Greetings and welcome to the BRP Group, Inc. Third Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. Operator instructions. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Austin Rock, Director of Strategy and Partnership. Thank you, Austin. You may begin.

Thank you, operator and good afternoon. By now, everyone should have access to our earnings announcement and slide presentation, which was released prior to this call, and which may also be found on the Investor Relations portion of our website at baldwinriskpartners.com. Before we begin our formal remarks, a reminder that part of our discussion today may include forward-looking statements, which are based on the expectations, estimates, and projections of management as of today. The forward-looking statements in our discussion are subject to various assumptions, risks, uncertainties and other factors that are difficult to predict and which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be based upon them. We refer all of you to our recent filings with the SEC, including our Form 10-Q filed today for a more detailed discussion of the assumptions, risks, uncertainties, and other factors that could impact the future operating results and financial condition of BRP Group, including those related to the potential effects of the COVID-19 pandemic on our business, financial condition, and results of operations. On this call, we refer to the effects of COVID-19 and related government shutdowns, stay at home orders, business closures, travel restrictions, social distancing, and other preventative measures, business disruptions, economic contraction, and COVID-19 related developments by generally referencing COVID-19 or the pandemic. We disclaim any intentions or obligations to update or revise any forward-looking statements, except to the extent required by applicable law. Also, our discussion today will include references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measure can be found within our earnings announcement and earnings supplement slide presentation, both posted on our website at ir.baldwinriskpartners.com or in our SEC filings. In addition, this call is being webcast and an archived version will be available after the call on the Investor Relations portion of our website. With that, I will now hand the call to Trevor Baldwin, Chief Executive Officer of BRP Group.

Thanks, Austin and good afternoon everyone. Welcome to our third quarter of 2020 earnings call. We appreciate your taking the time to join us and your interest in BRP Group. During today’s call, I will provide some brief highlights on our accomplishments during the quarter; Brad Hale, our Chief Accounting Officer, will then provide a more detailed review of our Q3 results; and Kris Wiebeck, our Chief Financial Officer, will wrap up with a few quick comments on our balance sheet and certain expectations regarding our outlook for the future. We will then open up the line for questions. In summary, we had another phenomenal quarter in Q3, which is further validation of the thoughtful and differentiated approach we have taken to build a business positioned to grow and thrive even in the face of the ongoing economic headwinds. For the quarter, we recorded strong year-over-year organic revenue growth of 20% and total revenue growth of 72%. We also saw double-digit organic growth in all four of our operating segments during the quarter with specialty led by MGA of the Future at 43%, leading the group, while rate and retention were healthy across all of our segments. Overall, our organic growth continues to be predominantly powered by our ability to win new business, highlighting our ability to quickly adapt to continue delivering tailored solutions to clients amidst broader economic challenges. On the partnership front, first and foremost, we are extremely excited to welcome the Insgroup team to the BRP family. As mentioned on our call last week, we have long admired the business Brian and his team have built and their culture; their strong track record of organic growth and presence at scale in Houston, Texas, which is the fastest growing top 20 MSA in the country, make them an excellent fit. We are excited about the meaningful role we think they can play in helping achieve our intermediate goal of becoming a top 10 broker in the U.S. over what is now the next eight years. Looking ahead, in terms of number, size and the quality of near-term opportunities, we continue to have a very strong pipeline and anticipate a busy finish to Q4 on the partnership front. Over the past six months, our partnership team and I have been on the road frequently, taking the time to safely meet with potential partners to share our optimism and resolve for an exciting future. It is my belief that, hopefully, as the world and business environment return to normal, you will see these efforts contribute to the strength and success of our partnership pipeline. As a reminder, the exact timing of partnerships is subject to change. To wrap up, none of what we have been able to accomplish would have been possible without the tenacity and tireless support of our colleagues who have continued to put clients first amidst a very challenging environment. To all of you, a huge thank you, you are the engine that powers BRP. And thanks to your efforts, our business is truly in the strongest position it has been in the firm’s history. With that, I will turn over the call to Brad to go into more detail on our Q3 results.

