% Adjusted the year decline to XX% Adjusted of prior period. EBITDA been in to quarter million recognizing expense of from payroll our headcount yet seasonality year for

as partnerships The approximately resulted changes that closed expect quarter fourth be in as is in which adjusted partnership to X in in in remaining in have large resulting QX, the points higher seasonality Westwood expansion. margin the of EBITDA full primarily the year well due now lower we to are XXXX quarters, that margin for

the mid-teens in our growth organic we XX% now full previous XXXX, the of guidance on year-to-date, performance across end we in includes to than are QX. which, higher of based our For expect high the organic seeing expectation growth mid-teens, for business and the XX% year an

to revenue than billion, million, million year previously now of $X.XX stated adjusted billion, $XXX expect $X.XX $X.XX stated the EBITDA of to million are $X.XX we full billion higher million from and raising $XXX Additionally, expectations up to $XXX to we $XXX range previously. our billion to

interest to For million, from backdrop, the of growth headwinds, challenging adjusted the to includes of $XX quarter Despite for million well ongoing EBITDA macro few results, institutions leverage, we first $X.XX an expect pullback which of $XX will in expectations adjusted potential EPS confidence second delivered credit which investments for our to higher revenue the in durable relative per flow that come. XXXX, These recent $X.XX years reflect rates drive and be strong as a cash the potential years. dislocation system XXXX years last for impacted of operating the between these quarter and to share. growth banking our anticipation record reinforce as continued we despite to

questions. We will Operator? now take

Operator

Instructions]. [Operator

from Meyer first The is from we KBW. Shields question have

Meyer Shields

in I about you in, sort break that that if some property. And of seems let's that continued be I you now are flesh in context. was a of you're of start, hard could could say, also hoping there widespread softening. of expectations market to if expectations I right because down seeing while what you manifesting Trevor, bit looking talked reaccelerating out could little was

Trevor Baldwin

Yes.

to was marketplace to valuation. softening in the pricing specific a M&A So the relative comment

is seen that have deals we've off data paid that And that headline come margin I compressed down basis EBITDA meaningfully, say that forma based has being so points we what are is approximately what the have on while would not really XXX pro transacting of seen. that about multiples

not while headline so does reduction that -- compression, is And a in it price. a multiple

insurance insurance our but in to I'd compensation, lines, all think broadly D&O, the point speaking, our of positive career. I say the their I'd seeing insurance pricing, is generally speaking, your limited challenging And public workers' seen there's are some most marketplace on softening of pressure. say professionals pockets pricing property have

Meyer Shields

was that of talk last I for hoping you that though, about lot, what's the gains because could I market about that was and the bit On note share a little concept on market. potential actually marketplace. I complexity could the the in Okay. hear you hoping a talk of going property

Trevor Baldwin

And And they a of that market, great exceptionally sophisticated well. platforms. we this in is more of complexity really themselves to No, type the Meyer. and challenges the do it's benefit market the question, larger, lend Yes. exactly

of of our they can so bring today clients, of we a bigger the bear talent, resources breadth to difference depth a on than and tools they the in would behalf that more market. sophistication and benign make the our And

components headline better I And year-over-year the break down even quarter. But that's it underlying in I from growth, the organic meaningfully XX%, our results. mean, becomes obviously, the as through of prior that story. an of showing up OG

about clients did growth share clients. XX.X%, What's at XX.X market that to building came past, you're new of perspective, and the our talked the from blocks important organic to be you look of new of when view my win? the And we've kind first organic And growth. is business. drivers we new the really in the most many taking? from there How as XX so And winning of X you

So the year is from in prior growth that's new period. of by net being vast XX.X% client logos, majority and up organic the driven our

to year-over-year, in be the Other from than impact prior plus X.X%, continues growth relatively the and from nominally in X.X% up was from is in nominal, that, exposure line with rate period. persistency and strong the and impact year contingents the

and a this market can the to story speaks take So it's good we -- of is where I really think share. type

Operator

Greenspan from Fargo. Elyse from next The is Wells question have we

Elyse Greenspan

mentioned support My first you your new over XX months. the growth next question, Trevor, colleagues so XX to guys you to hired XX

of here mean does you you incremental the kind meant hiring that don't So imply of that because from was that you front-loaded to front comment the the hiring, that growth in expect you? see given you

Trevor Baldwin

Yes.

me parse that, through let So Elyse.

