Q4 2020 BRP Group Inc Earnings Call
Greetings and welcome to B R. P group fourth quarter 'twenty 'twenty earnings call. At this time, all participants are in a listen only mode.
And the answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to US the Iraq director of strategy and partnership. Thank you you may begin.
Thank you operator, and good afternoon by now everyone should have access to our earnings announcement and slide presentation, which was the release prior to this call and which May also be found on the Investor relations portion of our website at Baldwin risk partners Dot com before we begin our formal remarks, a reminder of 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 of are subject to various assumptions risks uncertainties and other factors that are difficult to predict and which could cause actual results to differ materially from those expressed or implied in the forward looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them we refer all.
All of you to our recent filings with the SEC, including our form 10-K filed today for a more detailed discussion of the assumptions risks uncertainties and other factors that could impact the future operating results and financial condition of ERP group, including those related to the potential effects of the COVID-19 pandemic on our business financial condition and results.
For the operations.
We disclaim any intention or obligation to update or revise any forward looking statements except to the extent of required by applicable law.
Also our discussion today will include references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measure can be found within the earnings announcement and earnings supplement presentation. Both posted on our website at IR day, Baldwin risk partners Dot com or in our SEC filings. In addition, this call is being webcast.
And an archived version will be available after the call on the Investor Relations portion of our website with that I will now hand, the call. It the Trevor Baldwin Chief Executive Officer of ERP Group.
Thanks, Austin and good afternoon, everyone welcome to our fourth quarter of 2020 earnings call. We appreciate your taking the time to join US and your interest in <unk> group during today's call I'll provide some brief highlights on our accomplishments during the quarter and for the full year. Brad will then provide a more detailed review of.
Of our Q4 and fiscal year 2020 of results and Chris will wrap up with a few quick comments on our balance sheet and certain expectations regarding our outlook for the future well then open up the line for questions.
Summary, we had another fantastic quarter, and Q4 to cap of phenomenal year, and which we believe we firmly validated the power and resilience of our hybrid growth strategy and differentiated business model amidst the challenging macroeconomic backdrop for.
For the quarter, we recorded strong year over year organic revenue growth of 17% and total revenue growth of 91% and for the full year generated organic revenue growth of 16% and total revenue growth of 75% in Q4 of our organic growth was again led by our <unk>.
Specialty segment with the MGA of the future of growing 73% during the quarter driven by continued success in renters and the launch of our master tenant liability product, which Brad will discuss in detail in a bit.
On the partnership front, we had a successful quarter closing five transactions for $155 million of annual acquired revenue, marking the most active quarter from a partnership perspective in our firms history and becoming the first firm in recent history to acquire three top 100 middle market firms in a year, which we accomplish.
During the fourth quarter alone, we believe that all of the firms that joined us during the quarter our of uniquely high quality with strong track records of organic growth and bring to us incremental product and industry expertise and scale in some of the fastest growing regions in the country all of which will be important to delivering on our goal.
All of generating sustained double digit organic growth well into the future. So our new colleagues at <unk> group H C. Burnham and TBM. We welcome you to ERP and are excited about your future contributions to the organization, we are a better and stronger firm as a result of your joining.
Looking ahead in terms of number of size and the quality of the opportunities.
We continue to have a strong partnership pipeline and anticipate another robust 2021 on the partnership front as our story continues to increasingly resonate with potential partners.
And finally, we're excited to announce several promotions amongst the ERP leadership team effective April one 2021, Chris <unk> will be promoted from Chief financial officer to become our newly appointed Chief strategy Officer, Chris has been a driving factor in the transformation of our business and over it.
20th of increase in our annualized pro forma revenue since he joined as CFO of six years ago.
This new role will allow him to focus on driving our most important strategic initiatives across the firm and positioning us for success in what we anticipate will be of transformational decade for the insurance industry broadly.
Next Brad Hale will be promoted to chief financial officer transitioning from his prior role of Chief Accounting Officer.
<unk> has done a tremendous job for us since joining prior to the IPO and we expect this to be a smooth transition for him and the team with his continued involvement with our finance and accounting activities.