Thanks, Trevor and good afternoon to everyone on the call. For the third quarter, we generated revenue growth of 72% to $65.8 million. The revenue growth was driven once again by our hybrid growth model, namely organic growth combined with contributions from new partnerships. As Trevor mentioned, we once again generated double-digit organic revenue growth on a year-over-year basis, reporting 20% organic growth for the quarter, thanks to strong performance across all of our operating groups. Given that partnerships are an important portion of our ongoing growth strategy, in our regulatory filings, we also provide revenue metrics on an unaudited pro forma basis. This provides investors with a more apples-to-apples comparison, as if our 2020 partnerships had been acquired on January 1, 2020. For the third quarter of 2020, unaudited pro forma revenue was $66.1 million, up 70% from the prior year. Unaudited pro forma information should not be relied upon as being indicative of the historical results that would have been obtained if the partnerships had occurred on that date nor the results that may be obtained in the future. GAAP net loss for the third quarter of 2020 was $7.6 million or $0.10 per fully diluted share. Adjusted net income for the third quarter of 2020, which excludes share-based compensation, amortization and other one-time expenses, was $9 million or $0.11 per fully diluted share. A table reconciling GAAP net income to adjusted net income can be found in our earnings release and our 10-Q filed with the SEC. Adjusted EBITDA for the third quarter of 2020 rose 48% over the prior year period to $10.9 million. Adjusted EBITDA margin was 17% for the third quarter of 2020 compared to 19% in the prior year period. As a reminder, our adjusted EBITDA margins are seasonal in nature, with Q1 being the strongest quarter, and we usually record lower margins in the second half of the year with Q4 being our seasonally lowest margin quarter. We expect this trend to continue this year, especially given the seasonality of some of our recently added partners. Additionally, we plan to continue investing in the business as we have in Q2 and Q3 of this year. As a result, we expect fourth quarter margins will be similarly impacted. Additionally, as we do every quarter in the earnings supplement available on our IR website, we have updated the quarterly pro forma financial statements to reflect the partnerships we closed in the third quarter as if we had owned those businesses since the beginning of the year, which increases Q1 and Q2 revenue versus what we presented last quarter. As a reminder, the pro forma financials we present are not projections of future performance. Additionally, results for our individual operating segments can be found in the earnings supplement as well. Our MGA of the Future platform continues to outperform, growing 43% compared to the prior year period. The third quarter is typically the seasonally strongest for the MGA, and during the quarter, policies in force increased by over 54,000 from June 30, 2020. As of November 11, policies in force have increased further to over 510,000. We remain bullish on the MGA in terms of its ongoing sustainable contributions to our organic revenue growth, expanding penetration within our current network and utilizing its scalable and efficient technology to create new products that can be distributed across the BRP platform. As we have mentioned in the past, we continue to make progress on the rollout of both our Florida homeowner solution with our filings submitted to the state of Florida, and a private flood product, for which we have secured reinsurance capacity. With that, I will now turn the call over to Kris.

Thanks, Brad and good afternoon to everyone on the call. A few closing remarks before we hit Q&A. As you may have seen last month, we significantly enhanced the capacity on our balance sheet, pricing a new seven-year $400 million senior secured first lien term loan facility at a very reasonable cost of capital, as well as retaining and extending our $400 million revolving facilities maturity into 2025. As Trevor noted in his remarks, after the announcement of our partnership with Insgroup, we maintain a very strong partnership pipeline. Pro forma for the completion of Insgroup between our cash on hand, the remaining proceeds from the new term loan facility, and our $400 million revolver, we maintained roughly $590 million of capacity to execute on that pipeline and to remain front-footed as we head into 2021. As we’ve said before, we continue to believe that 3.5x to 4.0x leverage is a prudent run rate for our business, and we’d be comfortable taking leverage opportunistically up to around 4.5x. Our current leverage pro forma for the Insgroup partnership is 2.4x. As we move ahead, we expect that the effects of COVID-19 will continue to have an impact on the broader economy for Q4 and into Q1 2021. However, should the recent positive vaccine news come to fruition, we believe that the economy could improve materially over 2021. That being said, we believe we have clearly demonstrated over the past couple of quarters that our business model and growth strategy is extremely resilient in the face of economic headwinds, thanks to our commitment to investing in our technology, our tools and our people. As such, for Q4, we still feel confident in our ability to generate organic growth on the low end of our longer term 10% to 15% double-digit organic growth goals. As Brad mentioned, we continue to make investments into the client-facing side of the business, as well as to bolster our growth services and partnership integration teams. We continue to believe that the past six months and the current environment is one that affords us great opportunities to invest capital, both organically and through partnerships. As to next year, I do want to remind everyone that it typically takes 12 to 18 months for us to realize a full pro forma EBITDA from partnerships, particularly larger partnerships, as we work to integrate them into the broader BRP platform. In summary, we are very excited about our third quarter results and the momentum we have carried in the fourth quarter with the closing of our new facilities and the Insgroup announcement. We are enthusiastic about the success we have had in Q3 and strengthening our near-term partnership pipeline. And then finally, as we reflect on our recent first year anniversary as a public company, we are quite proud of the success we’ve been able to generate for all of our stakeholders over the past four quarters during an abnormal time in history, growing double digits organically over that time period and announcing $120 million of annualized partnership revenue. While we are proud of our performance, we are optimistic for a return to normalcy in 2021. I would echo Trevor’s thank you to our colleagues. The tangible result of all of their efforts is that we believe our business is positioned the best it has ever been. With that, I thank you for your time and we will now open the call for Q&A. Operator?

