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_____________________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-Q
______________________________
(Mark One)
Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2020
or
Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________ to _________
Commission File Number: 001-39095
______________________________
BRP GROUP, INC.
(Exact name of registrant as specified in its charter)
______________________________
 
Delaware
 
  brplogo.jpg
 
61-1937225
 
 
(State or other jurisdiction of
 
 
(I.R.S. Employer
 
 
incorporation or organization)
 
 
Identification No.)
 
4211 W. Boy Scout Blvd., Tampa, Florida 33607
(Address of principal executive offices) (Zip code)
(866) 279-0698
(Registrant’s telephone number, including area code)
Not Applicable
(Former Name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share
 
BRP
 
Nasdaq Global Select Market
______________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
Smaller reporting company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No  
The number of outstanding shares of the registrant’s Class A common stock, $0.01 par value, as of August 7, 2020 was approximately 33,946,172.




BRP GROUP, INC.
INDEX

 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





Note Regarding Forward-Looking Statements
We have made statements in this report, including matters discussed under Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Part II, Item 1. Legal Proceedings, Part II, Item 1A. Risk Factors and in other sections of this report, that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed under Part II, Item 1A. You should specifically consider the numerous risks outlined under Risk Factors in our Annual Report on Form 10-K filed with the SEC on March 24, 2020 and our Quarterly Report on Form 10-Q for the three months ended March 31, 2020 filed with the SEC on May 13, 2020.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this report to conform our prior statements to actual results or revised expectations.




Commonly Used Defined Terms
The following terms have the following meanings throughout this Quarterly Report on Form 10-Q unless the context indicates or requires otherwise:
AgencyRM
AgencyRM LLC, a Medicare Partner effective February 1, 2020
Book of Business
Insurance policies bound by us on behalf of our Clients
Clients
Our insureds
Colleagues
Our employees
Exchange Act
Securities Exchange Act of 1934, as amended
Highland
Highland Risk Services, LLC, a Specialty Partner effective January 1, 2020
Insurance Company Partners
Insurance companies with which we have a contractual relationship
IRP
Insurance Risk Partners, LLC, a Middle Market Partner effective April 1, 2020
JPMorgan Credit Agreement
Fourth amended and restated credit agreement between Baldwin Risk Partners, LLC, as borrower, JPMorgan Chase Bank, N.A., as agent and lender, and the several banks and other financial institutions as lenders entered into on December 19, 2019, pursuant to an amendment and restatement agreement between Baldwin Risk Partners, LLC, as borrower, Cadence Bank, N.A., as existing agent and lender, JPMorgan Chase Bank, N.A., as successor agent and lender, and the several banks and other financial institutions as lenders entered into on December 19, 2019, as amended by the Incremental Facility Amendment No. 1 entered into on March 12, 2020, the Amendment No. 2 to Credit Agreement entered into on April 6, 2020 and the Incremental Facility Amendment No. 3 entered into June 18, 2020
Lanier
Lanier Upshaw, Inc., a Middle Market Partner effective January 1, 2020
MGA
Managing General Agent
Operating Groups
Our reportable segments
Partners
Companies that we have acquired, or in the case of asset acquisitions, the producers
Partnerships
Strategic acquisitions made by the Company
Pendulum
Pendulum, LLC, a Specialty Partner effective May 1, 2020
Pre-IPO LLC Members
Owners of LLC Units of Baldwin Risk Partners, LLC prior to our initial public offering
Risk Advisors
Our producers
Rosenthal
Rosenthal Bros., Inc., a Middle Market Partner effective June 1, 2020
SEC
U.S. Securities and Exchange Commission
Securities Act
Securities Act of 1933, as amended
SPG
Southern Protective Group, LLC, a Middle Market Partner effective May 1, 2020,
TBA/RBA
Trinity Benefit Advisors, Inc./Russ Blakely & Associates, LLC, a Middle Market Partner effective June 1, 2020
Tax Receivable Agreement
Tax Receivable Agreement between BRP Group, Inc. and the holders of LLC Units in Baldwin Risk Partners, LLC entered into on October 28, 2019
VibrantUSA
VibrantUSA Inc., a Medicare Partner effective date of February 1, 2020





PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRP GROUP, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share data)
 
June 30, 2020
 
December 31, 2019
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
194,378

 
$
67,689

Restricted cash
 
10,058

 
3,382

Premiums, commissions and fees receivable, net
 
102,575

 
58,793

Prepaid expenses and other current assets
 
3,205

 
3,019

Due from related parties
 
121

 
43

Total current assets
 
310,337

 
132,926

Property and equipment, net
 
6,358

 
3,322

Other assets
 
7,994

 
5,600

Intangible assets, net
 
209,453

 
92,450

Goodwill
 
335,526

 
164,470

Total assets
 
$
869,668

 
$
398,768

Liabilities, Mezzanine Equity and Stockholders Equity
 
 
 
 
Current liabilities:
 
 
 
 
Premiums payable to insurance companies
 
$
110,512

 
$
50,541

Producer commissions payable
 
13,223

 
7,470

Accrued expenses and other current liabilities
 
16,650

 
12,334

Current portion of contingent earnout liabilities
 
4,212

 
2,480

Total current liabilities
 
144,597

 
72,825

Revolving lines of credit
 
226,000

 
40,363

Contingent earnout liabilities, less current portion
 
74,323

 
46,289

Other liabilities
 
2,114

 
2,017

Total liabilities
 
447,034

 
161,494

Commitments and contingencies (Note 14)
 
 
 
 
Mezzanine equity:
 
 
 
 
Redeemable noncontrolling interest
 
71

 
23

Stockholders’ equity:
 
 
 
 
Class A common stock, par value $0.01 per share, 300,000,000 shares authorized; 33,302,477 and 19,362,984 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
 
333

 
194

Class B common stock, par value $0.0001 per share, 50,000,000 shares authorized; 45,458,763 and 43,257,738 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
 
4

 
4

Additional paid-in capital
 
235,520

 
82,425

Accumulated deficit
 
(10,770
)
 
(8,650
)
Notes receivable from stockholders
 
(573
)
 
(688
)
Total stockholders’ equity attributable to BRP Group, Inc.
 
224,514

 
73,285

Noncontrolling interest
 
198,049

 
163,966

Total stockholders’ equity
 
422,563

 
237,251

Total liabilities, mezzanine equity and stockholders’ equity
 
$
869,668

 
$
398,768



See accompanying Notes to Condensed Consolidated Financial Statements.

5



BRP GROUP, INC.
Condensed Consolidated Balance Sheets (Continued)
(Unaudited)
The following table presents the assets and liabilities of the Company’s consolidated variable interest entities, which are included on the condensed consolidated balance sheets above. The assets in the table below include those assets that can only be used to settle obligations of the consolidated variable interest entities.
(in thousands)
 
June 30, 2020
 
December 31, 2019
Assets of Consolidated Variable Interest Entities That Can Only be Used to Settle the Obligations of Consolidated Variable Interest Entities:
 
 
 
 
Cash and cash equivalents
 
$
60

 
$
47

Premiums, commissions and fees receivable, net
 
167

 
75

Total current assets
 
227

 
122

Property and equipment, net
 
26

 
31

Other assets
 
5

 
7

Total assets
 
$
258

 
$
160

Liabilities of Consolidated Variable Interest Entities for Which Creditors Do Not Have Recourse to the Company:
 
 
 
 
Premiums payable to insurance companies
 
$
59

 
$
6

Producer commissions payable
 
1

 
15

Accrued expenses and other current liabilities
 
7

 
29

Total liabilities
 
$
67

 
$
50




















See accompanying Notes to Condensed Consolidated Financial Statements.