April, level colleagues that shared hired rate organic continued we've we're contrast expectation net years. the good to through hiring the a that what X.X we in So is for hiring is a XX And past high of run of business. is need not the support And ongoing I colleagues into business that order X,XXX-plus of is have the the been year growth. the net the

the the we as talent and X-year And for know, went a the platform period through future. you building program significant of and technology, so reinvestment

the is and the business efficiently processes, sets, intelligent And and platform so the been effectively the throughout kind and infrastructure and from scale of building here. is solutions, our we're our our ready. We've capabilities product built, to go-to-market ready automations

Elyse Greenspan

for growth That's what's Can the the then segments? mid-teens embedded quarter. you guys gave your give a helpful. sense that And guide within you second us organic guidance X for of

Trevor Baldwin

expectation mean is X challenging continued -- we're our all of provide I of segment Baked we that going segments. is would that continued guide to has what across but tell high-level not guidance level, the that don't what's performance at I Yes. backdrop. the in macro the guide into you Elyse, implicit

the the banking I And capacity the dynamics and some past having to impacts. everybody year. interest unknown up, of impacts credit moved relative XXX of there's drying points known aware rates basis over there's course is think industry, the

for the that's resiliency think that our to of a the positioned well. the are how clients. speaks year. remarkable of expectations value just There's but clients our is share and continue and this to couple industry of more of the we well softness performing our all of that set I in sectors, Largely, pockets add platform then industry built take into for And kind balance to specifically, still

Elyse Greenspan

the quarter. in guys $XX by down million then the mentioned And you paid revolver you

I think at a -- interest have -- expectations just sense a you of kind us interest should like rates. you guys, where sense will give of to Brad, want Do set you trend rate current usually expense do there?

Bradford Hale

Yes.

obviously been slight a call. since tick environment up last there's our in So the rate

now approximately $XXX we of would $XXX expense So project million cash rates. the million current net interest at base to

Operator

[Operator Adam Klauber is Instructions]. from The question have William next we Blair. from

Adam Klauber

earlier, -- an you how indication haven't. it is you guess, you mentioned new given discuss coming could if could but housing I housing is us Sorry give seems Westwood you if back, like going, if --

if I Sorry, it. missed

Trevor Baldwin

happy Yes. Adam, No, to.

a XX% ago. approximately what of the April, we Westwood as in from closed revenue, that year $XXX we transaction through So I generated mentioned when call, up earlier underwrote million about gross on

Alan team performance I So nothing exceptional from absolutely the and mean, -- there. just

business More over feel year. of how the double-digit for is the to specifically that today positioned continue is and expect do we're the the to how the perform how balance about short of we we to growth and deliver really and to good performing ability balance continue to our answer year, it

are is book. new of being look partners that our same largely for mid-single rates new the being there, of premium, an the up our as is slightly, by the play reason builder new business as homes policies that's rate new our are digits as at kind in down to in through increase we closings as sold sold that and digits, result home As mid-single dynamics a well attachment taken as well while up which

well balance strong of feel to on very flow business based year. lead So we're from a through we the positioned we expect would to what seeing the standpoint, perform the continue

specifically, So of resilience is -- we're platform, able point I it rates homes the think they're value to seeing speaks the those to a and of to transaction, our more sold. the it's again, industry, attachment represented the in add Westwood new increased which just

Adam Klauber

And rates nice a obviously, you premium that think in just there And are tailwind increased the a you on much the how rates -- helping rates renewal ballpark, I is is on mentioned in the up book? book on mentioned, renewal even homeowners.

Trevor Baldwin

Yes. There's no doubt it's helping, Adam.

book. that covering our on policy level premium then the when And low seeing a on you in mid- blender, And we're high XXX%. So persistency teens of seeing to put we're kind XXs. rate in impact book around retention the renewal

Adam Klauber

we to That's Any on margin a next forth. to of quarters be on the can a know and great expect for a lot And some of Great. can Switch I over expect we over quarters way a couple second. sign. stronger direction give there's would standpoint? seasonal the variations, you us margin back total, which

Bradford Hale

cover do I and the of saw up because Brad. it's the quarters we continue did EBITDA Adam, of of We'll largely, the expansion to expect what margin subsequent QX. in similar we sort in to full a each this give we on call. Yes, year total to seasonality the just guide on say would degradation