Thank you. Operator instructions. Thank you. Our first question comes from Meyer Shields with KBW. Please proceed with your question.

Great. Thanks. I want to spend a little time talking about client receptivity in middle market, just in terms of whether as time has passed and we sort of settled into routine, there is more receptivity for the extensive diagnostics or the growth drivers?

Hey, Meyer, yes, great question. So, what I would say is we were incredibly intentional at the onset of the COVID environment about rewriting our entire sales playbook to position our risk advisers to be able to approach clients in an unobtrusive manner that still enabled us to go through our highly consultative risk mapping process. That’s really been one of the hallmarks of how we have been able to maintain the level of organic growth that we have despite the headwinds of the economic challenges, the shutdowns, and limited accessibility of normal sales channels.

Okay. So that’s helpful. And also, I know there is a lot of confusion or concern broadly about the Medicare market. It looks like things are holding up pretty well. But I was hoping you can give us your view about what the market looks like, both in terms of developing organic growth and maybe acquisition pipeline?

Yes. So, as we shared on the call earlier, all four of our segments reported double-digit organic growth, so that would include the Medicare business. As we have talked about in the past, COVID has certainly had an impact on the Medicare business model when you think about the fact that the population that we are serving is typically more at risk to the virus. A lot of these interactions historically have been more face-to-face. With the onset of COVID, we made some significant investments into our technology infrastructure, launching our digital enrollment platform under the Guided Medicare Solutions brand in June and July of this year. Thus far, since the start of AEP, we’ve had 38% of our overall enrollment go through that new digital platform, which is terrific uptake. That has positioned our agents to remain effective despite the challenges associated with getting in front of people. With all that being said, there is certainly an impact from the COVID environment. I think broadly across the Medicare landscape, I would expect less churn this year as a result of probably less shopping activity. Folks are spending more time indoors and not in the typical settings where agents meet people. Overall, our performance in the Medicare business through AEP thus far has been consistent with how the business has performed in the COVID environment year-to-date.

Okay, that’s helpful. Thanks so much, sir.

Thanks, Meyer.

Thank you. Our next question comes from Elyse Greenspan with Wells Fargo. Please proceed with your question.

Hi, thanks. Good evening. My first question: you said for the fourth quarter you would be at the low end of the long-term target of 10% to 15% organic. You guys also filled up that last quarter from the third quarter and you printed 20%. So, what trended better than you had expected when you made those comments in reference to the third quarter and then why would that continue or is there some conservatism given the ongoing uncertainty with COVID?

Great question, Elyse. A couple of things. One, when you look at the dynamics of our business in the third quarter versus the fourth quarter, the third quarter is the seasonally largest quarter for the MGA of the Future, which is the fastest organically growing part of our business. So, there is more opportunity for outsized performance in Q3 than Q4 as a result of continued outperformance by the MGA of the Future. When we were guiding to the bottom end of that range for Q4, there was some concern relative to new policy issuances we would see in August related to student housing because many students were not going back on campus. While we did see some of that occur with new policy issuances in August for the MGA of the Future—up about 10% year-over-year—we outperformed in September, which more than made up for that shortfall and caused the overall outperformance. Looking toward Q4, it is our seasonally weakest quarter for the MGA of the Future in terms of relative revenue contribution to the overall business. Combine that with uncertainties from COVID and a continued choppy economic environment, we feel the lower end of the 10% to 15% range is the accurate number for Q4. The outperformance in Q3 is a story of terrific performance in the MGA of the Future and continued strong performance across our entire business despite operating challenges.

Okay, that’s helpful. So, away from the MGA of the Future, did the other segments perform in line with expectations or was there anything that performed better or worse than expected?