6



BRP GROUP, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
(in thousands, except share and per share data)
 
2020
 
2019
 
2020
 
2019
Revenues:
 
 
 
 
 
 
 
 
Commissions and fees
 
$
51,268

 
$
33,060

 
$
105,427

 
$
62,897

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Commissions, employee compensation and benefits
 
39,263

 
23,994

 
73,811

 
40,280

Other operating expenses
 
9,546

 
6,389

 
18,431

 
10,391

Amortization expense
 
4,450

 
2,835

 
8,046

 
3,711

Change in fair value of contingent consideration
 
4,581

 
(971
)
 
6,242

 
(3,757
)
Depreciation expense
 
240

 
149

 
405

 
276

Total operating expenses
 
58,080

 
32,396

 
106,935

 
50,901

 
 
 
 
 
 
 
 
 
Operating income (loss)
 
(6,812
)
 
664

 
(1,508
)
 
11,996

 
 
 
 
 
 
 
 
 
Interest expense, net
 
(1,047
)
 
(3,623
)
 
(1,632
)
 
(5,213
)
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
(7,859
)
 
(2,959
)
 
(3,140
)
 
6,783

Income tax provision
 

 

 
12

 

Net income (loss)
 
(7,859
)
 
(2,959
)
 
(3,152
)
 
6,783

Less: net income (loss) attributable to noncontrolling interests
 
(4,271
)
 
(2,959
)
 
(1,032
)
 
6,783

Net loss attributable to BRP Group, Inc.
 
$
(3,588
)
 
$

 
$
(2,120
)
 
$

 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
 
$
(7,859
)
 
$
(2,959
)
 
$
(3,152
)
 
$
6,783

Comprehensive income (loss) attributable to noncontrolling interests
 
(4,271
)
 
(2,959
)
 
(1,032
)
 
6,783

Comprehensive loss attributable to BRP Group, Inc.
 
(3,588
)
 

 
(2,120
)
 

 
 
 
 
 
 
 
 
 
Basic and diluted net loss per share
 
$
(0.18
)
 
 
 
$
(0.11
)
 
 
Basic and diluted weighted-average shares of Class A common stock outstanding
 
20,426,082

 
 
 
19,959,828

 
 
















See accompanying Notes to Condensed Consolidated Financial Statements.

7



BRP GROUP, INC.
Condensed Consolidated Statements of Stockholders’/Members’ Equity (Deficit) and Mezzanine Equity
(Unaudited)
For the Three Months Ended June 30, 2020
 
Stockholders Equity
 
 
Mezzanine Equity
 
Class A Common Stock
 
Class B Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands, except share data)
Shares
 
Amount
 
Shares
 
Amount
 
APIC
 
Accumulated Deficit
 
Notes Receivable from Stockholders
 
Non-controlling Interest
 
Total
 
 
Redeemable Non-controlling Interest
Balance at March 31, 2020
19,847,354
 
$
199

 
43,544,362
 
$
4

 
$
90,443

 
$
(7,182
)
 
$
(647
)
 
$
171,988

 
$
254,805

 
 
$
39

Net income (loss)

 

 

 

 

 
(3,588
)
 

 
(4,292
)
 
(7,880
)
 
 
21

Issuance of Class A common stock in offering, net of underwriting discounts and offering costs
13,225,000
 
132

 
(2,475,000
)
 

 
144,525

 

 

 
(9,398
)
 
135,259

 
 

Equity issued in business combinations

 

 
4,518,948
 

 

 

 

 
39,953

 
39,953

 
 

Share-based compensation, net of forfeitures
189,361
 
2

 

 

 
1,346

 

 

 
296

 
1,644

 
 

Redemptions and repurchases of common stock
40,762

 

 
(129,547
)
 

 
(794
)
 

 

 
(498
)
 
(1,292
)
 
 

Repayment of stockholder notes receivable

 

 

 

 

 

 
74

 

 
74

 
 

Contributions

 

 

 

 

 

 

 

 

 
 
11

Balance at June 30, 2020
33,302,477
 
$
333

 
45,458,763
 
$
4

 
$
235,520

 
$
(10,770
)
 
$
(573
)
 
$
198,049

 
$
422,563

 
 
$
71

For the Six Months Ended June 30, 2020
 
Stockholders Equity
 
 
Mezzanine Equity
 
Class A Common Stock
 
Class B Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands, except share data)
Shares
 
Amount
 
Shares
 
Amount
 
APIC
 
Accumulated Deficit
 
Notes Receivable from Stockholders
 
Non-controlling Interest
 
Total
 
 
Redeemable Non-controlling Interest
Balance at December 31, 2019
19,362,984
 
$
194

 
43,257,738
 
$
4

 
$
82,425

 
$
(8,650
)
 
