NINGI Research is short BRP Group, Inc. (NASDAQ: BRP), because, in our opinion, BRP has doctored its organic growth rate to beat analysts’ estimates. On top of that, shareholders are faced with a company whose key intellectual property was misappropriated, whose growth is declining, whose margins are not improving, and whose interest expense will increase significantly.
In our opinion,
- The company misled investors by presenting inorganic revenue as organic revenue through a self-proclaimed separate agreement with an affiliate,
- BRP’s true organic growth for Q2/2022 was 16.7% versus the reported 23.9% and analysts’ estimate of 18.6 percent,
- The company’s margin improvement is due to a change in the fair value of its contingent considerations, which indicate lower sales projections and growth opportunities,
- The organic growth for BRP’s “MGA of the Future” platform is 27% versus the reported 70 percent,
- In 2020 BRP’s proprietary “MGA of the Future” technology was misappropriated by an employee and handed to a competitor, as alleged by BRP in a lawsuit,
- The company allegedly did not notice the misappropriation until May 2021 but did not disclose the intellectual property theft to investors to date, despite arguing in a lawsuit that the theft has and will have severe damage to BRP’s revenue and market share,
- BRP updated its risk factors regarding intellectual property theft instead, leading to an additional full page of risk information, and the audit committee was tasked to monitor the company’s cybersecurity procedures,
- BRP’s M&A strategy has been falling apart as well as sales projections have to be slashed,
- The company’s plan for deleveraging the balance sheet through outsized organic growth is built on wishful thinking,
- the quantitative tightening of the Federal Reserve will lead to an estimated interest expense of 37 million dollars in the second half of 2022,
- BRP could be forced to do a share offering to fund its operations.