NASDAQ:BWIN The Baldwin Insurance Group Q2 2023 Earnings Report $40.71 -1.18 (-2.82%) Closing price 04:00 PM EasternExtended Trading$40.72 +0.01 (+0.01%) As of 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast The Baldwin Insurance Group EPS ResultsActual EPS$0.03Consensus EPS $0.16Beat/MissMissed by -$0.13One Year Ago EPSN/AThe Baldwin Insurance Group Revenue ResultsActual Revenue$297.19 millionExpected Revenue$286.50 millionBeat/MissBeat by +$10.69 millionYoY Revenue GrowthN/AThe Baldwin Insurance Group Announcement DetailsQuarterQ2 2023Date8/9/2023TimeN/AConference Call DateWednesday, August 9, 2023Conference Call Time5:00PM ETUpcoming EarningsThe Baldwin Insurance Group's Q1 2025 earnings is scheduled for Tuesday, May 6, 2025, with a conference call scheduled at 5:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by The Baldwin Insurance Group Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 9, 2023 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:08Please note this conference is being recorded. I will now turn the conference over to Bonnie Bishop, Executive Director of Investor Relations. Thank you. You may begin. Speaker 100:00:17Thank you, operator. Welcome to the BRP Group's Q2 2023 earnings call. Today's call is being recorded. 2nd quarter financial results, supplemental information and Form 10 Q were issued earlier this afternoon and are available on the company's website atir.baldwinriskpartners.com. Please note that remarks made today may include forward looking statements subject to various assumptions, Risks and uncertainties. Speaker 100:00:45The company's actual results may differ materially from those contemplated by such statements. For a more detailed discussion, please refer to the note regarding forward looking statements in the company's earnings release and to our most recent Form 10 Q, both of which are available on the BRP website. During the call today, the company may also discuss certain non GAAP financial measures. For a more detailed discussion of these non GAAP financial measures and historical reconciliation to the most closely comparable GAAP measures, Please refer to the company's earnings release and supplemental information, both of which have been posted on the company's website at ir.baldwinriskpartners.com. I will now turn the call over to Trevor Baldwin, Chief Executive Officer of BRP Group. Speaker 200:01:34Good afternoon and thank you for joining our 2nd quarter earnings call. I'm joined this afternoon by Brad Hale, our Chief Financial Officer Chris Wiebeck, Chief Strategy Officer and Bonnie Bishop, Executive Director of Investor Relations. BRP had an excellent second quarter with broad based strength on both the top and bottom lines across our segments. The power of our colleague and client franchise Continues to show through in our results with organic revenue growth of 22% on the back of a difficult prior year comp of 24%, driving adjusted EBITDA growth of 45% to 61,600,000 and representing a year over year margin increase of approximately 2 40 basis points to 21%. Total revenue grew 28% and adjusted earnings per share of $0.27 was up 17% In the face of an approximate $13,000,000 or 101 percent year over year increase in our cash interest expense in the quarter. Speaker 200:02:45Insurance Advisory Solutions achieved strong organic growth of 15%, continuing to benefit from outsized new business wins and rate and exposure tailwinds in certain areas. New business revenue wins increased 28% And net new business revenue wins increased 50% for the quarter compared to the prior year. In June July, we officially launched and announced 3 new centers of excellence in Private Equity, Venture Capital and government contracting. These centers of excellence are built around insurance experts with deep experience in their field. Their talent and expertise can be tapped across the entire BRP platform to provide specialized and differentiated solutions to our clients. Speaker 200:03:36We expect specialization to be a key and growing component to our sustained organic growth. Underwriting capacity and technology solutions grew 36% organically with the MG of the Future platform again performing exceptionally well, up 45% with broad based strength across the business and building underlying momentum That should accrue to continued outperformance on a go forward basis. In renters, growth was robust. We had our largest day ever for new business policies in June, which was already surpassed again in July And our pipeline of new distribution partners remains incredibly strong. In homeowners, our builder program With QBE continues to outpace expectations and the non builder portfolio had its largest quarter ever with net written premium up 40% versus the Q1 and over 5x what we generated in the Q2 of 2022. Speaker 200:04:40Our commercial umbrella business also saw strong growth in the quarter as it continues to benefit from strong new business, renewal And rate trends. On the new product front, we successfully secured capacity for a new high net worth focused homeowners program, which launched last