Greetings. Welcome to BRP Group Fourth Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to Austin Rock, Director of Strategy and Partnership. Thank you. 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-K 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. 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 the 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 In addition, this call is being webcast and an archived version will be available after the call on the Investor Relations portion of our website.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 fourth 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’ll provide some brief highlights on our accomplishments during the quarter and for the full-year; Brad will then provide a more detailed review of our Q4 and fiscal year 2020 results; and Kris will wrap up with a few quick comments on our balance sheet and certain expectations regarding our outlook for the future. We’ll then open up the line for questions. In summary, we had another fantastic quarter in Q4 to cap a phenomenal year, and we believe we firmly validated the power and resilience of our hybrid growth strategy and differentiated business model amidst a challenging macroeconomic backdrop. For the quarter, we recorded strong year-over-year organic revenue growth of 17% and total revenue growth of 91%, and for the full-year generated organic revenue growth of 16% and total revenue growth of 75%. In Q4, our organic growth was again led by our Specialty segment, with the MGA of the Future growing 73% during the quarter, driven by continued success in renters insurance and the launch of our master tenant liability products, which Brad will discuss in detail in a bit. On the partnership front, we had a successful quarter closing five transactions for $155 million of annualized revenue, marking the most active quarter from a partnership perspective in our firm's history, and becoming the first firm in recent history to acquire three top 100 middle market firms in a year, which we accomplished during the fourth quarter alone. We believe that all of the firms that joined us during the quarter are uniquely high quality with strong track records of organic growth and bring to us incremental product and industry expertise and scale in some of the fastest growing regions in the country. All of which will be important to delivering on our goal of generating sustained double-digit organic growth well into the future. To our new colleagues at Insgroup, AHT, Burnham, and TBM, we welcome you to BRP and are excited about your future contributions to the organization. We are a better and stronger firm as a result of your joining. Looking ahead, in terms of number, size, and the quality of opportunities we continue to have a strong partnership pipeline and anticipate another robust 2021 on the partnership front, as our story continues to increasingly resonate with potential partners. And finally, we're excited to announce several promotions amongst the BRP leadership team. Effective April 1, 2021, Kris Wiebeck will be promoted from Chief Financial Officer to become our newly appointed Chief Strategy Officer. Kris has been a driving factor in the transformation of our business and over a 20x increase in our annualized pro forma revenue since he joined as CFO six years ago. This new role will allow him to focus on driving our most important strategic initiatives across the firm, and positioning us for success in what we anticipate will be a transformational decade to the insurance industry broadly. Next, Brad Hale will be promoted to Chief Financial Officer transitioning from his prior role of Chief Accounting Officer. Brad has done a tremendous job for us since joining prior to the IPO, and we expect this to be a smooth transition for him and the team with his continued involvement with our finance and accounting activities. To round it out, Corbyn Galloway, currently our Director of Accounting will become our new Chief Accounting Officer. Like Brad, Corbyn joined us in May 2019, prior to the IPO, and has worked closely with him to drive the success of our accounting team. She is a tremendous asset to BRP and we're thrilled to welcome her to our executive team. In closing, we're exceptionally proud of the performance we were able to generate in 2020. None of which would have been possible without the tremendous efforts and hard work of our colleagues who work tirelessly to deliver for our clients amidst a challenging environment. To all of our colleagues, a huge thank you. You are the reason our business is in the strongest position it has been in the firm's history. With that, I'll turn the call over to Brad to go into more detail on our Q4 and full-year 2020 results.