Rounded out carbon Galloway currently our director of accounting will become our new Chief Accounting officer like Brad carbon joined US in May 2019 prior to the IPO and has worked closely with him to drive the success of our accounting team. She is a tremendous asset to be ERP and we are thrilled to welcome her to our executive.
The team.
In closing we're exceptionally proud of the performance we were able to generate in 2020.
None of which would of been possible without the tremendous efforts and hard work of our colleagues who worked tirelessly to deliver for our clients amidst the challenging environment. So all of her colleagues of huge thank you.
You are the reason our businesses in the strongest position that has been in the firm's history.
With that I will turn the call over to Brad to go into more detail on our Q4 and full year 2020 of results.
Yes.
Thanks, Trevor and good afternoon to everyone on the call for.
For the fourth quarter, we generated revenue growth of 91% to $69 6 million and for the year, we delivered revenue growth of 75% the $249 million. The revenue growth was driven once again by our hybrid growth model, namely organic growth combined with contributions from new partnerships.
Trevor mentioned.
Once again generated double digit organic revenue growth on a year over year basis recording 17% organic growth for the quarter and 16% organic growth for the year. Thanks to solid performance across all of our operating groups and particularly strong performance from our specialty segment driven by the MGA of the future.
Given the partnerships are an important portion of our ongoing growth strategy in our regulatory filings. We also provide revenue metrics on an unaudited pro forma basis. This provides investors with the more apples to apples comparison as if our 2020 partnerships have been acquired on January one 2020.
For the fourth quarter of 2020, unaudited pro forma revenue was $94 4 million up 158% from the prior year.
For the full year unaudited pro forma revenue was $426 2 million up 179% from 2019.
On the pro forma information should not be relied upon as being indicative of the the historical results that would have been obtained if the partnerships had occurred on that day nor of the results that may be obtained in the future.
GAAP net loss for the fourth quarter was $19 1 million or <unk> 29 per fully diluted share GAAP.
GAAP net loss for the full year was $29 9 million or <unk> 58 per fully diluted share.
Adjusted net income for the fourth quarter of 2020, which excludes share based compensation amortization and other one time expenses was $4 9 million or <unk> <unk> per fully diluted share.
For the full year adjusted net income was $32 4 million or <unk> 44 per fully diluted share of <unk>.
Reconciling GAAP net income to adjusted net income can be found in our earnings release, and our 10-K filed with the SEC.
Adjusted EBITDA for the fourth quarter of 2020 rose, 79% over the prior year period to $10 6 million.
Adjusted EBITDA margin was 15% for the fourth quarter of 2020 compared to 16% in the prior year period in line with expectations communicated on our Q3 earnings call.
The EBIT for the full year grew 54% over the prior year to $44 million.
Adjusted EBITDA margin was 18% for the full year.
As a reminder, our adjusted EBITDA margin for seasonal in nature with Q1 being the strongest quarter, we usually recorded lower margins in the second half of the year with Q4 being our seasonally lowest margin quarter.
Additionally, as we do every quarter in the earnings supplement available on our IR website, we have updated the quarterly pro forma financial statements to reflect the partnerships. We closed in the fourth quarter as if we had owned those businesses since the <unk>.
Beginning of the year, which increases the revenues in quarters, one through three versus what we presented last quarter.
As a reminder of the pro forma financials, we present are not projections of future performance. Additionally.
Additionally results for our individual operating segments can be found in the earnings supplement as well.
Our MGA of the future platform continues to outperform growing 73% during the quarter compared to the prior year period.
As Trevor mentioned at the outset. The results were driven by continued growth in renters and was incrementally bolstered by the broad launch and initial success of master tenant liabilities policy product, which allows property managers to mitigate risks from tenants the chose not to purchase of traditional Asia for renters policy.
Note that the 73% organic growth includes the cumulative catch up 10% as a result of the Q for 2020 contract establishment date for previously satisfied services.
We would note that without the impact of the launch of our master policy product organic growth of the MGA of the future when compared to the prior year period was approximately 40% which is in line with the results we've seen quarterly throughout 2020.
With the addition of the incremental products, we already have and plan to launch over the course of the year, we anticipate being able to maintain an approximate 40% revenue growth rate in the MGA of the future for the full year in 2021, even as the business continues to scale.