week. And we also anticipate launching a new commercial habitational property product by the end of the third quarter. Main Street Insurance Solutions delivered organic growth of 20%, driven by continued strong performance at Westwood, Our personal insurance platform embedded with many of the top homebuilders in the U. S, which has grown revenue rapidly since Joining BRP last April on the back of durable new business trends, higher attachment rates to new homes sold and favorable rate dynamics. Speaker 200:05:36Overall, our business continues to perform exceptionally well with broad based top line strength And growing margin accretion trends that should accelerate in the coming quarters as we fully lap the previously concluded 3 year talent and technology reinvestment cycle. I'd like to spend a minute focusing specifically on our investments in talent. We more than doubled our number of colleagues in 2021 2022, adding approximately 1,000 net new colleagues per year. By the end of Q3 of this year, we will have largely absorbed the incremental run rate payroll expense from last year's hiring growth. And as these newer colleagues are ramping on our platform, their contributions are now beginning to show up in new business wins. Speaker 200:06:28We have now settled into a more normalized hiring pattern as evidenced by our hiring through July, adding fewer than 100 net new colleagues year to date compared to more than 600 net new colleagues in the prior year period. We expect our normalized hiring pace, growing contributions from colleagues onboarded in the past 2 years And the completion of our 3 year cycle of infrastructure investments will deliver significant operating leverage and greater scalability for our platform and will begin to contribute materially to accelerating margin accretion over the next two quarters and into the first half of twenty twenty four. Lastly, I'm pleased to welcome Satish Muthukrishnan to our Board of Directors. His extensive experience in digital and technology transformation at Ally Financial, Where he serves as Chief Information, Data and Digital Officer will add tremendous value to BRP. Satish chairs our newly created Technology and Cyber Risk Committee. Speaker 200:07:38I also want to thank Phil Casey, who recently retired from the Board for his contributions to BRP as a Board member and as Audit Committee Chair since our IPO. We are grateful for Phil's guidance, counsel and dedication to BRP Group and our shareholders. I am incredibly proud of the continued strength of results Our colleagues have delivered for our stakeholders. The grit and perseverance our colleagues exhibit day in and day out Has enabled outstanding results for clients during a time of real challenge in pockets of the insurance marketplace. I want to thank our clients for their continued trust and confidence. Speaker 200:08:22The rate at which our clients continue to honor us with their renewals And the rate at which new clients choose to hire BRP over our competitors is the number one indication that the talent, Technology and platform we have invested in building over the past few years is enabling sustained outlier results. With that, I will turn it over to Brad, who will detail our financial results. Speaker 300:08:51Thanks, Trevor, and good afternoon, everyone. For the Q2, we generated revenue growth of 28 percent to $297,000,000 As Trevor mentioned, we generated organic growth in the quarter of 22% with all three reporting segments generating organic growth of 15% or higher in the quarter. In Q2, we paid down our revolver by $15,000,000 as we continue to generate cash flow from operations and manage working capital $7,000,000 or $0.40 per fully diluted share. Adjusted net income for the Q2 of 2023, Which excludes share based compensation, amortization and other one time expenses was $32,000,000 or $0.27 per fully diluted share. A table reconciling GAAP net loss to adjusted net income can be found in our earnings release and our 10 Q filed with the SEC. Speaker 300:10:04Adjusted EBITDA for the 2nd quarter rose 45 percent to $61,600,000 compared to $42,500,000 in the prior year period. Adjusted EBITDA margin was 21% for the quarter compared to 18% in the prior year period. This margin expansion can be attributed to our organic growth, offset by absorbing the rollover impact of 2022 new hires. We made significant investments in 2022 that we are now 1 quarter away from largely absorbing. Therefore, our continued organic growth will be more accretive to margin in the back half of twenty twenty three and into 2024. Speaker 300:10:42For the full year 2023, we now expect organic growth in the high teens. Based on the performance we are seeing across our business year to date, which includes an expectation for mid teens organic growth in Q3. Additionally, we now expect full year revenue Of $1,180,000,000 to $1,200,000,000 higher than the range of $1,160,000,000 to $1,190,000,000 we stated on the first quarter Finally, we are reaffirming our adjusted EBITDA expectation to between $255,000,000 to $265,000,000 And for the Q3 of 2023, we expect