Q3 2020 BRP Group Inc Earnings Call
Greetings and welcome to the B R. P group.
Incorporated third quarter 2020 earnings call at this time, all participants are in a listen only mode.
Hey brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Austin Rock director of strategy and partnership. Thank you Austin you may begin.
Thank you operator, and good afternoon by now everyone should have access to our earnings announcement slide presentation, which was released prior to this call and which May also be found on the Investor relations portion of our website at Baldwin risk partners Dotcom 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.
If he's a future performance and therefore undue reliance should not be placed upon them.
We refer all of you to our recent filings with the FTC, including our form 10-Q filed today for a more detailed discussion of the assumptions risks uncertainties and other factors that could impact the future operating results and financial condition of the RP.
Garrett, including those related to the potential effects of the Cove in 19 pandemic on our business financial condition and results of operations on this call. We refer to the effects of Cove at 19 and related government shutdown stay at home orders business closures travel restrictions social bit syncing and other preventative measures.
Group business disruption economic contraction in Cove in 19 related developments I generally referencing COVID-19, or the pandemic, we disclaim any intentions or obligations to update or revise any forward looking statements except to the extent required by applicable law also our discussion today will include references to certain non-GAAP.
GAAP measures.
A reconciliation of these measures to the most comparable GAAP measure can be found within our earnings announcement, an earnings supplement slide presentation. Both posted on our website at IR Dot Bob unrest partners Dot com or in our SEC filings. In addition, this call is being webcast and an archive version will be available after the call.
On the Investor Relations portion of our website with that I'll now hand, the call to Trevor Baldwin Chief Executive Officer of PRP Group.
Thanks, Austin and good afternoon, everyone welcome to our third quarter of 2020 earnings call and we appreciate your taking the time to join US and your interest in PRP group during today's.
I'll call I'll provide some brief highlights on our accomplishments during the quarter Brad Hill, Our Chief Accounting Officer will then provide a more detailed review of our Q3 results and Chris We back our Chief Financial Officer will wrap up with a few quick comments on our balance sheet and certain expectations regarding our outlook for the future will.
Then open up the line for questions.
In summary, we had another phenomenal quarter in Q3, which is further validation of the thoughtful and differentiated approach we have taken to build the business positioned to grow and thrive even in the face of the ongoing economic headwinds for the quarter we recorded.
Strong year over year organic revenue growth of 20% and total revenue growth of 72%. We also saw double digit organic growth in all four of our operating segments during the quarter with specialty led by MGM the future at 43% leading the group.
While rate and retention where how.
See across all of our segments overall or organic growth continues to be predominantly powered by our ability to win new business highlighting our ability to quickly adapt to continue delivering tailored solutions to clients and thats broader economic challenges.
On the partnership front first and foremost we are extreme.
Really excited to welcome the Ens group team to the PRP family as mentioned on our call last week, we have long admired the business, Brian and his team have built and their culture strong track record of organic growth and presence and scale in Houston, Texas, which is the fastest growing top 20 MSR in the country make them an excellent.
Fit and we're excited about the meaningful role we think they can play in helping achieve our intermediate goal of becoming a top 10 broker in the us over what is now the next eight years.
Looking ahead in terms of number size and the quality of near term opportunities. We continue to have a very strong.
His line and anticipate a busy finish to Q4 on the partnership front over the past six months, our partnership team and myself have been on the road frequently taking the time to safely meet with potential partners to share our optimism and resolve for an exciting future. It is my belief that hopefully as the world and.
Business environment returned to normal you will see these efforts contribute to the strength and success of our partnership pipeline as a reminder, the exact timing of partnerships is subject to change.
To wrap up none of what Weve been able to accomplish would have been possible without the tenacity and tireless so.
Support of our colleagues who have continued to put clients first amidst a very challenging environment to all of you a huge. Thank you you are the engine that powers PRP and thanks to your efforts our business is truly in the strongest position. It has been in the firm's history with that I will.
I'll turn over the call to Brad to go into more detail on our Q3 results.