Thanks, Trevor and good afternoon to everyone on the call. For the fourth quarter, we generated revenue growth of 91% to $69.6 million and for the year we delivered revenue growth of 75% to $240.9 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 recording 17% organic growth for the quarter, and 16% organic growth for the year. Thanks to solid performance across all of our operating groups and particularly strong performance from our specialty segment, driven by the MGA of the Future. Given that partnerships are an important portion of our ongoing growth strategy, and 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 fourth quarter of 2020, unaudited pro forma revenue was $94.4 million, up 158% from the prior year. For the full-year, unaudited pro forma revenue was $426.2 million, up 179% from 2019. Unaudited pro forma information should not be relied upon as being indicative of the historical results that would have been attained if the partnerships had occurred on that date, nor the results that may be obtained in the future. GAAP net loss for the fourth quarter was $19.1 million, or $0.29 per fully diluted share. GAAP net loss for the full-year was $29.9 million or $0.58 per fully diluted share. Adjusted net income for the fourth quarter of 2020, which excludes share-based compensation, amortization and other one-time expenses was $4.9 million or $0.06 per fully diluted share. For the full-year, adjusted net income was $32.4 million or $0.44 per fully diluted share. A table reconciling GAAP net income to adjusted income can be found in our earnings release and our 10-K filed with the SEC. Adjusted EBITDA for the fourth quarter of 2020 rose 79% over the prior year period to $10.6 million. Adjusted EBITDA margin was 15% for the fourth quarter of 2020, compared to 16% in the prior year period, in line with expectations communicated on our Q3 earnings call. Adjusted EBITDA for the full-year was 54% over the prior year to $44 million. Adjusted EBITDA margin was 18% for the full-year. As a reminder, our adjusted EBITDA margins are seasonal in nature with Q1 being the strongest quarter. We usually record lower margins in the second half of the year with Q4 being our seasonally lowest margin quarter. 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 fourth quarter as if we had owned those businesses since the beginning of the year, which increases the revenues in quarters one through three, 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 73% during the quarter, compared to the prior year period. As Trevor mentioned at the outset, the results were driven by continued growth in renters insurance, and was incrementally bolstered by the broad launch and initial success of our master tenant liability policy product, which allows property managers to mitigate risks from tenants that choose not to purchase a traditional HO4 renter’s policy. Note that the 73% organic growth includes a cumulative catch-up of 10% as a result of the Q4 2020 contract establishment date for previously satisfied services. We would note that without the impact of the launch of our master policy product, organic growth of the MGA of the Future when compared to the prior year period was approximately 40%, which is in line with the results we've seen quarterly throughout 2020. With the addition of the incremental products we already have and plan to launch over the course of the year, we anticipate being able to maintain an approximate 40% revenue growth rate in the MGA of the Future for the full-year in 2021, even as the business continues to scale. Ultimately and what is typically our lightest quarter for the MGA, policies in force increased by over 24,000 from September 30, 2020. As of March 10, policies in force have increased further to over 547,000. We've also made nice progress adding new units to our ecosystem and turning on buildings within our distribution footprint. As of March 10, we now have over 17 million units within our property management software provider and property manager ecosystem, up from the 15 million we have communicated since the IPO as a result of new client wins for both us and our distribution partners. Within that ecosystem, we also successfully turned on over 2 million units in 2020. As of March 10, our turned-on count stands at 8.2 million units, versus 5.6 million units at the end of 2019. In summary, we continue to be bullish on the MGA in terms of its ongoing sustainable contributions to our organic revenue growth, driven by continued growth in renters, a continued build-out of the holistic suite of products for the habitational real estate sector and distribution through our existing middle market client base, and the pending rollout of our private flood and homeowners insurance products. With that, I'll now turn the call over to Kris.

Thanks Brad, and good afternoon to everyone on the call. A few closing remarks before we have Q&A. As most of you are aware, we successfully raised $249 million in primary equity proceeds in our December follow-on offering, allowing us to fund our partnership activity in Q4 and de-lever the balance sheet ahead of what we anticipate will be a robust 2021. Pro forma for the completion of the equity offering and the closing of our Q4 partnerships, net leverage stands at 2.8 times, and we maintain $480 million of capacity between cash on hand and our full $400 million revolving credit facility to execute on our 2021 partnership pipeline. As we've said before, we continue to believe that 3.5x to 4x leverage is a prudent run rate for our business and we'd be comfortable taking leverage opportunistically up around the 4.5 area in the wake of a larger transaction. Looking ahead, as the economy continues to recover from the COVID-19 pandemic, amidst positive vaccine developments, we are hopeful for material improvements in the business environment over the course of 2021. As such and given strong performance across our business in January to start the year, as we sit here today for Q1, we feel confident in our ability to generate organic growth on the higher end of our longer-term 10% to 15% double-digit organic growth goals. Additionally, given seasonality, we expect the margin in Q1 to be back to a similar level of the prior year above 30%. For the full-year, we plan to continue investing in the organic growth of the business. However, as it stands today, we would expect a 100 basis points to 200 basis points increase in the adjusted EBITDA margin above last year's 18%. We continue to feel good about the $120 million to $150 million of annualized acquired revenue for the year and would reiterate that we expect at least 90% of those transactions to close in quarters two, three, and four. As a reminder, the exact timing of partnerships is subject to change. And then finally, another reminder that it typically takes 12 months to 18 months for us to begin to realize full pro forma EBITDA from partnerships, particularly larger partnerships as we work to integrate them into the broader BRP platform. In summary, we are excited about our results during the quarter and for the full-year. The momentum we have carried into the start of 2021 and what we believe will be another very strong year on the partnership and organic front, I would echo Trevor’s thank you to our colleagues who have been the driving force for the continued success of the business, and have put our business in the best position we've ever been. With that, I thank you for your time and will now open the call for Q&A. Operator?