adjusted EBITDA to be between $62,000,000 to $66,000,000 Operator00:11:59Our first question is from Elyse Greenspan with Wells Fargo. Speaker 400:12:05Hi, thanks. My first question, you guys didn't raise the EBITDA margin the EBITDA target for the year. But you do expect revenue to be higher. And I know from the prepared comments a couple of times you mentioned tailwinds to margins in the back half of the year. So, I guess why wouldn't that EBITDA target be higher, if revenues higher and if There is tailwinds to your margins right from employees that you're hiring right being closer to full potential. Speaker 300:12:40Elyse, it's Brad. Look, we're really pleased with the margin expansion we saw in Q2 2.40 basis points. If you look through the guidance we gave for Q3, at a minimum, we're expecting 400 point to margin expansion in Q3. So we really are living that story that we portrayed in Q1 where we're lapping the the significant investments we made in 2022 and are really starting to see margin expansion in the business. As we find operating leverage across the really the service and admin burden in comp. Speaker 300:13:20We did raise revenue guidance based on performance year to date. We continue See strong organic trends in the business that make us confident we can hit that guidance. And in terms of the full year EBITDA, I think We've got a certain amount of conservatism in that number, which we always portray. But if we can hit those result, it's going to show meaningful organic growth for the year and it's going to show meaningful margin expansion going into 2024, where we anticipate we can get even further margin expansion. Speaker 400:13:50So maybe building on that, right, you guys did say, right, that you expect The operating leverage from the hires to benefit your margin right over the next two quarters and into the first half of next year. So you have a view of your margin profile for next 12 months, right, so the next 4 quarters and once we get through Q2 of 'twenty four, where do you think the margin BRP could be once we reflect all the upcoming tailwinds. Speaker 200:14:21Yes. Hey Elyse, this is Trevor. We're not going to get into Projecting margin for 2024 yet, we'll start providing guidance at the normal time period there. What I would tell you is, what I've said in the past is the mature margin profile of this business is in excess of 30%. And we believe based on the amount of kind of technology and automation, particularly in our MGA, The mature margin profile is meaningfully higher than our peers. Speaker 200:14:53We've been pulling pretty hard on the margin lever over the past 6 months or so and you're going to begin seeing that really flow through in the back half of the year and the first half of twenty twenty four. But that by no means Means that, that margin accretion story will be done then. We're also continuing to focus on thoughtfully investing And talent in the business, in a more kind of normal course way to ensure that we sustain They outlier organic growth results that you've grown accustomed to seeing from our business. Speaker 400:15:29And then one last one, right. So you guys said you'll be at that leverage target at the end of this year. So should we think about then you obviously have some more capital flexibility. Should we think about a return to M and A in 2024 and just overall like an update on M and A would be great. Thank you. Speaker 200:15:52Yes. So we continue to kind of remain active and opportunistic around our pipeline of opportunities and keep that live. Our priority remains delevering the business Down below our long term range of 4.5 turns and we've got earn out liabilities that will be funded through free cash flow over the course The next 18 months. At that point, the business is going to be in a very different position from a financial flexibility perspective. We'll likely have delevered materially without absent any further M and A materially below kind of our target range of call it 3 to 4.5 tons of leverage. Speaker 200:16:41And so I would expect us to begin thinking about Being more intentional around M and A towards the end of 2024 and certainly into 2025, but that It's going to be very, situational depending on the environment we find ourselves in, the quality of opportunities and deal flow that we're seeing, And the value that those opportunities present for the business based on where deals are trading. Speaker 300:17:10And just to add to that, Elyse, we are on the leverage trajectory that we projected. We are at 5.19 times, Down from approximately 5.5 in Q1. Based on the guidance I provided for Q3, I believe we'll be in the 4 0.7 times range as of the end of Q3 with a path to being at 4.5 by Q4 like we've communicated previously. We're meeting those targets as the year progresses. As Trevor mentioned, we've got earn out liabilities we've got to address over the next 18 months, but certainly in terms of getting to the leverage profile that we've talked about to the market, we're on track to get there. Speaker 400:17:57Thank you. Operator00:18:00Our next question is from Meyer