Across the board, the business performed really well. We had double-digit organic growth in every operating segment. Considering the environment we are operating in, we are really pleased with those results, which were at or slightly ahead of expectations.

Okay, that’s great. And then on M&A, you mentioned there could be a flurry to get deals done before the end of the year. Do you still expect to see a good amount of deals between now and year-end? And can you give a sense of size—smaller deals versus something larger like Insgroup—so we can think about the pipeline and timing?

Hey, Elyse, I’ll take that one. We still have a strong pipeline and do expect things to close before year end. With Insgroup, when people model revenue for partnerships, they will only get one month of it this year. Other deals that close may also contribute only a month or possibly none if they close right at year end. So when modeling, be careful not to put too much revenue into this year. I do think we could be a positive surprise for Q1 when you move that revenue forward. As far as the types of deals in the pipeline, they are similar to what you have seen us do this year—high-quality deals with a history of organic growth that we think are strong additions to the business—but we won’t comment on specifics because deals are never done until they are done.

Okay, thank you. I appreciate all the color.

Thanks, Elyse.

Thank you. Our next question comes from Pablo Singzon with JPMorgan. Please proceed with your question.

Hi. So, my first question is related to organic growth: I noticed that there was a pickup in profit sharing revenues year-over-year. To what extent was organic growth driven more by core commissions versus profit sharing? Can you break that out separately?

Pablo, the majority was driven by core commissions. We did not see a notable gap like we did in Q1 when we broke those out separately for information purposes. We are seeing some positive performance in contingency through more favorable contract terms and some underlying mix from the 2020 partnerships, but overall the lion’s share of what contributed to organic in Q3 is core commissions and fees.

Pablo, to add to that, what’s powering our outsized organic growth relative to peers is our ability to generate new business at an outsized rate. The building blocks of organic growth include retention of prior year revenues, which for us tends to be in line with or marginally better than peers, and the combined impact of insurance rate and exposure unit expansion. On a year-to-date basis for our middle-market segment that’s a bit over plus 4%, reflecting continued acceleration in the rate environment, but that benefit is shared by many peers. The real delta is our ability to write new business at a rate that meaningfully exceeds many in our peer group. I attribute that to the tailored approach we take with prospective clients, the shelter distribution models we’ve built, and how we execute at point-of-sale consistently.

Got it. Thanks for that, Trevor. Second question: on your investments in the business, can you frame that for us as a percentage of revenue or in dollar terms and how much this year and potentially next year?

Pablo, a couple of things to call out. One, we have some new expenses and higher interest expense in Q4 due to the term loan. Unlike the revolver, when you close the term loan you start paying interest day one on the full amount. We intend to use that capital and don’t like paying interest on unused capital, but that will impact EPS in Q4 and should not be material into next year. If you think about what Brad said, margins have been about 200 basis points lower the past couple quarters than the prior year as we reinvested that in the business. That’s a good rule of thumb: take our Q4 from last year and reduce by about 200 basis points to estimate the extent of reinvestment. We have other investments we can make, but we’re trying not to reduce margin too much further.

Got it. That’s helpful. Last one for me: you’ve been doing about $30 million of acquired revenue a quarter this year. Is there reason to think that won’t sustain or could be stronger into next year?

Pablo, partnership activity is episodic. We have seen a pickup in activity in the back half of 2020 and I expect some carry into 2021, but I wouldn’t necessarily expect more than a $30 million per quarter run rate. It could be zero in one quarter and $60 million in another. We don’t control when high-quality businesses decide to sell or join BRP. We are diligent about building relationships so when they do decide, we’re their first call and they understand our business, culture, and how we can deliver durable double-digit organic growth.

One last comment on margin, Pablo: it’s hard to look at each quarter in isolation, particularly with revenue recognition timing variability. In the supplement we provide quarterly phasing of revenue from new partnerships and you can see a heavy concentration in Q1 historically. So take a partnership in June and much of its revenue may phase into Q1. It’s better to look across a broader base and see pro forma annualized margins in the supplement for a consistent view.

Got it. If I could squeeze one small one in: I noted BRP made a small investment in High Wing and some peers have invested in digital small commercial brokerages. Can you speak to what you see in that business going forward?