Thanks, Trevor and good afternoon, everyone on the call.
For the third quarter, we generated revenue growth of 72% to 65.8 million.
Revenue growth was driven once again by our hybrid growth model, namely organic growth combined.
With contributions from new partnerships.
As Trevor mentioned, we once again generated double digit organic revenue growth on a year over year basis reporting 20% organic growth for the quarter. Thanks to strong performance across all of our operating groups give.
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 is if our 2020 partnerships have been acquired on January Onest 2020.
For the third quarter of 2020, unaudited pro forma revenue was $66.1 million.
Up 70% from the prior year.
Unaudited pro forma information should not be relied upon as being indicative of the historical results that would have been attained if the partnerships had occurred on that date, nor the results that may be obtained in the future.
GAAP net loss for the third quarter of 2020 was $7.6 million.
Or 10 cents per fully diluted share.
Adjusted net income for the third quarter of 2020, which excludes share based compensation amortization and other one time expenses was $9 million or 11 cents per fully diluted share.
A table reconciling GAAP net income to adjusted net income can be found in our earnings.
The release and our 10-Q filed with the SEC.
Adjusted EBITDA for the third quarter of 2020 rose, 48% over the prior year period to $10.9 million Ajay.
Adjusted EBITDA margin was 17% for the third quarter of 2020 compared to 19% in the prior year period.
As a reminder.
Under our adjusted EBITDA margins are seasonal in nature with Q1 being the strongest quarter and we usually record lower margins in the second half of the year with Q4 being our seasonally lowest margin quarter. We expect this trend to continue this year, especially given the seasonality of some of our recently added partners. Additionally, we plan to continue invest.
Vesting in the business as we have in Q2 in Q3 of this year and as a result, we expect fourth quarter margins will be similarly impacted.
Additionally, as we do every quarter in the earnings supplement available on our IR website, we have updated the quarterly pro forma financial statements to reflect the partnerships we closed in the third quarter.
We own those businesses since the beginning of the year, which increases the Q1 and Q2 revenue versus what we presented last quarter.
As a reminder, the pro forma financials, we present, our non projections of future performance.
Additionally results for our individual operating segments can be found in the earnings supplement as well.
As our Mg of the future platform continues to outperform growing 43% compared to the prior year period.
The third quarter is typically the seasonally strongest for the EMG and during the quarter policies in force increased by over 54000 from June Thirtyth 2020.
As of November 11 policies in force have increased further.
To over 510000.
We remain bullish on the M. Jay in terms of its ongoing sustainable contributions to our organic revenue growth expanding penetration within our current network and utilizing its scalable and efficient technology to create new products that can be distributed across the PRP platform.
As we have mentioned in the.
Past, we continue to make progress on the rollout of both our Florida homeowners solution with our filings submitted to the state of Florida, and a private flood product for which we have secured reinsurance capacity.
With that I will now turn the call over to Chris Thanks, Brad and good afternoon, everyone on the call a few closing remarks before we get to unit.
As you may have seen last.
And we significantly enhanced the capacity in our balance sheet pricing, a new seven year $400 million senior secured first lien term loan facility at a very reasonable cost of capital as well as retaining and extending our $400 million revolving facilities maturity into 2025 as Trevor noted in his remarks after the announcement of our partnership with ends group we.
Maintain a very strong partnership pipeline pro forma for the completion of intergroup between our cash on hand, the remaining proceeds from the new term loan facility and our $400 million revolver, we maintain roughly $590 million of capacity to execute on that pipeline and to remain front footed as we head into 2021 as we've said before we continue to.
Asked me the three and a half to four times leverage is a prudent run rate for our business and we'd be comfortable taking leverage opportunistically up to around four and a half our current leverage pro forma for the Andrew partnership is 2.4 times as we move ahead, we expect that the effects of COVID-19, we'll continue to have an impact in the broader economy for Q4 and into.
Really Q1, 2021, however should the recent positive vaccine news come to fruition, we believe that the economy could improve materially over 2021 that being said, we believe we have clearly demonstrated over the past couple of quarters that our business model and growth strategy is extremely resilient in the face of economic headwinds thanks to our commitment to investing in our.