Shields with KBW. Please proceed. Speaker 500:18:07Thanks. And a couple of questions about some expenses that are adjusted out in calculating EBITDA. I guess because we saw an uptick in severance expense and transaction related partnership. And I guess I was a little surprised, At least on the latter one, because you haven't been doing M and A recently. I was hoping you could walk us through what's going on there? Speaker 300:18:29Yes. This is Brad. We did have a severance line item this quarter. We took action Primarily in our back office administrative function where we were post a lot of the integration work We've been working on in the IIS business, and we looked at those colleague bases primarily in accounting and finance and HR, And had some excess resources that post integration really weren't necessary as we had Migrated to a single agency management system. To Trevor's point previously, We've redeployed some of that capital into customer facing roles as we continue to be aggressive about organic growth and funding that for the future. Speaker 300:19:19But We did take an opportunity to have a reduction force there amongst some of our back office colleagues. In terms of the transaction related, we have continued to experience integration related costs, primarily in the MGA side of the business and With Westwood, as you know, Westwood was a carve out of a public company. We anticipated that, that integration would be Expensive. It has been even more expensive than we anticipated, albeit 100% worth it given the fantastic performance that we continue to see in the Westwood business. I'd say the positive side, Meyer, is that We're by the midpoint of next year, we believe will be largely through those integration expenses with Westwood and the TSA, but it has been more expensive than we anticipated throughout the integration period. Speaker 500:20:19Okay. That's very helpful. Thank you so much. Operator00:20:44Our next question is from Pablo Singhal with JPMorgan. Please proceed. Speaker 600:20:51Hi, good afternoon. Can you please remind us of the earnouts you expect to Speaker 300:20:55pay out in cash this year? Speaker 600:20:59Did you say this year Pablo? I'm sorry, you broke up. Yes, this year. Speaker 300:21:04Yes, in year, It's about $35,000,000 to $40,000,000 in anticipated earn out payments, and there's about another $75,000,000 to $80,000,000 We anticipate paying in Q1 of 2024. Speaker 600:21:20Okay. And I think Year to date, my numbers might be off here, but I'm looking at about $14,000,000 of payouts, right? So you're basically implying a pickup in the second half of the year in terms of the payouts? Speaker 300:21:32Yes, that's correct. Speaker 600:21:34Okay. And then a question along the same lines of, I guess, it's severance and M and A expense. So I think, Brad, there's this line other and I think most of it is an indication expense. Do you expect most of and I think year to date, it's running at about, call it, $14,000,000 Do you expect that to be mostly done by the end of this year? Or do you think that Speaker 300:22:02Yes, I expect that Speaker 600:22:03to be mostly done by the Speaker 300:22:05end of this year. Again, that's some outside temporary help and folks that are largely focused On integration as well, but as we come on the back of a lot of the MGA related integration and Westwood integration we're doing, I do expect that line Operator00:22:43There are no more questions at this time. I would like to turn the call back over to Trevor Baldwin for closing remarks. Speaker 200:22:50I want to thank you all for joining us on the call this evening. In closing, I want to thank our 4,000 colleagues for their Grit and dedication to delivering for our stakeholders. I also want to thank our clients for their continued trust and confidence. So thank you all very much and we look forward to speaking with you next quarter. Good evening.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallThe Baldwin Insurance Group Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) The Baldwin Insurance Group Earnings HeadlinesMoody’s affirms Baldwin’s B2 ratings, outlook shifts to stableApril 28, 2025 | investing.comFlorida Rep. Scott Franklin Sold Over $500K Worth of Baldwin Insurance Stock: Here's What You Should KnowApril 18, 2025 | benzinga.comThink NVDA’s run was epic? You ain’t seen nothin’ yetAsk most investors and they’ll probably tell you Nvidia is the undisputed AI stock of the decade. In 2023, it surged 239%. And in 2024, it soared another 171% on the year… But what if I told you there was a way to target those types of “peak Nvidia” profit opportunities in 24 hours or less?May 5, 2025 | Timothy Sykes (Ad)Baldwin Insurance Group’s credit rating upgraded to ’B’ by S&P Global RatingsApril 17, 2025 | investing.comAnalysts Have Conflicting Sentiments on These Financial Companies: Baldwin Insurance Group (BWIN), Regions Financial (RF) and US Bancorp (USB)April 17, 2025 | markets.businessinsider.comBaldwin Group price target raised to $42 from $41 at JefferiesApril 12, 2025 | markets.businessinsider.comSee More The Baldwin