We are very excited about the investment in High Wing, which is a technology platform that will bring transparency and efficiency to how we transmit data with trading partners. It will enable more forthright and efficient relationships and lead to more effective placements for our clients. We are also excited about the group of peer firms invested alongside us—some of the highest quality independent firms in the country. Our combined thought leadership, premium volume and influence with carriers will help develop a solution that allows us to monetize rich data and deliver superior results to clients by making placement more efficient and transparent.

Thank you. Our next question comes from Marco Holanda with Raymond James. Please proceed with your question.

Hi, guys. Thanks for taking my question. I wanted to stick with the margin discussion. As we think about next year, can you talk about the incremental margin opportunity as you balance investments in the platform and some P&E reductions this year due to COVID?

Marco, the pro forma view is probably the best sense of where margin is heading; look at it on an annualized basis. The deals we are doing should be accretive to the long-term story. In the near term, we are continuing to invest about 200 basis points more than last year, especially in Q4, to prepare for new partners and ensure we can serve them well on the BRP platform.

Marco, we are focused on executing a playbook that enables investments for the long term to deliver durable double-digit organic growth. We believe investing now is the right decision for shareholders: many peers have harvested margin quickly by pulling back, but our view is to continue investing to scale revenue and produce larger, more durable cash flows. Our focus is on organic growth and accreting margin over time without sacrificing growth.

Got it. Organic has been humming, congrats. Last question: about the MGA, the renters product acceleration and the PIF growth—any synergies running through that number with the Rosenthal Brothers acquisition? And you mentioned the flood product—can you talk about the rollout timing and whether we should expect to see that in the numbers?

The MGA continues to perform extremely well. The growth you’re seeing does not include revenue synergies from the Rosenthal partnership to date. I wouldn’t expect to see that until next year as we integrate their sales team into the platform. Regarding new products, we are on file with the Florida Department of Insurance for a new homeowners product and expect a first half of 2021 launch. We have reinsurance capacity for a private flood solution and expect that also in the first half of 2021. Depending on timing, you could see these begin to impact MGA results in the tail end of H1 or certainly in H2 of next year.

Thank you. Our next question comes from Dan Fannon with Jefferies. Please proceed with your question.

Thanks. My question is on MGA of the Future: given the strength you are seeing on the top line, can you remind us how the profitability of that business works and how we should think about scale and margin expansion of that segment alone, given its growth trajectory?

Dan, I’ll start. The MGA business is profitable today and generating free cash flow for us. In the quarter they added over 50,000 units in a profitable manner—those are actual policies with us. They also added approximately 550 units we have turned on previously, which builds additional capture potential down the road. The key point is the business is profitable and we are continuing to invest in it for additional products.

I’ll add that we make money on day one once a policy is sold without the lead advertising burden and costs. We do share commission with downstream partners, particularly property management software companies, so there’s limited margin expansion from the adviser model itself. However, the technology is efficient; over time you’ll see margin accretion from G&A and servicing efficiencies. On an individual basis the margin is basically flat year-over-year, which is attributable to investments we’re making into new products. We are effectively using margin to invest in growth there.

Great. A follow-up on Insgroup: is there seasonality to that business similar to other portions? And you previously mentioned equity for deals returned to the low 20s—given Insgroup was your largest deal as a new partner, should we expect the equity component to be higher for larger transactions?

When you think about the equity component, it’s not tied to deal size but rather to the conviction of the management team. Insgroup’s management had a lot of conviction about what we can do together; they thought of it as buying into BRP, not selling their business. That’s a positive indicator but not necessarily the norm. On seasonality, Brad can provide specifics.

Insgroup is primarily P&C, which is less seasonal than benefits. It’s not as drastic as some benefits businesses; you’ll see some concentration in the first and second quarters for that business and slightly lower in the third and fourth. So it’s more in line with our legacy P&C businesses and not as drastic as some benefits partners we worked with in 2020.

Great. Last one: on geographies, Insgroup gives you scale in Texas, which you’ve targeted. Are there other regions you view as attractive demographically or from a business perspective that you’d like to target similarly?

When you look at geographies that have economic and demographic tailwinds and industry sectors that can outgrow the broader economy, those are areas we have interest in being overrepresented in. It’s easier to grow when you have a tailwind at your back.

There are no further questions at this time. I would like to turn the floor back over to management for any closing comments.

Thank you. I want to thank everybody for taking the time this evening to join us. I want to remark on our one-year anniversary as a public company and how proud I am of all the accomplishments our colleagues have enabled. We are very proud of the results we have generated and are excited for what the future holds. Thank you and we look forward to talking with you all soon.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.