Overall BRP Group had a strong fourth quarter in 2021. BRP Group (NASDAQ: BRP) reported 4Q21 adjusted Earnings Per Share (EPS) of $0.10 on revenue of $159.2 million, above consensus estimates of $0.09 on $142.4 million. The company reported strong organic growth of 18% and total revenue growth of 129% for the quarter. For the full year 2021, BRP had organic revenue growth of 22% and total revenue growth of 135%. All segments of the business (MGA of the Future, Specialty, Middle Market, and Mainstreet) contributed, with all four having double-digit organic growth for the fourth quarter.
Here are notable takeaways from BRP’s fourth quarter:
- Total revenue growth (including acquired revenue) was 129% in 4Q21 vs. 106% in 3Q21. Organic growth was 18% in 4Q21 vs. 26% in 3Q21. BRP’s partnership strategy exceeded its expectations, with 16 new partnerships announced during the year and contributions of over $206 million in acquired revenue. BRP noted that it saw a 2.3% lift in organic growth from the rate in 4Q21 and a 3.5% lift from the rate overall in 2021. Rate impact is expected to be a “modest tailwind” in 2023.
- The MGA of the Future platform saw strong 4Q21 organic growth of 36%. Strength in multifamily, flood, and homeowners drove the growth in this segment. Fourth quarter growth was despite a challenging comparable with 4Q20, which effectively recorded five months of revenue related to the master tenant legal liability product.
- BRP still believes it is well positioned to execute its Merger & Acquisitions (M&A) pipeline, as it completed an upsized term loan B add-on of $350 million in December. BRP also expects to acquire $100 million to $150 million in revenue in 2022, which has been an ongoing target. ”Even with increasing interest rates, we believe that debt capital will be the most efficient funding source for continued M&A growth in our business,” commented CEO Trevor Baldwin. The company did note, however, that rising interest rates are likely to have an impact on M&A valuations, which the company believes peaked in 2021 and will “slightly” pullback in 2022, with “signs of modest softening” already being seen in the market this year.
- The company noted its additions of Brush Creek Partners and Arcana Insurance Services. These firms expand BRP’s expertise in verticals such as cyber and technology and single-family real estate offerings, respectively. Furthermore, BRP added two Top 100 brokers in November 2021 – Wood Gutmann & Bogart and Construction Risk Partners. These mark BRP’s acquisition of seven Top 100 partnerships since 4Q20.
- As a result of the strong start during January and February 2022, BRP now projects 1Q22 organic growth at the midpoint to the top end of its long-term 10%-15% double-digit organic growth goal. However, adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) margins for 1Q22 are now seen to be about 200 to 300 basis points lower than 1Q21 “because of the run rate on investments made in the back half of the year, and changes to the seasonality of our business as a result of 2021 partnership activity.”
- Regarding full-year 2022 guidance, BRP expects organic growth for the year to be modestly above its 10% to 15% target, driven by significant investments made in 2021 and in 2022. In terms of adjusted EBITDA margin, the company sees an additional 50- to 100-basis point increase, above 2021’s 20%. BRP plans to invest $50 million, mainly in the MGA of the Future and Main Street areas, on talent and technology.
- CEO Trevor Baldwin said: “We expect that we’ll see meaningful organic growth contributions from all four segments in the fiscal year 2022. Similar to prior years, the MGA of the Future and our Specialty segment will continue to be at the top end of organic growth for our business, and we would expect meaningful double-digit organic growth in the balance of the operating segments.”
Overall, BRP sees its strong performance continuing in 2022, given the ongoing momentum around its organic growth and partnerships. The company believes that its ability to hire the right talent and partner with top independent firms will lead to meeting its long-term targets of 10%-15% organic growth or higher.
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This earnings summary has been prepared by Marsh, Berry & Co., LLC. and is not intended to provide investment recommendations on any company. It is not a research report, as such term is defined by applicable laws and regulations, and it does not contain sufficient information upon which to make an investment decision. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities, financial instruments or to participate in any particular trading strategy. These materials are based solely on information contained in publicly available documents and Marsh, Berry & Co., LLC has not independently attempted to investigate or to verify such information.