Technology, our tools and our people.
As such for Q4, we still feel confident in our ability to generate organic growth on the low end of our longer term, 10% to 15% double digit organic growth goals as Brad mentioned, we continue to make investments into the client facing side of the business as well as to bolster our growth services and partnership integration teams.
We continue to believe that the past six months and the current environment is one that affords us great opportunities to invest capital both organically and through partnerships as to next year I do want to remind everyone that it typically takes 12 to 18 months for us to realize full pro forma EBITDA from partnerships, particularly larger partnerships.
As we work to integrate them into the broader PRP platform. In summary, we are very excited about our third quarter results and the momentum we have carried in the fourth quarter with the closing of our new facilities and the ins group announcement, we are enthusiastic about the success. We've had in Q3 and strengthening our near term partnership pipeline and then finally as we reflect in our region.
And first year anniversary as a public company, we are quite proud of the success, we've been able to generate for all of our stakeholders over the past four quarters. During an abnormal time in history growing double digits organically over that time period, and announcing a 120 million of annualized partnership revenue. While we are proud of our performance. We are optimistic for a return to normalcy in 20.
Slide 21, I would echo traverse thank you to our colleagues. The tangible result of all of their efforts is that we believe our business is positioned divest that has ever been.
With that I. Thank you for your time and we'll now open the call for today operator.
Thank you we will now be conducting a question and answer session. If you would like to ask.
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One moment, please while we poll for questions.
Thank you. Our first question comes from Meyer Shields with KBW. Please proceed with your question.
Great. Thanks, I want to spend a little time talking about.
Client receptivity in middle market just in terms of weather as time has passed and we sort of settled the two teams there's more receptivity for the extensive diagnostics for the growth.
Both drivers.
Hey, Mayor, yes, great question so ill.
What I would say is we were incredibly intentional at the onset of the cobot environment about rewriting our entire sales playbook.
To position, our risk advisors to be able to.
The approach clients in.
And obtrusive manner that still enabled us to go to our highly console paid of risk mapping process and thats really been one of the hallmarks of how we've been able to maintain the level of organic growth that we have.
Despite the headwinds of the economic challenges the shutdowns and accessibility of normal sales channels.
[music].
Okay. That's helpful. That's good to know.
And also I know, there's a lot of confusion and concern broadly about the Medicare market looks like things are holding up pretty well.
I was hoping you could give us your view about what the market looks like both in terms of developing organic growth and maybe acquisition pipeline.
Yeah. So you know as as we shared on the call earlier, all four of our segments reported double digit organic growth. So that would include the Medicare business.
But.
Yes, as we've talked about in the past Cove. It has certainly had an impact on the Medicare business model. When you think about the fact that the population that we're serving is typically more at risk to the virus.
And a lot of those interactions historically have been.
More of a face to face environment, but.
With the onset of covered we made some pretty significant investments into our technology infrastructure launching our digital enrollment platform under the guided Medicare solutions brand in June and July of this year and thus far since the start of a.
We've actually at 38% of our overall enrollment going to that new digital platform, which is.
Really terrific uptake so positioning our agents to remain.
Quite effective despite some of the challenges associated with getting in front of people with.
All that being said Theres certainly an impact from the current environment I think.
As we look broadly across the Medicare landscape I would expect less churn. This year as a result of probably last kind of shopping activities folks are spending more time than indoors.
Or not and.
And some of the typical settings that that agents are getting in front of people.
But overall.
Our performance in the Medicare business through a t., thus far has been consistent with how the business has performed.
In the current environment a year to date.
Okay, that's fantastic thing I'm not sure.
Okay.
Thanks, Matt.
Thank you. Our next question comes from a lease Greenspan with Wells Fargo. Please proceed with your question.
Hi, Thanks. Good evening My first question on the you got it.
<unk> for the fourth quarter would be at the low end of the long term target of 10% to 15% or panic, but it also tells us that last quarter for the third quarter and you can do 20%.