Adam Klauber

Okay.

in quarter a is but you to items this of had EBITDA, I small guess, $XX million. of income other million net was real, What's there? -- $XX in are Sorry, add-back going and other sort last question,

Bradford Hale

you referencing transaction of combination Adam? and Are the related other,

Adam Klauber

It's the $XX.X like this that's quarter? item million

Bradford Hale

have So $X.X add-back of million. other and EBITDA I adjusted

Adam Klauber

Yes, one. yes, the think I've On I yes, X, yes, same I think that's I that's... got but EBITDA, assume

Bradford Hale

Yes, is what's there onetime captured costs.

data as legal there throughout continue fees as some strategy. hires as work fees we got significant to We've QX onetime temporary recruiting help and advanced outside some We well some as onetime on costs. in well other on some made

Adam Klauber

cash always more as a makes cash that is quarter in so for Okay. the and first far flow, it's cash the helpful. challenging sense. then industry, quarter That's as And

Well, questions. So I going Do cash one. flow positive the with the quarters? next you maybe couple guess be X is I'll just and one in think that start turning then next start related to ask -- of

Bradford Hale

Yes.

the supplement bit. walk a free Just and wanted of our X to to direct through flow calculation cash Page you little

first got bonus challenging. from So always the is yes, prior you a little year. quarter mentioned, We've as payouts

in In the by renewals AP carriers. directly up AR but our lot addition, of are because a large times the doesn't billed for occur associated we that those benefits QX, employee recognized show

a So you competitors. across as our And QX. see impact timing do you get that a said, bit to of you

reasons and the can calculation calculate cash just you about you can this And flow. to driven. -- If show the a cash see of interest look that's really adjusted of one added free we see down is our That's year-over-year. we business. impact quarter you adjusted the interest on XX% entirely And

actually back So can that you XX%. about up if out, we're you see

I cash we mentioned, a some there expanded in flow. there as timing standpoint, QX. So seeing But from are, business are differences

Adam Klauber

wanting around you think? guidance, but not second, exact third turning again, for begin should And that quarter

Bradford Hale

do $XXX the year We full be $XXX operating flow. for previously, cash million expect and we've said of between free million as to generating,

Adam Klauber

next million. quarter it then looks if as cash always first minimum as a little like disproportioned, cash but What's cash equivalents? around the $XX is million, equivalents, And right, Okay. I'm $XX cash with -- more question you and that is and related, far operate cash but weak, to so

Bradford Hale

Yes.

our $XX So would could minimum that operate be comfortably. about with million we

Adam Klauber

out putting just ask, are I'll assuming I'm you I'm flow Okay. as outside Or but for cash I'll And are looking -- that come turns you to positive? not up well, -- ask, expecting sources? -- well, looking

Bradford Hale

we cash and down No. interest that. I pay mean opportunistic and capital the utilize to flow about our we'll to revolver working manage expense that extent reduce the can free and be

Trevor Baldwin

is this Trevor. Adam, Yes,

revolver to and a take I of to capital working that super needed. under can from reduce cash excess standpoint, And there the continue outstanding our and run as line debt. out point think come -- working intent that to in capital to sweep the we can is efficiently is so flow we free

Operator

from Pablo we question is Singzon JPMorgan. from next have The

Pablo Singzon

is to I I for the question the today. I guess revenue and presume Trevor. up I hoping first more out growth expect as just I was And your you leverage as compensation broadly, leverage you flesh in in line? on one could comment business implicit the on comp point. about more one, you well OpEx hoping that hiring. So on context could model for provide follow track was wanted the doesn't do line

Trevor Baldwin

reinvestment significant conclusion to answer, in at we and leverage our And technology do talent line. and Yes. base kind talked The a the that delivering of expect X-year OpEx out comp Pablo, we leverage. the short in as we've growth of is forward vision about, as both double-digit of cash infrastructure propel the free built and and us significant was the earnings we durable organic flow cycle

days we've And significant kind productivity will X that earn we to platform in as meaningful on years, we that margin approximately are of reinvestment, to accretion and grow built. of enhancement that beginning, over continue earning see business and we early the in which in expect the to

Pablo Singzon

for Okay. And second the then Brad. question is

Just other expenses expense how you and a much I that follow-up guess, persists would on of through if So we a expenses, expenses, those about, have XXXX other on right? assume be? or expenses Adam's yes, view question M&A integration and should

Bradford Hale

Yes.