Ultimately in what is typically our lightest quarter for the MGA policies enforce increased by over 24000 from September 32020.
As of March 10 policies in force of increased further to over 547.
We've also made nice progress, adding new units to our ecosystem and turning on buildings within our distribution footprint.
As of March 10, we now have over 17 million units within our property management software provider and property manager ecosystem up from the $15 million, we have communicated since the IPO as a result of new client wins for both us and our distribution partners.
Within that ecosystem. We also successfully turned on over 2 million units in 2020.
As of March 10 are turned on count stands at $8 2 million units versus $5 6 million units at the end of 2019.
In summary, we continue to be bullish on the MGA in terms of its ongoing sustainable contributions to our organic revenue growth driven by continued growth in renters. The continued build out of the holistic suite of products from the habitation of real estate sector and distributed through our existing middle market client base and the pending rollout of.
Of our private flood and homeowner's insurance products.
With that I'll now turn the call over to Craig.
Thanks, Brad and good afternoon to everyone on the call a few closing remarks before we head Q&A as most of you are aware, we successfully raised $249 million of primary equity proceeds in our December follow on offering, allowing us to fund our partnership activity in Q4 of de levering. The balance sheet ahead of what we anticipate will be of robust 2021 pro forma for.
The completion of the equity offering and the closing of our Q4 of partnerships net leverage stands at two eight times and we maintained for $180 million of capacity between cash on hand, and our full $400 million revolving credit facility to execute on our 2021 partnership pipeline as we've said before we continue to believe the three five to four ex leverages of prudent run.
For our business and we'd be comfortable taking leverage opportunistically up around the four and a half area in the wake of a larger transaction.
Looking ahead as the economy continues to recover from the COVID-19 pandemic amidst of positive vaccine developments, we are hopeful for material improvements in the business environment over the course of 2021 as such and given strong performance across our business in January to start the year as we sit here today for Q1, we feel confident in our ability to generate organic.
Gross on the higher end of our longer term, 10% to 15% double digit organic growth goals.
Additionally, given seasonality, we expect margin in Q1 to be back to a similar level as the prior year above 30% for the full year. We plan to continue investing in the organic growth of the business. However, as it stands today, we would expect of 100, the 200 basis point increase in the adjusted EBITDA margin above last year's 18%.
We continue to feel good about the $120 million to $150 million of annualized acquired revenue for the year and would reiterate that we expect at least 90% of those transactions to close in the quarters two three and for as a reminder of the exact timing of partnerships is subject to change and then finally, another reminder of that it typically takes 12 to 18 months.
For us to begin to realize full pro forma EBITDA from partnerships, particularly larger partnerships as we work to integrate them into the broader ERP platform and.
In summary, we are excited about our results during the quarter and for the full year. The momentum we have carried into the start of 2021 and for what we believe will be another very strong year in the partnership and organic growth front I would echo Trevor. Thank you to our colleagues who have been the driving force for the continued success of the business and we have put our business in the best position we've ever been.
I. Thank you for your time and we'll now open the call for Q&A operator.
Thank you and if he would like to ask the question. Please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star of keys.
Our first question is from Greg Peters with Raymond James. Please proceed.
Oh, good afternoon, everyone and before I started my questions. Congratulations on the promotions and Brad I have to say you did the flawless job in reading your script share off to a good start.
Thanks, Craig.
So.
Firstly, let's let's talk about the organic revenue growth results and specifically you know.
The MGA of the future clearly is driving the consolidated results can you talk a little bit about how the middle market is progressing and perhaps mainstream Medicare as well.
Yeah, Hey, Greg This is Trevor.
So as you articulated the MGA of the future had just a fantastic quarter in Q4 at over 70% growth.
Propelled by the launch of our new master tenant liability product.
With that being said I think when we look at the full year results relative to the overall economic and operational environment. We're really pleased with the results of of all of our segments and so outside of specialty Youll see that we had mid single digit organic growth.
You'll also recall in the third quarter of that that we had guided towards the lower end of our target, 10% to 15% organic growth range for the fourth quarter and that was the result of anticipated exposure unit.
Right sizing and our client base, particularly on the employee benefit size side as businesses took action as it became clear that there was not going to be of fourth quarter of stimulus package that ultimately was passed so I think we've gotten through that.