Thank you. Our first question is from Greg Peters with Raymond James. Please proceed.

Good afternoon, everyone. And before I start my questions, congratulations on the promotions, and Brad I have to say you did a flawless job in reading your scripts, you're off to a good start. So first, let's talk about the organic revenue growth results. And specifically, the MGA of the Future clearly is driving the consolidated results. Can you talk a little bit about how the middle market is progressing and perhaps Main Street and Medicare as well?

Yeah, hey Greg, this is Trevor. So, as you articulated, the MGA of the Future had just a fantastic quarter in Q4 at over 70% growth, propelled by the launch of our new master tenant liability product. With that being said, when we look at the full-year results, relative to the overall economic and operational environment, we're really pleased with the results of all of our segments. Outside of specialty, you'll see that we had mid-single-digit organic growth. You'll also recall in the third quarter that we had guided towards the lower end of our target 10% to 15% organic growth range for the fourth quarter. And that was a result of anticipated exposure unit right-sizing in our client base, particularly on the employee benefits side, as businesses took action when it became clear that there was not going to be a fourth quarter stimulus package that ultimately was not passed. So, I think we've gotten through that across our business in middle market and Main Street in particular. As you heard Kris talk about in the prepared remarks, we're excited about where we're positioned, and as a result feel really good about delivering organic growth towards the upper end of our 10% to 15% range in Q1.

Yeah, got it. Okay. The second question I had was, I think Kris in your comments, you mentioned that there could be 100 basis points to 200 basis points of EBITDA margin expansion in 2021. I just wanted to make sure I heard that correct. And I guess, I'm curious about how you're thinking about working capital needs, considering the substantial growth that you reported last year, and as you think about this year? The last question — one of the things that struck me as I was going through your slide deck, if you look at the earnout potential on Slide 3 you had said in the third line from the bottom that the maximum contingent earnout has now in the fourth quarter moved up to almost $300 million. If I look at that number and the growth of that number, and then I go down into your table six and look at the adjustments to adjusted EBITDA, we're seeing a change in the fair value of that contingent consideration. Can you just walk us through how you're thinking with such a large contingent consideration sitting out there, how that might affect the pro forma commission fees and this adjusted EBITDA bridge that you report on?

Sure. So, I'll start and then I'll let Brad provide some additional commentary. We want to remind folks, the maximum contingent consideration in the earnouts is generally at a level higher than even 20% organic growth. A lot of times we've taken those tables to 30% or higher. So, there's a tremendous amount of growth that would have to happen for those businesses to hit the maximum. And at the same time, we've de-levered ourselves down. The businesses would have generated significantly more EBITDA at the payment of those than when they joined. So, I want to make sure people remember that the consideration is very much tied to fantastic performance, and we find nothing happier than to pay maximum consideration at the end of the day. Brad, maybe you can comment on the accounting side.

Right. So, as you know, Greg, on day one of a partnership, you record a fair value of that contingent consideration, which has to contemplate any number of scenarios, in fact, all scenarios that could occur with that business. You get a significant discounting factor, both in terms of what's going to happen in that business over three years, and the time value of money. What we're seeing is, particularly as we have a larger base of contingent consideration, our mark-to-market each quarter is sometimes substantial, which is why we are calling it out and adding it back, because it makes our true GAAP net income somewhat distorted. So, to the extent that number is increasing, that's in our mind a good thing because it means those businesses are performing. And, as we've said before, we like nothing more than to pay on the high end of contingent consideration, because that means that business has grown at the levels that Kris just outlined — meaning 20% plus organic growth.

Got it. Thanks for the answers. I'll let others ask questions.

Our next question is from Elyse Greenspan with Wells Fargo. Please proceed.

Hi, thanks. I also want to extend my congrats to Kris and Brad on the recent promotions. My first question, when you laid out the 2021 plan in December, you had said that you expected M&A to be pushed into the back two quarters of the year, which you reaffirmed today. Do you have a sense, timing-wise, when you would expect to see some of the deals starting to come in 2021?