$
(688
)
 
$
163,966

 
$
237,251

 
 
$
23

Net income (loss)

 

 

 

 

 
(2,120
)
 

 
(1,069
)
 
(3,189
)
 
 
37

Issuance of Class A common stock in offering, net of underwriting discounts and offering costs
13,225,000
 
132

 
(2,475,000
)
 

 
144,525

 

 

 
(9,398
)
 
135,259

 
 

Equity issued in business combinations
487,534
 
5

 
4,805,572
 

 
7,672

 

 

 
44,453

 
52,130

 
 

Share-based compensation, net of forfeitures
186,197
 
2

 

 

 
1,692

 

 

 
595

 
2,289

 
 

Redemptions and repurchases of common stock
40,762

 

 
(129,547
)
 

 
(794
)
 

 

 
(498
)
 
(1,292
)
 
 

Repayment of stockholder notes receivable

 

 

 

 

 

 
115

 

 
115

 
 

Contributions

 

 

 

 

 

 

 

 

 
 
11

Balance at June 30, 2020
33,302,477
 
$
333

 
45,458,763
 
$
4

 
$
235,520

 
$
(10,770
)
 
$
(573
)
 
$
198,049

 
$
422,563

 

$
71









See accompanying Notes to Condensed Consolidated Financial Statements.

8



BRP GROUP, INC.
Condensed Consolidated Statements of Stockholders’/Members’ Equity (Deficit) and Mezzanine Equity (Continued)
(Unaudited)
For the Three Months Ended June 30, 2019
 
Members’ Equity (Deficit)
 
 
Mezzanine Equity
(in thousands)
Members Deficit
 
Notes Receivable from Members
 
Noncontrolling Interest
 
Total
 
 
Redeemable Noncontrolling Interest
 
Redeemable Members’ Capital
Balance at March 31, 2019
$
(91,956
)
 
$
(355
)
 
$
2,451

 
$
(89,860
)
 
 
$
41,391

 
$
73,688

Net income (loss)
(2,607
)
 

 
39

 
(2,568
)
 
 
788

 
(1,179
)
Contributions

 

 

 

 
 
19

 

Repayment of member notes receivable

 
99

 

 
99

 
 

 

Issuance and vesting of Management Incentive Units
230

 

 

 
230

 
 

 

Issuance of common units
612

 

 

 
612

 
 

 

Equity issued in business combinations

 

 

 

 
 
30,963

 

Change in the redemption value of redeemable interests
(33,271
)
 

 

 
(33,271
)
 
 
(5,479
)
 
38,750

Distributions
(1,877
)
 

 
(66
)
 
(1,943
)
 
 
(1,776
)
 
(663
)
Balance at June 30, 2019
$
(128,869
)
 
$
(256
)
 
$
2,424

 
$
(126,701
)
 
 
$
65,906

 
$
110,596


For the Six Months Ended June 30, 2019
 
Members’ Equity (Deficit)
 
 
Mezzanine Equity
(in thousands)
Members Deficit
 
Notes Receivable from Members
 
Noncontrolling Interest
 
Total
 
 
Redeemable Noncontrolling Interest
 
Redeemable Members’ Capital
Balance at December 31, 2018
$
(63,606
)
 
$
(90
)
 
$
937

 
$
(62,759
)
 
 
$
46,208

 
$
39,354

Net income
2,697

 

 
132

 
2,829

 
 
2,321

 
1,633

Contributions

 

 

 

 
 
34

 

Contributions through issuance of member notes receivable

 
(310
)
 
47

 
(263
)
 
 
263

 

Repayment of member notes receivable

 
144

 

 
144

 
 

 

Issuance and vesting of Management Incentive Units
360

 

 

 
360

 
 

 

Issuance of common units
612

 

 
386

 
998

 
 

 
5,509

Repurchase of common units

 

 

 

 
 

 
(11,177
)
Repurchase redemption value adjustments

 

 

 

 
 

 
(1,323
)
Equity issued in business combinations

 

 
1,000

 
1,000

 
 
30,963

 

Change in the redemption value of redeemable interests
(66,542
)
 

 

 
(66,542
)
 
 
(10,958
)
 
77,500

Distributions
(2,390
)
 

 
(78
)
 
(2,468
)
 
 
(2,925
)
 
(900
)
Balance at June 30, 2019
$
(128,869
)
 
$
(256
)
 
$
2,424

 
$
(126,701
)
 
 
$
65,906

 
$
110,596
















See accompanying Notes to Condensed Consolidated Financial Statements.