And so obviously things in the third quarter trended better I guess, it's a two part question I guess, what im trying to.
Better than you had expected when you made those comments you referenced the third quarter and then why wouldn't that continue in the fourth quarter.
Or is there just some conservatism given you know the ongoing uncertainty with Cobiz.
Yeah, Great question at least so a couple of things one Mike.
Hi, Thanks.
Look at the dynamics of our business in the third quarter versus the fourth quarter. The third quarter is a seasonally largest quarter for the MJ the future, which as you know is can the fastest organically growing part of our business. So when you look at kind of the relative kind of contribution.
Funds from that part of our business in the third quarter compared to the fourth quarter Theres more opportunity for really kind of outsized performance in Q3 than Q4.
As a result of the continued outperformance by Ngs at a future.
When we were guiding down to the bottom end of that range for.
When you Q3, there was some concern relative to a new policy issuances, we would see in the month of August related to student housing.
As a result of the cobot environment, a lot of students not going back on campus.
Correct.
And while we saw some of that actually occur with new policy issuance is in the month of August for the MJ the future actually only up about 10% year over year, we really outperformed in the month of September can have more than made up for that that.
As shortcoming, which which caused that overall outperformance and then as we look towards Q4 that is our seasonally weakest quarter and the M.J. the future in terms of relative revenue contribution.
To the overall.
Business.
And so when you combine that you combine the uncertainties of the Kogan environment and you combine what is really a continued choppy economic environment.
We feel like the lower end of that 10% to 15% range is really probably the accurate.
Number for Q4, so the outperformance in Q3 is certainly no a story of terrific performance in the MJ the future as well as continued strong performance across our entire business in the face of some pretty significant operating challenges.
Okay. That's helpful. So would you say I got away from the NGL Ginger Wonder if were talking about your other businesses in the quarter would you can you kind of talk to what might have performed better or worse.
Worse than expected or were they or did the remaining segments kind of pretty much come in line.
Thank you Jason.
Yes, I mean at least I'd say kind of across the board. The board the business performed really well we had double digit organic growth in every single operating segment. So considering the environment. We're operating and we're really pleased with those results and I'd say they were kind of at or slightly ahead of expectations.
Okay, that's great and then on.
On the rise.
We will now begin to appeal and then also say eluded to this strong M&A pipeline.
You.
Also mentioned that there could be kind of a flurry to get done before the end of the year I guess to that statement.
Evening.
Bill do you still expect to see a good amount of deals between now and the end.
Second of all can you give us a sense of like the size of the deals in the pipeline.
Noticed relative.
Smaller deals up no something larger in the vicinity of ansible, how we could think about the potential pipeline.
And when we might see some more deals are getting.
Hey at least it's Chris I'll take that one.
Thank you Echo what we said in the release, we still have a great pipeline.
You know and I think you are right. We do expect things to close before year end I think even with the industry group.
If you're modeling.
The revenue for partnerships hitting into groups of rolling in to get one month of it.
The other stuff that would that would close we may get a month or are there maybe none at all in actual this year because things could close up to 12 31. So so I do and when folks are modeling I want to make sure that that you're not putting too much in this year.
I do think there will be probably a positive surprise to where folks are thinking we're going to be in Q1 when.
When you move that over.
You know as far as the type of deals in the pipeline I think it's similar to what you've seen us do this year.
Our high quality deals that had a history of organic growth and we think our strong.
Add to the business, but we don't want to comment on anything specifically because you know as Trevor said deals never done until it's done.
Okay. Thank you I appreciate all the color.
Thanks Louise.
Thank you our next question comes from.
Pablo Singzon with JP Morgan. Please proceed with your question.
Hi.
So my first question is related to organic growth I noticed that there was a pickup in profit sharing revenues year over year I was wondering.
To what extent forget growth was driven more.
Our bicuar commissions versus profit sharing if you have it spiked out separately.
Yeah, what I'll say Pablo is that and this is Brad the the majority was was driven by core commissions.