Yeah, hey Elyse. This is Trevor and thanks for the congrats for Kris and Brad — we're really excited about their new roles and future contributions. As we think about our pipeline and the broader M&A landscape, our pipeline is very strong and we have a number of very high quality opportunities across the range of size. We feel good about our target in that $120 million to $150 million range. When it comes to timing, M&A can be lumpy and timing is subject to the nuances and vagaries of the M&A process. I don't want to provide specific details other than we do believe activity will be weighted toward the back half of the year, as a result of the dynamics of how busy Q4 was, the time we're taking to effectively integrate the partners that joined us at the end of last year, and marketplace dynamics. There was a bit of an air pocket at the beginning of Q1 as many folks who were thinking about transacting in the near term pulled deals into Q4 of 2020 for tax-related reasons. We're excited about our pipeline and the quality of organizations in it and confident in our ability to execute on our partnership strategy this year.

Okay, thank you. My next question: looking at the organic growth in the quarter, the MGA of the Future clearly drove consolidated results. If we neutralize for that, it does seem like the rest of the businesses decelerated a bit, which I imagine might be timing. Since you indicated Q1 would be at the high end of the 10% to 15% target, can you provide any color on why some segments might have contracted or seen pressure in the fourth quarter?

Elyse, I'll take that one. As Trevor mentioned earlier, we did see some weakness on the employee benefits side where clients delayed decisions into year-end hoping for stimulus. That resulted in some exposure unit right-sizing. We haven't seen that continuation into January, which is positive. Main Street had a tough start earlier last year with some contingent headwinds, but by Q3 many of those businesses were growing double-digit. Q4 was a little lighter, January looks good, and as we sit here today we expect Q1 to be on the higher side of that 10% to 15% range.

Elyse, we feel like we've created a lot of momentum into 2021 across all of our businesses, and feel really good about how we're positioned to continue executing on our long-term goal of consistent, durable double-digit organic growth.

That's great. And then one last one — regarding the slide presentation, the full-year 2020 adjusted EBITDA margin was 26% and you said you would expect 20% in 2021. I'm assuming that delta is essentially the reinvestment you mentioned earlier, which is a substantial portion of the difference, and also the fact that it takes 12 to 18 months for some of the acquired businesses to scale. Is that correct?

That's exactly right, Elyse. We see an incredible opportunity to keep investing in our business, particularly the MGA of the Future where we're experiencing exceptional results. As Kris pointed out, we plan to invest over $30 million in new talent alone, in addition to technology and other investments across our business.

Okay, thanks. I appreciate the color.

Our next question is from Josh Shanker with Bank of America. Please proceed.

Yeah, thank you, and congratulations on the quarter and all the good news for everybody. I hope that you can talk a little bit — I'm interested in the relationship between the contingent payout and sales inducement programs. To what extent are sales inducement programs going to be a common feature of future acquisitions? Given the first couple months you have here of data, to what extent are your producers taking you up on those opportunities? And when you set objectives, how did you think about the relationship between what you're willing to pay the firm and what you're willing to pay individual producers?

Yeah Josh, to clarify, the inducement program is tied — it is part of the overall consideration for an individual transaction. One of the unique things about our M&A program is that generally all colleagues at a partner firm receive equity consideration as a part of the purchase price that we publish. So, the inducement plan is not separate and distinct from the purchase price; it is a part of that. It is the way in which we put equity in the hands of individuals who may not be owners or material owners of the business at the time of the transaction, but whom we believe will be considerable drivers of future performance. We're using that to align their interests with the overall organization.

So, the total price that will be paid, given perfect execution, includes that inducement cost within the price?

Correct.

Okay. And should we expect, looking forward, that most deals you do will include an inducement component for producers?

Yes. And virtually all transactions we pursue will include a component designed to incentivize and retain key producers and contributors.

Okay. And in general, when you look at the Business Insurance top 100 list, of course there are many companies that don't appear on that list that are attractive. If you had your choice, how many of those top 100 companies are actually the right fit for Baldwin? In other words, how many out of 100 companies are actually attractive to you?

I'd say my sense would be around 20%. Those are companies that have the long-term growth culture and fit our model.

And in terms of pipeline and deal size, should we expect bolt-ons to be regularly announced, and also larger deals occasionally, as part of your strategy?

Yes, I think that's a fair characterization of how the partnership program will continue.

Okay. Thank you very much.

Our next question is from Meyer Shields with KBW. Please proceed.

Great. Thanks. Trevor, you'd mentioned that things were looking stronger, even in some of the segments that had a weaker fourth quarter. Is that improvement also on the employee benefits side? Can you talk about what's looking better so far in 2021?