9



BRP GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
For the Six Months Ended June 30,
(in thousands)
 
2020
 
2019
Cash flows from operating activities:
 
 
 
 
Net income (loss)
 
$
(3,152
)
 
$
6,783

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
8,451

 
3,987

Change in fair value of contingent consideration
 
6,242

 
(3,757
)
Share-based compensation expense
 
3,117

 
31

Payment of contingent earnout consideration in excess of purchase price accrual
 
(1,316
)
 

Amortization of deferred financing costs
 
195

 
731

Loss on extinguishment of debt
 

 
115

Issuance and vesting of Management Incentive Units
 

 
360

Participation unit compensation
 

 
61

Changes in operating assets and liabilities, net of effect of acquisitions:
 
 
 
 
Premiums, commissions and fees receivable, net
 
(9,464
)
 
8,309

Prepaid expenses and other current assets
 
(334
)
 
(439
)
Due from related parties
 
(78
)
 
114

Accounts payable, accrued expenses and other current liabilities
 
39,983

 
(7,981
)
Other liabilities
 

 
548

Net cash provided by operating activities
 
43,644

 
8,862

Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(2,619
)
 
(780
)
Investment in business venture
 

 
(200
)
Cash consideration paid for asset acquisitions, net of cash received
 
(695
)
 
(375
)
Cash consideration paid for business combinations, net of cash received
 
(224,112
)
 
(76,186
)
Net cash used in investing activities
 
(227,426
)
 
(77,541
)
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of Class A common stock, net of underwriting discounts
 
167,346

 

Repurchase/redemption of LLC Units and Class B common stock
 
(32,610
)
 

Payment of common stock offering costs
 
(769
)
 

Payment of contingent and guaranteed earnout consideration
 
(665
)
 
(813
)
Proceeds from revolving line of credit
 
185,637

 
55,795

Proceeds from related party debt
 

 
38,920

Payments on long-term debt
 

 
(205
)
Payments of debt issuance costs and debt extinguishment costs
 
(1,918
)
 
(15
)
Proceeds from repayment of stockholder/member notes receivable
 
115

 
144

Repurchase of common units
 

 
(12,500
)
Distributions
 

 
(6,292
)
Other
 
11

 
1,479

Net cash provided by financing activities
 
317,147

 
76,513

Net increase in cash and cash equivalents and restricted cash
 
133,365

 
7,834

Cash and cash equivalents and restricted cash at beginning of period
 
71,071

 
7,995

Cash and cash equivalents and restricted cash at end of period
 
$
204,436

 
$
15,829




See accompanying Notes to Condensed Consolidated Financial Statements.

10



BRP GROUP, INC.
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)
 
 
For the Six Months Ended June 30,
(in thousands)
 
2020
 
2019
Supplemental schedule of cash flow information:
 
 
 
 
Cash paid during the period for interest
 
$
1,486

 
$
4,102

Disclosure of non-cash investing and financing activities:
 
 
 
 
Equity issued in business combinations
 
52,130

 
31,963

Contingent earnout consideration issuances
 
25,188

 
25,619

Change in the redemption value of redeemable interests
 

 
66,542

Capitalization of issuance to redeemable common member
 

 
5,509

Debt issuance costs added to revolving line of credit
 

 
2,554

Transfer of long-term debt to revolving line of credit
 

 
1,820










































See accompanying Notes to Condensed Consolidated Financial Statements.