Across our business and middle market and main street in particular.
And.
As you heard Chris talk about in the prepared remarks, we're super excited about where we're positioned and as a result feel really good about delivering.
Delivering organic growth towards the upper end of our 10% to 15% range in Q1.
Yeah got it okay.
The second question I had was.
Chris in your comments, you mentioned that there could be 100 to 200 basis points of EBITDA margin.
The expansion in 'twenty one.
And I just wanted to make sure I heard that correct and I guess you know.
I'm curious about how you're thinking about working capital needs considering the substantial gross that you reported last year and as you think about this year.
Yes, that's right Greg. So if you look at this year I think at year end were at 18%.
We're planning to invest over $30 million in the business this year and even in the face of doing that we think we will get about 100 of 200 basis points increase above that 18 as we sit here today. So from a working capital standpoint, we think we're in great shape, we raised equity in debt.
December we still have our whole revolver available, we still of a decent amount of cash on the balance sheet.
So we think we're in really good shape going into the year and as we said so far in January we've had some positive results.
Got it the last question.
One of the things that struck me as I was going through your slide deck.
If you if you look at.
If you look out the earn out potential.
On slide three you said.
The third line from the bottom of the maximum contingent earn out is now.
In the fourth quarter moved up to almost $300 million and then you know if I you look at those that number in the growth of that number and then they go down into your table six and look at the adjustments. If you will of the bridge to adjusted EBITDA were seeing.
A change in the fair value of that contingent consideration can you just walk us through how you're thinking with such a large contingent consideration sitting out there how that might.
The fact, you know pro forma commission fees and the does the adjusted EBITDA Bridge that you report on.
Sure. So I'll start and then I'll, let Brad.
Provide some additional commentary one I want to remind folks of the maximum contingent consideration and the earn outs.
It's generally at a level.
Higher than even 20% organic growth for a lot of times, we've taken those tables to 30% of higher so there's a tremendous amount of growth that would have to happen for those businesses to hit the maximum and at the same time, we've de levered ourselves down.
And they would have generated significantly more EBITDA at the payment of those and then when they joined so I'd want to make sure people remember that the.
The consider the consideration is very much tied to fantastic performance and we find nothing happier to pay Max consideration at the end of the day as far as some of the detail I'll, let Brad comment.
Alright, so as you know, Greg and we've talked about this before.
On day, one of that partnership right, you're recording of fair value of that contingent consideration, which passed the contemplate any number of scenarios in fact, all scenarios that could occur with that business. So you get a significant discounting factor both in terms of.
Of what's going to happen in that business over three years and the time value of money.
So what we're seeing is particularly as we have a larger base of contingent consideration.
Our mark to market each quarter is sometimes substantial which is why we are calling it out and adding it back because it makes our true.
GAAP net income somewhat distorted so to the extent that number is increasing thats in our mind a good thing because it means those businesses are performing and as we've said before we like nothing more than to pay on the high end of contingent consideration because that means that business has grown at debt levels that Chris just outlined in terms of 20 plus percent organic growth.
Got it thanks for the answers I'll, let others ask the questions.
Our next question is from Elyse Greenspan with Wells Fargo. Please proceed.
Hi, Thanks.
So I want to extend my congrats to Christian Brad on the recent promotion.
My first question.
So I guess, maybe I'll start with M&A.
I know you guys said when you laid out the 2021 plan in December you had said that you expected it to be.
Question for the back from quarters of the year.
All of which you reaffirmed today.
Pretty close to the second quarter. So do you have a sense.
The timing wise.
I know maybe it depends upon some tax changes or things like that but when.
When you said when you would expect to see.
Some of the deals starting to come in in 2021.
Yeah, Hey, Elyse this is Trevor.
Thanks for the big Congrats for Chris and Brad We're really excited about their new roles and continued and future contributions to the business as we think about our pipeline and the broader M&A landscape is as we articulated on the call.
Our pipeline is very strong and we have a number of very high quality opportunities across the range of of size and so we feel good about.
Our target in that $120 million to $150 million range when it comes to the timing.