Yeah, it is. Universally across all three of the single-digit segments, we're seeing enhanced performance thus far in 2021. To provide some specificity, as we think about the impact of the exposure unit pullback in Q4, the combined impact of rate and exposure was an 8% headwind. Remember, you can think about rate as being positive to the tune of high single digits even. So, it was a pretty significant right-sizing that we were still able to grow through at 17% overall across the business. We think we've gotten most if not all of that underlying client-level exposure unit right-sizing out now and feel really good about the momentum and the positioning of our organization, the relative new business pipelines across our segments and risk advisors. As we shared, we feel good about achieving organic growth on the higher end of our 10% to 15% target range for Q1.

Okay, very helpful. Doing some quick math on the investment plans, it looks like maybe 40% of the annual investment might come in early, given the margin numbers Kris provided. Should we expect that level of seasonality because of the revenue heaviness? Is that the right way to think about the investment timing?

I wouldn't think about the investment as being front-loaded. I would think about it being more evenly distributed across the year. The $30-plus million is mostly talent, and onboarding talent means we need bandwidth to appropriately welcome new colleagues, get them trained on our go-to-market approach, and educate them on all the resources and capabilities available across our platform.

When you say talent, I assume that's brokerage talent, but also IT — is that correct?

It's talent across the business. Yes, a significant amount would be brokerage talent, but it's also technology talent — developers, product management specialists in the MGA, HR and training and development to bolster onboarding, and recruiting talent to build our bench. So, it's across the board.

Understood. Final question: if we look at roughly 40% organic revenue growth for the MGA of the Future for 2021, when we look at individual quarters, because the comparable in Q4 is so high, should we expect stronger earlier-quarter growth and then tougher lapping later in the year?

Yeah, I think that's a fair characterization, Meyer.

Our next question is from Pablo Singzon with JPMorgan. Please proceed.

Hi, thank you. So, in thinking about your organic growth guidance of 10% to 15%, I think you can easily get to that range with the MGA going 40% for the next several quarters, but I'm more interested in the rest of BRP’s businesses — are you comfortable that the rest of BRP will be growing and contributing a piece of double-digit organic growth to support the overall 10% to 15% growth?

Yeah Pablo, what I'd say is we've always said each segment can grow at 10% to 15% on a longer-term basis. Last year some segments fell short due to the economic environment, but that's not our expectation going forward. Our expectation is those businesses can all grow double-digits over time. The quarterly timing varies, but in the long run we believe each business can contribute double-digit growth.

Got you. And Trevor, based on your comments about the headwind from exposure, is it fair to assume that exposures in Q1 2021 are better than what you booked in Q4 2020, but are probably still lower than Q1 2020, conceptually?

Yeah, that's right, Pablo. If you think back to last year, COVID impacts didn't fully affect the country until March, so January and February renewals were often on pre-COVID terms. As you moved into March and April, you saw renewals in a post-COVID world, and then later you had stimulus and quantitative easing that supported businesses. By Q4, with the lack of an immediate stimulus, some businesses right-sized. So, Q1 2021 exposures are conceptually better than Q4 2020 but may still be below Q1 2020, depending on the pace of recovery.

I think last year there was some noise in terms of negative adjustments from mid-term exposure audits. As the economy recovers, do you expect mid-term adjustments to be positive this year or early next year?

That's a reasonable expectation, subject to how quickly and robustly the economy recovers. Businesses have learned to do more with less over the past year and may remain efficient, so you might not see an immediate rebound, but over time exposure unit growth should layer back in.

Last one: can you contextualize the new renters product — the master tenant liability product — any color on commission rates, overlap with existing renters product, and how it interacts with your 17 million unit ecosystem?

Sure. The master tenant liability product pairs nicely with our embedded HO4 solution because it allows property managers to place liability-only coverage on units for individuals who choose not to buy the full HO4 solution. It's a way for tenants to satisfy insurance obligations without the larger HO4 product. On impact, at building maturity you may see 20% to 30% penetration with the HO4 product; layer in the tenant master liability solution and you could get to as high as 50% overall penetration on a combined basis between the two. A few momentum stats: we've grown turned-on units inside the system to 8.2 million as of yesterday, up significantly from the 7.7 million at the end of 2020 and 5.6 million at the end of 2019. For buildings we've been active in for over 12 months, we've increased penetration from 6.4% to 7.3% — roughly 15% growth in policies in force for those buildings. We're seeing growing adoption and improving at marketing and offering our solution set into activated buildings and integrations.

Got it. Thanks for your answers.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Thank you. We appreciate all of your interest and support. I just want to thank our colleagues one last time for the amazing grit and perseverance that they showed throughout 2020. We're incredibly fortunate to have a uniquely talented group of colleagues. And I can tell you that we're exceptionally excited about what 2021 has in store for our business, and the opportunities for us to continue growing and innovating the industry. Thank you.

Thank you. This does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.