11



BRP GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Business and Basis of Presentation
BRP Group, Inc. (“BRP Group” or the “Company”) was incorporated in the state of Delaware on July 1, 2019. BRP Group was formed for the purpose of completing an initial public offering of its common stock and related transactions in order to carry on the business of Baldwin Risk Partners, LLC (“BRP”) as a publicly-traded entity. On October 28, 2019, BRP Group completed an initial public offering of its Class A common stock (the “Initial Public Offering”) and became the sole managing member of BRP. The consolidated financial statements of BRP Group have been presented as a combination of the financial results of BRP Group and BRP as of the earliest period presented as discussed further under Principles of Consolidation below.
BRP Group is a diversified insurance agency and services organization that markets and sells insurance products and services to its customers throughout the U.S., although a significant portion of the Company’s business is concentrated in the southeastern U.S. BRP Group and its subsidiaries operate through four reportable segments (“Operating Groups”), including Middle Market, Specialty, MainStreet, and Medicare, which are discussed in more detail in Note 15.
Public Offering
On June 29, 2020, the Company completed a public offering of 13,225,000 shares of its Class A common stock, including 1,725,000 shares sold pursuant to the underwriters’ over-allotment option. The shares were sold at an offering price of $13.25 per share for net proceeds of $166.6 million after deducting underwriting discounts and commissions of $7.9 million and offering expenses of $769,000.
Principles of Consolidation
The consolidated financial statements include the accounts of BRP Group and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
As the sole manager of BRP, BRP Group operates and controls all the business and affairs of BRP, and has the sole voting interest in, and controls the management of, BRP. Accordingly, BRP Group began consolidating BRP in its consolidated financial statements as of the closing date of the Initial Public Offering, resulting in a noncontrolling interest related to the LLC Units held by BRP’s LLC members (the “LLC Units”) on its consolidated financial statements.
BRP and BRP Group have been under the common control of the Company’s Chairman, Lowry Baldwin, before and after the reorganization transactions undertaken in connection with the Initial Public Offering (the “Reorganization Transactions”). Prior to the Reorganization Transactions, Mr. Baldwin held a controlling interest in Baldwin Investment Group Holdings, LLC (“BIGH”), which was the controlling owner of BRP through its majority ownership of BRP’s common units. In addition, Mr. Baldwin was the sole shareholder of BRP Group. Upon reorganization, BRP Group became the sole managing member of BRP. Holders of the Class B common stock hold a majority of the voting power of BRP Group and stockholders of the then majority of the Class B common stock, including BIGH, executed a Voting Agreement in which they agreed to vote in the same manner as Mr. Baldwin. As a result, Mr. Baldwin continued to control BRP Group subsequent to the Initial Public Offering and Reorganization Transactions. Accordingly, we have accounted for the Reorganization Transactions as a transaction between entities under common control in accordance with Accounting Standards Codification (“ASC”) Topic 805-50, Business Combinations - Related Issues, under which the financial information of BRP Group has been combined with that of BRP as of the earliest period presented.
The Company has prepared these consolidated financial statements in accordance with ASC Topic 810, Consolidation (“Topic 810”). Topic 810 requires that if an enterprise is the primary beneficiary of a variable interest entity, the assets, liabilities, and results of operations of the variable interest entity should be included in the consolidated financial statements of the enterprise. The Company has recognized certain entities as variable interest entities of which the Company is the primary beneficiary and has included the accounts of these entities in the consolidated financial statements. Refer to Note 4 for additional information regarding the Company’s variable interest entities.
Topic 810 also requires that the equity of a noncontrolling interest shall be reported on the condensed consolidated balance sheets within total equity of the Company. Certain redeemable noncontrolling interests are reported on the condensed consolidated balance sheets as mezzanine equity. Topic 810 also requires revenues, expenses, gains, losses, net income or loss, and other comprehensive income or loss to be reported in the consolidated financial statements at consolidated amounts, which include amounts attributable to the owners of the parent and the noncontrolling interests.