We did not see what would be a notable gap like we did in.
Probably one when we broke those out separately for information purposes.
So we are seeing some positive performance in contingents as you indicated through some.
Some more favorable contract terms and also some.
Some of the underlying mix and nature of the partner.
Ownerships from 2020.
Overall, the lion's share of what contributed to organic in Q3 is core commissions and fees.
Pablo Who's got over just to add on to that you know.
What is continuing to be.
The driver and what is powering.
Our outsized organic growth relative to our peers is truly our ability to generate new business at an outsized rate.
As we think about the building blocks of organic growth and we've talked about this in the past you look at.
Retention of prior year revenues, which for us.
Maintenance to be in.
In line with to maybe marginally better than our peers you look at the combined impact of insurance rate and exposure unit expansion or compression.
And on a year to date basis for our middle market segment that you know little.
A little bit over plus 4%.
So.
So up slightly up a couple of hundred basis points from from the.
The second quarter, reflecting continued acceleration in the rate environment.
But that benefit is also shared by many of our peers and so really what drives kind of the.
Different so the delta is our ability to write new business at a rate that.
Meaningfully exceeds what what many in our peer group are doing and I attribute that to.
The really the tailored approach in which we engage with prospective clients the shelter distribution models that weve built.
Now and how we're able to execute at point of sale on a consistent basis.
Got it Thats why that Trevor and second question, just a follow up to your comments on or maybe Chris comments on the.
Going investments in the business I was just wondering if as we possibly can you sort of frame that for us whether.
As a percentage of revenue Garen turnarounds and.
I guess, how much you did this year and potentially how much do you see.
Doing next year as well.
Pablo It's Chris I'll I'll take that one you know a couple of things to call out one yeah. We have some expenses that are new and some higher interest expense in Q.
Or than we had in Q3 because of the term loan b right. So unlike the revolver. When you close that debt you start paying interest day, one on the full amount and so we fully intend to use that we don't like paying interest on capital that we're not using that I think thats going to impact EPS in Q4.
I don't think it really be material into next year.
If you think about what Brad said similar margin, we've been taking about 200 basis points. The past couple quarters lower than we were in the prior year and reinvesting that in the business and I think thats a good rule of thumb as you could take our Q4 from last year take 200 basis points. That's about the extent I mean, we have some great investments, we can make but we're also still.
I'll try not to take margin back too much but I think thats, how you should think about it.
Got it that's helpful and then last for me sorry, sorry.
Volume of deals that you've done this year, you're doing about you know talking about 39th acquired revenue quarter.
Is there any reason to think why that wouldn't sustain or maybe.
Even stronger coming for next year.
Yeah, Hey, Pablo Striver. So the first thing I'd say is partnership for M&A is episodic in nature and so.
I think you know as we've talked about in the past the back end of 2020, we are seeing.
You know somewhat of a pretty significant pickup in activity I do think we will see some of that kind of carry forward into 2021, but I'm not sure I would I would expect anything more than that $30 million quarter kind of run rate and you know you just got to remember that.
You know that could be zero in one quarter it could be 60 million in another.
We don't get to choose one the very best most high quality businesses decide.
That they want to have a conversation about selling in and becoming a part of our larger entrepreneurial insurance enterprise.
What we do know is.
Is that we're being very diligent about continuing to be out in front of folks that we think highly of building relationships. So that when it is time for them to think about doing something where the first phone call. They make and they have a really strong awareness and understanding of our business our culture and how we're going to continue.
We need to build an organization that can deliver durable durable double digit organic growth well into the future.
Im not going to comment on.
Margin Pablo it's I think it's hard to look at each quarter in a silo.
Particularly with 606 revenue recognition and the timing variability.
That if you take.
What we provided in the supplement which is the quarterly phasing of revenue of new partnerships.
You can see that there's heavy concentration in Q1. So you know when ticket ticket TBR BA acquisition or partnership and.
And in June and we built up infrastructure to support that business, but 70% or something have their of their Rev. Rec hits in Q1 based on historical pattern. So it's.