Insurance Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like The Baldwin Insurance Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on The Baldwin Insurance Group and other key companies, straight to your email. Email Address About The Baldwin Insurance GroupThe Baldwin Insurance Group (NASDAQ:BWIN) operates as an independent insurance distribution firm that delivers insurance and risk management solutions in the United States. It operates through three segments: Insurance Advisory Solutions; Underwriting, Capacity & Technology Solutions; and Mainstreet Insurance Solutions. The Insurance Advisory Solutions segment provides commercial risk management, employee benefits, and private risk management solutions for businesses and high-net-worth individuals, as well as their families. The Underwriting, Capacity & Technology Solutions segment offers Future platform, that manufactures technology-enabled insurance products suite comprises personal, commercial, and specialty lines; specialty wholesale broker business that delivers professionals, individuals, and niche industry businesses; and reinsurance brokerage services. The Mainstreet Insurance Solutions segment provides personal insurance, commercial insurance, and life and health solutions to individuals and businesses in communities. The company was formerly known as BRP Group, Inc. and changed its name to The Baldwin Insurance Group, Inc. in May 2024. The Baldwin Insurance Group, Inc. was founded in 2011 and is headquartered in Tampa, Florida.View The Baldwin Insurance Group ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's EarningsAmazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousRocket Lab Braces for Q1 Earnings Amid Soaring ExpectationsMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback Plan Upcoming Earnings American Electric Power (5/6/2025)Advanced Micro Devices (5/6/2025)Marriott International (5/6/2025)Constellation Energy (5/6/2025)Arista Networks (5/6/2025)Brookfield Asset Management (5/6/2025)Duke Energy (5/6/2025)Energy Transfer (5/6/2025)Mplx (5/6/2025)Ferrari (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 7 speakers on the call. Operator00:00:08Please note this conference is being recorded. I will now turn the conference over to Bonnie Bishop, Executive Director of Investor Relations. Thank you. You may begin. Speaker 100:00:17Thank you, operator. Welcome to the BRP Group's Q2 2023 earnings call. Today's call is being recorded. 2nd quarter financial results, supplemental information and Form 10 Q were issued earlier this afternoon and are available on the company's website atir.baldwinriskpartners.com. Please note that remarks made today may include forward looking statements subject to various assumptions, Risks and uncertainties. Speaker 100:00:45The company's actual results may differ materially from those contemplated by such statements. For a more detailed discussion, please refer to the note regarding forward looking statements in the company's earnings release and to our most recent Form 10 Q, both of which are available on the BRP website. During the call today, the company may also discuss certain non GAAP financial measures. For a more detailed discussion of these non GAAP financial measures and historical reconciliation to the most closely comparable GAAP measures, Please refer to the company's earnings release and supplemental information, both of which have been posted on the company's website at ir.baldwinriskpartners.com. I will now turn the call over to Trevor Baldwin, Chief Executive Officer of BRP Group. Speaker 200:01:34Good afternoon and thank you for joining our 2nd quarter earnings call. I'm joined this afternoon by Brad Hale, our Chief Financial Officer Chris Wiebeck, Chief Strategy Officer and Bonnie Bishop, Executive Director of Investor Relations. BRP had an excellent second quarter with broad based strength on both the top and bottom lines across our segments. The power of our colleague and client franchise Continues to show through in our results with organic revenue growth of 22% on the back of a difficult prior year comp of 24%, driving adjusted EBITDA growth of 45% to 61,600,000 and representing a year over year margin increase of approximately 2 40 basis points to 21%. Total revenue grew 28% and adjusted earnings per share of $0.27 was up 17% In the face of an approximate $13,000,000 or 101 percent year over year increase in our cash interest expense in the quarter. Speaker 200:02:45Insurance Advisory Solutions achieved strong organic growth of 15%, continuing to benefit from outsized new business wins and rate and exposure tailwinds in certain areas. New business revenue wins increased 28% And net new business revenue wins increased 50% for the quarter compared to the prior year. In June July, we officially launched and announced 3 new centers of excellence in Private Equity, Venture Capital and government contracting. These centers of excellence are built around insurance experts with deep experience in their field. Their talent and expertise can be tapped across the entire BRP platform to provide specialized