12



Noncontrolling Interest
Noncontrolling interests are reported at historical cost basis adjusted for cumulative earnings or loss allocations and classified as a component of stockholders’ equity on the condensed consolidated balance sheets. Noncontrolling interest as presented as of June 30, 2020 and December 31, 2019 and for the six months ended June 30, 2020 and 2019 consists of the noncontrolling interest holdings of BRP Group subsequent to the Company’s reorganization in connection with the Initial Public Offering. The controlling interest holdings of BRP for the period from January 1, 2019 through June 30, 2019 have been reclassified to noncontrolling interest holdings of BRP Group for presentation of activity for the three and six months ended June 30, 2019.
Unaudited Interim Financial Reporting
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. Accordingly, they do not include all the information and related notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting of recurring accruals, considered necessary for fair statement have been included. The accompanying balance sheet for the year ended December 31, 2019 was derived from audited financial statements but does not include all disclosures required by GAAP. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2020.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates underlying the accompanying consolidated financial statements include the application of guidance for revenue recognition, including determination of allowances for estimated policy cancellations, business combinations and purchase price allocation, impairment of long-lived assets including goodwill, and valuation of the Tax Receivable Agreement liability and share-based compensation.
Changes in Presentation
Certain prior year amounts have been reclassified to conform to current year presentation.
Recent Accounting Pronouncements
As an emerging growth company, the Jumpstart Our Business Startups (“JOBS”) Act permits the Company an extended transition period for complying with new or revised accounting standards affecting public companies. The Company has elected to use this extended transition period and adopt certain new accounting standards on the private company timeline, which means that the Company’s financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards on a non-delayed basis. The Company has elected the extended transition period for the adoption of the Accounting Standards Updates (“ASUs”) below, except those where early adoption was both permitted and elected.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”). The guidance in ASU 2016-02 supersedes the lease recognition requirements in Accounting Standards Codification (“ASC”) Topic 840, Leases. ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. The FASB has subsequently issued several additional ASUs related to leases, which improved upon, provided interpretation of and transition relief for, the guidance issued in ASU 2016-02 and extended the adoption date for nonpublic business entities. This guidance is effective for the fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the full effect that the adoption of this standard will have on its consolidated financial statements.

13



In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements (“ASU 2016-13”), which amends the guidance for recognizing credit losses on financial instruments measured at amortized cost. ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The FASB has subsequently issued several additional ASUs related to credit losses, which improved upon, provided interpretation of and transition relief for, the guidance issued in ASU 2016-13 and extended the adoption date for nonpublic business entities. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the full effect that the adoption of this standard will have on its consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) (“Topic 820”): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This update modifies the disclosure requirements related to fair value measurement by removing certain disclosure requirements related to the fair value hierarchy. This update also modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company adopted the guidance in ASU 2018-13 effective January 1, 2020, which impacted the presentation of the fair value measurements disclosure in Note 13 but did not otherwise impact the Company’s consolidated financial statements.
2. Significant Accounting Policies
There have been no material changes in the Company’s significant accounting policies from those that were disclosed for the year ended December 31, 2019 in the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2020, except as noted below.
Self-Insurance Reserve
The Company converted to a self-insured health insurance plan beginning in March 2020 for which it carries an insurance program with specific retention levels or high per-claim deductibles for expected losses. The Company records a liability for all unresolved claims and for an estimate of incurred but not reported ("IBNR") claims at the anticipated cost that falls below its specified retention levels or per-claim deductible amounts. In establishing reserves, the Company considers actuarial assumptions and judgments regarding economic conditions and the frequency and severity of claims. The Company had an IBNR reserve of $458,000 at June 30, 2020, which is included in accrued expenses and other current liabilities on the condensed consolidated balance sheets.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents. The Company manages this risk using high creditworthy financial institutions. Interest-bearing accounts and noninterest-bearing accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. Deposits exceed amounts insured by the FDIC. The Company has not experienced any losses from its deposits.
3. Business Combinations
The Company completed nine business combinations for an aggregate purchase price of $309.4 million during the six months ended June 30, 2020. In accordance with ASC Topic 805, Business Combinations (“Topic 805”), total consideration was first allocated to the fair value of assets acquired, including liabilities assumed, with the excess being recorded as goodwill. For financial statement purposes, goodwill is not amortized but rather is evaluated for impairment at least annually or more frequently if an event or change in circumstances occurs that indicates goodwill may be impaired. Goodwill is deductible for tax purposes and will be amortized over a period of 15 years.
The recorded purchase price for certain of the foregoing business combinations includes an estimation of the fair value of contingent consideration obligations associated with potential earnout provisions, which are generally based on recurring commissions and fees revenue. The contingent earnout consideration amounts identified in the tables below are measured at fair value within Level 3 of the fair value hierarchy as discussed further in Note 13. Any subsequent changes in the fair value of contingent earnout liabilities will be recorded in the condensed consolidated statements of comprehensive income (loss) when incurred.
The recorded purchase price for certain business combinations also includes an estimation of the fair value of noncontrolling interests, which are calculated based on a valuation of the entity with the relevant percentage applied.