It's hard to look at it and isolation I think you have to look across a broader base and see on a pro forma basis as we show in the supplement what are we doing.
And year over year in terms of margin so.
That's a that's a good lenders look at too and I think you'll see that it's more consistent if you look at it on an annualized basis from that perspective.
Got it.
Screens and one small one and.
I know I noted that.
We have made a small investment.
Doing and.
I think some of your Burger peers, who have made investments or acquisitions and sort of like digital small commercial brokerage I'm. Just wondering if you could speak to that.
No what you see in that business going forward. Thank you.
Yeah Pablo So we're we're very excited about the partnership and investment in high wing, which.
Hi, James.
A technology platform that is going to bring transparency and efficiency in how we transmit data with our trading partners, enabling us to ultimately have more forthright and efficient relationships that result in more effective placed.
That's on behalf of our clients. We're also super excited about the the group of peer firms that are invested alongside us with that platform, which represent some of the highest quality independent firms across the country and so collectively I think our thought leadership or.
Collective premium volume and influence with all the write insurance companies are going to enable us to develop a solution.
That allows us to not only monetize the rich data that we have in our organizations, but also deliver a superior results to our clients as we are able to bring a fish.
Licensee and transparency into the placement process.
Got it thank you so much.
Thank you. Our next question comes from Marco Hollander with Raymond James. Please proceed with your question.
Hey, guys. Thanks for taking my question.
Right.
I just wanted to stick with the margin discussion and just as we think about next year.
Maybe talk to us about the incremental margin opportunity as we balance your investments in the platform and maybe some t. any that you put out this year due to cogan.
Yeah, I mean, I think I'd accurate.
That said earlier remark to.
The pro forma is probably the best sense and if you look at it on an annualized basis to see kind of where margins heading.
We obviously think that the deals we are doing.
End up being accretive to that long term story here in the near term.
What we said is we're continuing to continuing to invest.
That's about 200 basis points more than last year into business.
Especially in Q4 kind of what the success were having on the partnership front, making sure that were ready enable to serve those new partner as well and bring them on and to be RP platform and have them be successful.
Marcos.
The other thing I would add is.
As we've talked about in the past we are very focused on executing a playbook that enables us to make investments for the long term to deliver double double double digit organic growth.
In our view is that is going to not only be the right.
Decision for the business, but is the right decision for our shareholders because as you've seen with many of our peers you can pull the margin lever in these businesses really fast.
And harvest that margin and our business is not different from a structural perspective in any manner than any.
It appears that have done that but so long as we can continue investing in our business to deliver that outsized organic growth scaling up our overall revenue stream that will enable us over a relatively short time period to deliver larger and more durable cash flow streams and so our focus is on.
On building up our business from an organic standpoint, and continuing to build and accrete margin over time, but not at the cost of growth.
Got it and organics going homing. So congrats on that I guess my last question is on the on the Aviate renters product nice acceleration here in terms of gross.
I'm wondering if there's any sort of synergies running through that number with the Rosenthal brothers acquisition and then too you mentioned the flood product maybe talk to us a little bit more about that rollout in which we should expect to see that I'm not in the numbers.
Yeah. So.
Great questions Mark as you know the MJ that future continues to perform extremely well today the growth you're seeing does not include any revenue synergies from.
From the Rosenthal partnership I wouldn't expect to begin seeing that really until sometime next year as we really get.
Their kind of their sales team integrated and how that platform operates.
When we think about some of the new products in our pipeline. We are on file with the department of shipments in the state of Florida for our new homeowners product and we expect that.
But that should be a first half of 21 launch. In addition, we have.
I have.
Tom Green light on capacity.
Our private flood solution and we also expect that to be a first half of 21 launch.
So depending on kind of the exact timing of those launches I think you could see those begin to impact the MJ that future results either in the tail end of the first half.
Half of next year, but certainly going into the second half of next year.
Got it thank you for answers.
Thank you. Our next question comes from Dan Fannon with Jefferies. Please proceed.
Question.