M&A can be lumpy and timing is subject to the nuances and vagaries of of the M&A process and so I don't want to provide kind of any specific.
Detail there other than we do believe it's going to be back end weighted.
As a result of the dynamics of how busy Q4 was the time, we are taking the really effectively integrate the partners.
This first quarter that joined us at the end of last year and then just the dynamics in the marketplace. As you know there was a little bit of an air pocket at the beginning of Q1 as.
A lot of folks that we're thinking about transacting in the relative near term.
Pulled it forward into the fourth quarter of 2020 for for tax concern reason. So we're excited about our pipeline and the quality of the organizations that are in it and excited about.
How we're going to be able to execute from a partnership strategy. This year.
Okay. Thank you and then.
My next question.
So.
When you look at the organic growth in the quarter.
Towards the high end of your expectations that you guys.
As you pointed out the exceptional growth for them.
<unk> debt Nashville, we neutralize for that it does seem like the rest of the business of salary, which.
And there might be from timing nuances going on.
And that is I think you said the Q1 would be at the high end of the 10% to 15% target.
You know the specialty business for the 40% of back into it imply gross and the rest of your business just from the first quarter. So can you just.
I'm, assuming you're correct on the outlook and can you provide any color on why some of the segments might of contracted or seen some pressure in the fourth quarter.
Alicia it's Chris I'll take that one of I mean think as Trevor mentioned earlier, we did see some weakness, especially in the middle market just on the employee benefit side, where I think folks had a weighted to make decisions until after the election season, and if stimulus was going to happen and they tried to right size of getting into year end.
We haven't seen that kind of continue into January.
So that's positive and as far as the other businesses. We talked about last year main Street has had a tough start in Q1 with some contingent headwinds.
Q3 of this year all of them had been double digit organic.
For Q4 was a little lighter January is look good and as we said we expect as we sit here today Q1, the b on the high side of that 10% to 15.
Yes at least we feel like we've paid a lot of momentum into 'twenty, one across all of our businesses and feel really good about how we're positioned to continue executing on our long term goal of consistent and durable double digit organic growth.
That's great and then one last line of I'm looking at the.
The presentation I guess, the supplement and so for full year 2020, adjusted EBITDA margin was 20.
I believe you said you would expect the 20% in 2021 I'm, assuming the delta between the two numbers.
Essentially the.
Reinvestment that you pointed to in response when all of your question, which is you know.
Almost the good chunk of it and then sort of for back to the pool.
The 18 months for some of these businesses to scale.
Once you pay that's exactly right yeah.
Yes, we see an incredible opportunity to keep doubling down on investing in our business in particular, the MGA of the future of where we're experiencing exceptional results and so as Chris pointed out we plan to invest over $30 million and the new talent alone. In addition to the technology and other investments that we're making across our business.
Okay. Thanks, I appreciate the color.
Our next question is from Josh <unk> with Bank of America. Please proceed.
Yes, Thank you and the graduate from the quarter and all of the good news for everybody.
I hope that you can talk a little bit of I'm interested in the relationship between.
The contingent payouts and sales inducement programs.
To what extent, our sales and just the programs going to be of common feature of future acquisitions. Given the first couple of months you have year of data to what extent are the producers taking upon those opportunities.
And when you set of objectives.
How did you sort of think about the relationship between.
What you are willing to pay and what you are willing to pay individual producers.
Yeah. So just to clarify the inducement program is tied it is part of the overall consideration for.
For an individual transaction and so one of the unique things about our M&A program is that all generally all colleagues at of partner firm are receiving equity consideration as a part of the purchase price debt that at times, We're publishing so the inducement plan is.
Separate and distinct from the purchase price that you would see published in our materials. It is a part of that and it is the way in which we put equity in the hands of the individuals that may not be owners for a material owners of the business at the time of the transaction but.
We believe there is going to be considerable drivers of future performance well into the future and so we're using that to align their interests.
With with the overall organization.
So the total price debt will be paid given perfect execution.
Includes debt inducement cost within the price.
Correct.
Okay and.
Should we expect I mean, you put a press release out for that to explain how it works when would you expect from the future debt.
Most deals that youre going from will come with.
The inducing the component for the producers.
Yes, and yes.
Actually of steel.
Okay.
And.