14



The Company completed the following nine business combinations during the six months ended June 30, 2020:
Lanier, a Middle Market Partner effective January 1, 2020, was made to expand the Company’s Middle Market presence in the healthcare, higher education, construction, property and non-profit businesses throughout Florida and other states.
Highland, a Specialty Partner effective January 1, 2020, was made to expand the Company’s Specialty presence in the healthcare and cyber insurance businesses and to add capabilities within the real estate business.
AgencyRM, a Medicare Partner effective February 1, 2020, was made to expand the Company’s Medicare business presence in Texas.
VibrantUSA, a Medicare Partner effective February 1, 2020, was made to expand the Company’s Medicare business presence in Washington.
IRP, a Middle Market Partner effective April 1, 2020, was made to expand the Company’s capabilities within the energy and infrastructure business.
Southern Protective Group, a Middle Market Partner effective May 1, 2020, was made to expand the Company's risk consulting capabilities in the medical malpractice market.
Pendulum, a Specialty Partner effective May 1, 2020, was made to expand the Company's specialty risk consulting capabilities in the long-term care and senior living markets.
Rosenthal, a Middle Market Partner effective June 1, 2020, was made to expand the Company’s capabilities within the habitational real estate industry.
TBA/RBA, a Middle Market Partner effective June 1, 2020, was made to expand the Company’s employee benefits business in Tennessee and across the Southeastern U.S.
The operating results of these business combinations have been included in the condensed consolidated statements of comprehensive income (loss) since their respective acquisition dates. The Company recognized total revenues and net income from these business combinations of $17.7 million and $2.2 million, respectively, for the six months ended June 30, 2020.
Acquisition-related costs incurred in connection with these business combinations are recorded in other operating expenses in the condensed consolidated statements of comprehensive income (loss). The Company incurred acquisition-related costs from these business combinations of $1.4 million for the six months ended June 30, 2020.


15



The table below provides a summary of the total consideration and the estimated purchase price allocations made for each of the business acquisitions that became effective during the six months ended June 30, 2020. The "All Others" column includes amounts for the AgencyRM, VibrantUSA, Southern Protective Group and Pendulum business combinations.
(in thousands)
Lanier
 
Highland
 
IRP
 
Rosenthal
 
TBA/RBA
 
All Others
 
Totals
Cash consideration paid
$
24,450

 
$
6,603

 
$
26,223

 
$
75,936

 
$
76,272

 
$
22,253

 
$
231,737

Fair value of contingent earnout consideration
1,628

 
788

 
5,521

 
7,051

 
7,000

 
3,200

 
25,188

Fair value of equity interest
6,119

 
4,500

 
7,535

 
10,147

 
21,427

 
2,402

 
52,130

Deferred payment

 

 

 

 
300

 

 
300

Total consideration
$
32,197

 
$
11,891

 
$
39,279

 
$
93,134

 
$
104,999

 
$
27,855

 
$
309,355

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash
$
2,413

 
$
1,542

 
$
1,694

 
$
954

 
$

 
$
1,022

 
$
7,625

Premiums, commissions and fees receivable
2,494

 
5,977

 
3,229

 
4,734

 
8,731

 
1,598

 
26,763

Property and equipment
294

 

 
123

 

 

 
27

 
444

Other assets
168

 
13

 
22

 
11

 

 
16

 
230

Intangible assets
 
 
 
 
 
 
 
 
 
 
 
 

Purchased customer accounts
6,308

 

 
8,262

 
33,670

 
53,900

 
4,993

 
107,133

Distributor relationships

 
6,500