and differentiated solutions to our clients. Speaker 200:03:36We expect specialization to be a key and growing component to our sustained organic growth. Underwriting capacity and technology solutions grew 36% organically with the MG of the Future platform again performing exceptionally well, up 45% with broad based strength across the business and building underlying momentum That should accrue to continued outperformance on a go forward basis. In renters, growth was robust. We had our largest day ever for new business policies in June, which was already surpassed again in July And our pipeline of new distribution partners remains incredibly strong. In homeowners, our builder program With QBE continues to outpace expectations and the non builder portfolio had its largest quarter ever with net written premium up 40% versus the Q1 and over 5x what we generated in the Q2 of 2022. Speaker 200:04:40Our commercial umbrella business also saw strong growth in the quarter as it continues to benefit from strong new business, renewal And rate trends. On the new product front, we successfully secured capacity for a new high net worth focused homeowners program, which launched last week. And we also anticipate launching a new commercial habitational property product by the end of the third quarter. Main Street Insurance Solutions delivered organic growth of 20%, driven by continued strong performance at Westwood, Our personal insurance platform embedded with many of the top homebuilders in the U. S, which has grown revenue rapidly since Joining BRP last April on the back of durable new business trends, higher attachment rates to new homes sold and favorable rate dynamics. Speaker 200:05:36Overall, our business continues to perform exceptionally well with broad based top line strength And growing margin accretion trends that should accelerate in the coming quarters as we fully lap the previously concluded 3 year talent and technology reinvestment cycle. I'd like to spend a minute focusing specifically on our investments in talent. We more than doubled our number of colleagues in 2021 2022, adding approximately 1,000 net new colleagues per year. By the end of Q3 of this year, we will have largely absorbed the incremental run rate payroll expense from last year's hiring growth. And as these newer colleagues are ramping on our platform, their contributions are now beginning to show up in new business wins. Speaker 200:06:28We have now settled into a more normalized hiring pattern as evidenced by our hiring through July, adding fewer than 100 net new colleagues year to date compared to more than 600 net new colleagues in the prior year period. We expect our normalized hiring pace, growing contributions from colleagues onboarded in the past 2 years And the completion of our 3 year cycle of infrastructure investments will deliver significant operating leverage and greater scalability for our platform and will begin to contribute materially to accelerating margin accretion over the next two quarters and into the first half of twenty twenty four. Lastly, I'm pleased to welcome Satish Muthukrishnan to our Board of Directors. His extensive experience in digital and technology transformation at Ally Financial, Where he serves as Chief Information, Data and Digital Officer will add tremendous value to BRP. Satish chairs our newly created Technology and Cyber Risk Committee. Speaker 200:07:38I also want to thank Phil Casey, who recently retired from the Board for his contributions to BRP as a Board member and as Audit Committee Chair since our IPO. We are grateful for Phil's guidance, counsel and dedication to BRP Group and our shareholders. I am incredibly proud of the continued strength of results Our colleagues have delivered for our stakeholders. The grit and perseverance our colleagues exhibit day in and day out Has enabled outstanding results for clients during a time of real challenge in pockets of the insurance marketplace. I want to thank our clients for their continued trust and confidence. Speaker 200:08:22The rate at which our clients continue to honor us with their renewals And the rate at which new clients choose to hire BRP over our competitors is the number one indication that the talent, Technology and platform we have invested in building over the past few years is enabling sustained outlier results. With that, I will turn it over to Brad, who will detail our financial results. Speaker 300:08:51Thanks, Trevor, and good afternoon, everyone. For the Q2, we generated revenue growth of 28 percent to $297,000,000 As Trevor mentioned, we generated organic growth in the quarter of 22% with all three reporting segments generating organic growth of 15% or higher in the quarter. In Q2, we paid down our revolver by $15,000,000 as we continue to generate cash flow from operations and manage working capital $7,000,000 or $0.40 per fully diluted share. Adjusted net income for the Q2 of 2023, Which excludes share based compensation, amortization and other one time expenses was $32,000,000 or $0.27 per fully diluted share. A table reconciling GAAP net loss to