Thanks. My question is on M.G., the future as well and given the strength you're seeing on the top line can you remind us how the profitability of that business works and how we should think about the scale and margin expansion of that segment alone given the growth profile or trajectory that it's on.
Okay.
Yes, Dan I'll start and Brad.
Follow on I think the key versus some of our competitors in the space as the business is very profitable today, it's generating free cash flow for us and so I think thats the first step.
If you think about kind of what they did in the quarter over 50000.
Units added in a profitable manner and then if you think about it and that's that's actual policies with US and then the broader thing that we've said in the past as they also added about 550 units that we called turned on.
Before and so yes.
Units turned on it that's basically growing our additional pipeline of possible captured.
In the road, but.
But overall I would say that the key thing is that the business is profitable.
We are continuing to make investments into that business as Trevor mentioned for additional products.
But but the business is doing very well as you as you pointed out.
Yes, I'll just add to that.
To Chris' point, we make we make money on day, one once that policy is sold without the sort of leading advertising.
Burden and costs, but we are sharing that commission with our.
Downstream partners, particularly those property management software company so.
So.
There is only so much margin expansion that it can come from that when when you're in an advisor type model like that.
What I will say is we've talked about the efficiency of the tech before so from a gene in a build in a servicing build.
You will see margin accretion there over time.
Based on on on how efficient the tech is but Chris is point.
I'm looking at the margin on an individual basis, Dan and it's basically flat year over year, and I think thats directly attributed to the investments we're making.
In that business with respect to these new products so were effect.
If we utilize that margin to invest in growth there.
Great and then.
A follow up on in group a is there seasonality to that business similar to the other portions and when we think about modeling. It and then you know you I know you mentioned on the call last week about the normalization of equity.
For other deals going back to the low twentys, but given this was the largest deal you've done as a new partner.
Should we think just and you know when you do have a larger transactions that that the equity component likely goes up similar to this.
Yeah. So when you think about the equity component Dan I I think.
It's not really tied.
Tied to the size of the transaction I think it's tied to the fact that the management team at ends at a lot of conviction around what we could do together.
And they didn't think about it as a sale of their business is rather kind of selling in or buying and to be RP and becoming.
Part of what we're building and having a lot of conviction around what we can accomplish together so I wouldn't expect that to necessarily continue to be the norm.
And although we do see that as a very positive.
Indicator.
The bullishness of those business principles on what we're going to be able to accomplish.
On the seasonality side Brad.
I think you can provide a little bit more specificity around around that yes.
Yes.
In group is primarily.
The largest component of their of their businesses PNC, which is less seasonal in nature.
Typically than what you'll see in a benefits business.
So it's not as drastic as the example, I provided before but we do see.
Some constant.
Contraction in the first and second quarters purchase.
Pertaining to that business and slightly lower in the third and fourth.
So probably more in line with with what we would say in our legacy.
Ks business on the PC side and not as drastic as some of the benefits.
Businesses, we partnered with in 2020.
Great and then just last one on just the new the pipeline kind of potential.
Potential partnerships this into Europe, obviously gives you scale in the Texas region, something you have talked about for some time are there other regions that you.
View as attractive.
The graphically or you just from a business perspective that as you look out you would like to target in a similar way.
Yeah. It's a you know when you when you look at geographies that have economic and demographic tailwinds when you look at industry sectors.
Have all the necessary attributes to outgrow.
The broader economy those are areas that we have a lot of interest and being over.
Overrepresented at and so.
You know it's easier to grow when you have a tailwind that you're back.
Okay alright, thank you.
Thanks.
There are no further questions at this time I would like to turn the floor back over to management for any closing comments.
Thank you I want to thank everybody for taking the time this evening and for joining us and just want to remark here on our one year anniversary as a public company on how proud I am.
Of all the accomplishments that our colleagues have enabled us to have we're super proud of the results. We've generated thus far and there are very much excited for what the future holds thank you and we'll look forward to talking with you all soon.
This concludes.
Today's conference you may disconnect your lines at this time. Thank you for your participation and have a great day.