So integration onetime XXXX QX terms if expectation of good you -- down I rate is both and look, in other for the we type run are the a but QX, think, expenses. from meaningfully amount, of

Trevor Baldwin

And Pablo... then,

Pablo Singzon

last And one... then the

Trevor Baldwin

pretty next to out meaningfully come of QBE To largely of platform. the that's the transition year, down tied Westwood

Pablo Singzon

question you How to earnouts the much for XXXX? in me, Brad. I then last out cash guess, expect Yes, And understood. for pay

Bradford Hale

Yes.

to we'd in earnout XXXX million be somewhere pay that expect would cash So million. and $XX between the $XX pure

Operator

The next we of Josh [Operator have Shanker Bank America. from Instructions]. from is question

Joshua Shanker

try Adam's I'm going again. questions to

margins got of I would but the playing it better the adjusted got have guys everything than the right. at going beginning seasonality I to Is you way you year? do. probably terms information the wrong, guys Is -- it Just exact according it of plan? in operating thought you out

Bradford Hale

is. Yes, it

Joshua Shanker

the -- to so of in it's think role we as expenses XQ the its in forward we the at And out look XQ the seasonality play 'XX can you revenues? earn how about going move and that how to 'XX

Bradford Hale

Yes.

Joshua Shanker

are revenues And the that at of are the is the Westwood lighter -- or than heavy are and rest lightness expense in of heavy because the year? and given expenses that margin XQ,

Bradford Hale

It is both.

Joshua Shanker

It's okay. both,

the and -- think we guess, so expect as any, adjusted highest, there in have margins And do I I you which the is guess, year? to forward, quarter

Trevor Baldwin

following Brad we're shared. EBITDA and call. for not quarter quarter-by-quarter Yes, as each in provide on We'll growth going Josh, share continue to guidance, to expectation the

Operator

Weston The we from have from is UBS. last question Bloomer

Weston Bloomer

hoping specifically that saw of I of expound the other out currently renters growth you or if I'm from can was business. maybe for the this quarter. you lines business in versus MGA sure lines. is break much other today But not could organic on you Specialty giving how you're

be I in said the think at around premium. your residential was Investor million updates there Day, would $XXX and you Any umbrella great.

Trevor Baldwin

Yes. which grow online products as of we're of well, certainly brought it's I a I a launching some represents is, every to strategy Weston, And are the continue tell year in drive the and to each still in of recent conveyor products. the is proprietary even growing of so new more -- products minority growth out really and can renters exceptionally be more factory that belt building would MGA. we continuing we we've revenue that premium faster, that build proving our what generating is you mean, to while the news is good

proportion expect overall. generate continue a the and smaller be source would renters but the meaningful become I to place growth a value to continue premium and of to of revenue and So the important we we MGA overall in

Weston Bloomer

of Great. on that was organic the clients. by or from new is your is segment then broad-based in XX% one geographic Or the specialized winning focus? segment? Is comment, any it And pretty

Trevor Baldwin

pretty broad based. that's No,

consistent fairly at kind you the new relative if So a of business is OG proportion, of kind its across segments. contribution and look that's to

the share, more than just and the peers market of drive we win we we how So we outsized -- business do. really growth organic new is that's our we do -- and story take

Weston Bloomer

give you now, enrollment but I Mainstreet And know the update an of with success Got it. the of can broader XQ just kind is kind segment that season, Medicare on business? active the of being within

Trevor Baldwin

a strong had continue real the enrollment we Yes, of out solid expect Solutions annual period, good, Mainstreet results to that part and of segment. they

Operator

no floor time. this There closing at over Trevor go Please questions back ahead, for now further to turn comments. like are sir. the I Baldwin to would

Trevor Baldwin

to like Baldwin I their hard thank call for speaking the our for of thank with colleagues want and next this Partners. work us quarter. on I'd to I Risk look to dedication commitment, forward everyone evening. X,XXX joining you their to all

Operator

Thank you, then sir. and gentlemen, Thank Ladies that for conference. joining today's concludes us. you

your You now may disconnect lines.

The Baldwin Insurance Group, Inc. (BWIN) 9 May 232023 Q1 Earnings call transcript