adjusted net income can be found in our earnings release and our 10 Q filed with the SEC. Speaker 300:10:04Adjusted EBITDA for the 2nd quarter rose 45 percent to $61,600,000 compared to $42,500,000 in the prior year period. Adjusted EBITDA margin was 21% for the quarter compared to 18% in the prior year period. This margin expansion can be attributed to our organic growth, offset by absorbing the rollover impact of 2022 new hires. We made significant investments in 2022 that we are now 1 quarter away from largely absorbing. Therefore, our continued organic growth will be more accretive to margin in the back half of twenty twenty three and into 2024. Speaker 300:10:42For the full year 2023, we now expect organic growth in the high teens. Based on the performance we are seeing across our business year to date, which includes an expectation for mid teens organic growth in Q3. Additionally, we now expect full year revenue Of $1,180,000,000 to $1,200,000,000 higher than the range of $1,160,000,000 to $1,190,000,000 we stated on the first quarter Finally, we are reaffirming our adjusted EBITDA expectation to between $255,000,000 to $265,000,000 And for the Q3 of 2023, we expect adjusted EBITDA to be between $62,000,000 to $66,000,000 Operator00:11:59Our first question is from Elyse Greenspan with Wells Fargo. Speaker 400:12:05Hi, thanks. My first question, you guys didn't raise the EBITDA margin the EBITDA target for the year. But you do expect revenue to be higher. And I know from the prepared comments a couple of times you mentioned tailwinds to margins in the back half of the year. So, I guess why wouldn't that EBITDA target be higher, if revenues higher and if There is tailwinds to your margins right from employees that you're hiring right being closer to full potential. Speaker 300:12:40Elyse, it's Brad. Look, we're really pleased with the margin expansion we saw in Q2 2.40 basis points. If you look through the guidance we gave for Q3, at a minimum, we're expecting 400 point to margin expansion in Q3. So we really are living that story that we portrayed in Q1 where we're lapping the the significant investments we made in 2022 and are really starting to see margin expansion in the business. As we find operating leverage across the really the service and admin burden in comp. Speaker 300:13:20We did raise revenue guidance based on performance year to date. We continue See strong organic trends in the business that make us confident we can hit that guidance. And in terms of the full year EBITDA, I think We've got a certain amount of conservatism in that number, which we always portray. But if we can hit those result, it's going to show meaningful organic growth for the year and it's going to show meaningful margin expansion going into 2024, where we anticipate we can get even further margin expansion. Speaker 400:13:50So maybe building on that, right, you guys did say, right, that you expect The operating leverage from the hires to benefit your margin right over the next two quarters and into the first half of next year. So you have a view of your margin profile for next 12 months, right, so the next 4 quarters and once we get through Q2 of 'twenty four, where do you think the margin BRP could be once we reflect all the upcoming tailwinds. Speaker 200:14:21Yes. Hey Elyse, this is Trevor. We're not going to get into Projecting margin for 2024 yet, we'll start providing guidance at the normal time period there. What I would tell you is, what I've said in the past is the mature margin profile of this business is in excess of 30%. And we believe based on the amount of kind of technology and automation, particularly in our MGA, The mature margin profile is meaningfully higher than our peers. Speaker 200:14:53We've been pulling pretty hard on the margin lever over the past 6 months or so and you're going to begin seeing that really flow through in the back half of the year and the first half of twenty twenty four. But that by no means Means that, that margin accretion story will be done then. We're also continuing to focus on thoughtfully investing And talent in the business, in a more kind of normal course way to ensure that we sustain They outlier organic growth results that you've grown accustomed to seeing from our business. Speaker 400:15:29And then one last one, right. So you guys said you'll be at that leverage target at the end of this year. So should we think about then you obviously have some more capital flexibility. Should we think about a return to M and A in 2024 and just overall like an update on M and A would be great. Thank you. Speaker 200:15:52Yes. So we continue to kind of remain active and opportunistic around our pipeline of opportunities and keep that live. Our priority remains delevering the business Down below our long term range of 4.5 turns and we've got earn out liabilities that will be funded through free cash flow over the course The next 18 months. At that point, the business is going to be in a very different position from a financial flexibility perspective. We'll likely have delevered materially without absent any