In terms of.
The.
Guys look at I think that you've done a great job of identifying great transactions and we do talk about that.
Business insurance top 100 list of of course, there's many companies that don't appear that lists that are attractive.
Just to kind of frame I'm not asking the spirits your competitors, but when you look at.
<unk> like the 100 companies how many of those companies not particularly income are great fits for a company like Baldwin If you had your choice.
If money were no object and you guys can say look these are companies that we think our group comedy out of a 100 companies are actually all the material.
I'd say.
My sense would be 20% Josh.
The percent and Thats based on long term gross and culture I guess.
That's exactly right.
And and in terms of.
You know sort of your pipeline.
And deal size I don't want to give too much away but.
Should we expect.
Bonds to be regularly announced and large deals of course for something unusual.
Yeah, So I think Thats, a fair characterization of how the partnership program will continue.
Yes.
Thank you very much.
Thanks, Josh.
As a reminder, the star one on your telephone keypad, if he would like to ask a question. Our next question is from Meyer Shields with <unk>. Please proceed.
Great. Thanks.
Thank Trevor you had mentioned that things were looking stronger even in some of the segments that had a little bit of a weaker fourth quarter is that.
Is that improvement also on the employee benefit side or can you talk about what's looking better so far in 2021.
Yes, it is and what I would tell you mayor is universally across.
All three of the single digit segments, we're seeing.
Enhanced performance, thus far in 2021, I mean, just the.
Provide some specificity there as we think about the impact of the export exposure unit pullback.
In the first quarter in the fourth quarter the impact on the business the combined impact of rate and exposure was an 8% headwind and remember you can think about rate as being positive to the tune of high single digits. Even in so it was a pretty significant right.
Sizing that we were still able to grow through at 17% overall across the business. We think we've gotten most if not all of that kind of underlying client level of exposure unit rates of right sizing out now and feel really good about the momentum and the positioning of our organization.
The relative new business pipelines that exist across our segments and risk advisors and.
We shared we feel good about achieving organic growth on the higher end of our 10% to 15% target range for.
For the first quarter.
Okay, No that's very helpful.
Doing some quick back of the envelope math of it looks like I don't really the 40% of the annual investment I'm just looking at the the margin numbers of course they provided.
A lot of that investment will come in Q1 should we expect that level of seasonality because of the revenue heaviness is that the right way to think about the investment opportunity.
I don't know that I'd think about the investment coming that front loaded.
I would think about of being more evenly kind of distributed across the year.
Because remember the 30 plus million dollars is all in talent and.
Onboarding talent. It means we've got to have the resources and bandwidth to appropriately welcome.
Those new colleagues into our organization get them trained on our unique ways in which we go to market and educated on all of the resources and capabilities that they have access to as part of our broader platform.
Okay No understood. When you say challenge that I assume that thats brokerage towns of opposed to it but I think for that right.
It's it's talent across the business. So yes, a significant amount of it would certainly be brokerage talent, but it's also technology talented developers.
Product management specialists in the MGA is HR and training and development talent to continue to bolster our ability to onboard and welcome our new colleagues. It's recruiting talent. So that we can continue to build our bench of recruiters that are focused on identifying high potential individuals.
<unk> to come on board so it's across the board.
Okay that works and I guess final question.
If we're looking at 40% or so organic revenue growth on the MGA of the future in 2021, I assume that if we look at individual quarters, because the comparable in <unk> is so high it will be higher in the earlier quarters and then we're just lapping that more difficult one is that fair.
Yes, I think Thats, a fair characterization mayor.
Okay I'm all set thanks, so much.
Thanks, Matt.
And our next question is from Pablo <unk> with Jpmorgan. Please proceed.
Hi, Thank you so in thinking about your organic growth guidance of 10% to 15% I think you could easily get to that range for MSI growing 40 per cent for the the next several quarters, but I'm more interested in the the rest of the beer piece of business is your expectation that the rest of the ERP will be growing the.
The double digit for interest support the 10% to 15% overall growth.
Yes Pablo.
What I'd say is we've always said any segment. We have we think we can grow at 10% to 15% on a longer term period of time, obviously last year, we fell a little short of that in some of the segments and last year was the tough year with some economic stuff going on.