further M and A materially below kind of our target range of call it 3 to 4.5 tons of leverage. Speaker 200:16:41And so I would expect us to begin thinking about Being more intentional around M and A towards the end of 2024 and certainly into 2025, but that It's going to be very, situational depending on the environment we find ourselves in, the quality of opportunities and deal flow that we're seeing, And the value that those opportunities present for the business based on where deals are trading. Speaker 300:17:10And just to add to that, Elyse, we are on the leverage trajectory that we projected. We are at 5.19 times, Down from approximately 5.5 in Q1. Based on the guidance I provided for Q3, I believe we'll be in the 4 0.7 times range as of the end of Q3 with a path to being at 4.5 by Q4 like we've communicated previously. We're meeting those targets as the year progresses. As Trevor mentioned, we've got earn out liabilities we've got to address over the next 18 months, but certainly in terms of getting to the leverage profile that we've talked about to the market, we're on track to get there. Speaker 400:17:57Thank you. Operator00:18:00Our next question is from Meyer Shields with KBW. Please proceed. Speaker 500:18:07Thanks. And a couple of questions about some expenses that are adjusted out in calculating EBITDA. I guess because we saw an uptick in severance expense and transaction related partnership. And I guess I was a little surprised, At least on the latter one, because you haven't been doing M and A recently. I was hoping you could walk us through what's going on there? Speaker 300:18:29Yes. This is Brad. We did have a severance line item this quarter. We took action Primarily in our back office administrative function where we were post a lot of the integration work We've been working on in the IIS business, and we looked at those colleague bases primarily in accounting and finance and HR, And had some excess resources that post integration really weren't necessary as we had Migrated to a single agency management system. To Trevor's point previously, We've redeployed some of that capital into customer facing roles as we continue to be aggressive about organic growth and funding that for the future. Speaker 300:19:19But We did take an opportunity to have a reduction force there amongst some of our back office colleagues. In terms of the transaction related, we have continued to experience integration related costs, primarily in the MGA side of the business and With Westwood, as you know, Westwood was a carve out of a public company. We anticipated that, that integration would be Expensive. It has been even more expensive than we anticipated, albeit 100% worth it given the fantastic performance that we continue to see in the Westwood business. I'd say the positive side, Meyer, is that We're by the midpoint of next year, we believe will be largely through those integration expenses with Westwood and the TSA, but it has been more expensive than we anticipated throughout the integration period. Speaker 500:20:19Okay. That's very helpful. Thank you so much. Operator00:20:44Our next question is from Pablo Singhal with JPMorgan. Please proceed. Speaker 600:20:51Hi, good afternoon. Can you please remind us of the earnouts you expect to Speaker 300:20:55pay out in cash this year? Speaker 600:20:59Did you say this year Pablo? I'm sorry, you broke up. Yes, this year. Speaker 300:21:04Yes, in year, It's about $35,000,000 to $40,000,000 in anticipated earn out payments, and there's about another $75,000,000 to $80,000,000 We anticipate paying in Q1 of 2024. Speaker 600:21:20Okay. And I think Year to date, my numbers might be off here, but I'm looking at about $14,000,000 of payouts, right? So you're basically implying a pickup in the second half of the year in terms of the payouts? Speaker 300:21:32Yes, that's correct. Speaker 600:21:34Okay. And then a question along the same lines of, I guess, it's severance and M and A expense. So I think, Brad, there's this line other and I think most of it is an indication expense. Do you expect most of and I think year to date, it's running at about, call it, $14,000,000 Do you expect that to be mostly done by the end of this year? Or do you think that Speaker 300:22:02Yes, I expect that Speaker 600:22:03to be mostly done by the Speaker 300:22:05end of this year. Again, that's some outside temporary help and folks that are largely focused On integration as well, but as we come on the back of a lot of the MGA related integration and Westwood integration we're doing, I do expect that line Operator00:22:43There are no more questions at this time. I would like to turn the call back over to Trevor Baldwin for closing remarks. Speaker 200:22:50I want to thank you all for joining us on the call this evening. In closing, I want to thank our 4,000 colleagues for their Grit and dedication to delivering for our stakeholders. I also want to thank our clients for their continued trust and confidence. So thank you all very much and we look forward to speaking with you next quarter. Good evening.Read morePowered by