But that's not our expectation of our expectation is that those businesses all can grow double digits now obviously the quarterly timing of that there is as these businesses are still growing immensely sometimes in the pullback a little bit but.
In the long run year over year, we think all of those businesses can grow double digits.
Gotcha and then Trevor.
Based on your comments about I guess the headwind from exposure is it fair to assume debt. The exposures you were booking I guess.
Much of the apples to apples as you can get right now.
One of the one but is it fair is the thing debt exposures in <unk> to one or better than what you were booking in the fourth quarter 2020, but probably the still lower than the.
The first quarter last year is that sort of the right way to think about it conceptually.
Yes, I think that's right Pablo I mean, if you think if you think back to last year Covid wasn't universally impacting the country until really March and so you can think about January and February.
Comps really being two accounts that renewed in a pre COVID-19 world and then as you get into March and April you can begin thinking about accounts that had renewed and of post COVID-19 world, but the post COVID-19 world that was a wash and significant stimulus funding and.
In QE in support of keeping.
Businesses and jobs of lives.
And then as you lap into the fourth quarter, you can think about the lack of stimulus funding that made it out into the system and businesses that may be it held on a little bit longer finally.
Deciding that they needed the right size.
Okay, and then I think last year, there was some noise in terms of negative adjustments from.
I guess ex Bush of audits right midterm exposure audits, if we sort of think about.
Out of the trough in the call.
And we are recovering.
Would it be reasonable to expect I guess adjustments on the positive side, whether this year early next.
Yes, I think thats, a reasonable expectation of course.
Subject to how quickly and how robust the economy recovers I think.
Businesses are likely over the past year, they've learned how to do more with less.
And I think of lot of organizations would tell you that they've learned how to be a lot more efficient I mean, we've seen it in our public peers in our industry as an example, with margins achieving relatively record highs across the peer group.
So I'm not sure you see it immediately.
Mediate rebound because I believe businesses will look to do continue doing more with less broadly.
But over time.
Certainly I think exposure unit growth will get layered back then.
Okay and last one for me I was just hoping that you could sort of contextualize for us of the new rent free products. So any color you can share or the commission rates are similar or is it part of the 17 million unit ecosystem. You described is there an overlap of the existing <unk>.
Our interest brought up the surf any detail you can provide would be helpful. Thanks.
Yes, so I mean the new.
Master tenant liability product is something the team has been working on in fact, we've been working on a full suite of solutions to complement the overall habitation of real estate.
The ecosystem that we're serving and so and of the master of tenant liability of product is one that pairs up nicely with the integrated and embedded <unk> solution that we offer because it enables property managers to.
<unk> liability only coverage on units for individuals who choose not to buy of for H O for a solution and therefore.
As a way for those tenants to satisfy their insurance obligation without the larger.
Without the larger H O for product.
And as you think about kind of what impact that has for us more broadly what we've shared in the past is building at maturity you may see 20% to 30% penetration with the H O for product you layer and the tenant master of liability solution.
And you could get to as high as 50% overall penetration on a combined basis between the two.
And just a few other I think stats to highlight some of the momentum we're seeing in that part of the business.
We grew the overall units turned on inside the system to $8 2 million as of yesterday, which was up significantly from the $7 7 million debt. We ended at the end of 2020 with and the $5 6 million debt. We ended at the end of 2000.
In 19, and if you think about the relative penetration of those units that we've been in since the end of 2019, we've gone from six 4% to seven 3% or 15% growth in overall policies in force for buildings that we've been active in.
For over 12 months. So we're continued to see growing adoption and continuing to get better at marketing.
Marketing and offering our solution set into the buildings that we've activated in net were integrated into.
Got it thanks for your answers.
Thanks Pablo.
We have reached the end of our question and answer session I would like to turn the conference back over the management for closing remarks.
Thank you. We appreciate all of your interest and support and I just want to thank our colleagues one last time for the amazing grit and perseverance that they showed throughout 2020.
We're incredibly fortunate to have.
A uniquely talented group of colleagues and I can tell you that we're in.
Exceptionally excited about what 2021 Hasnt store for our business and the opportunities for us to continue growing and innovating the industry. Thank you.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.