The Baldwin Insurance Group, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Strong overall results in Q3 despite dynamic operating environment; organic revenue growth 5%, YTD 9%; adjusted EBITDA flat Y/Y, YTD 9%.
• Two temporary headwinds: procedural accounting change in IAS impacting commission revenue timing and reduced commission from QBE on builder-sourced homeowners’ book; expected to reverse into tailwinds by H1 2026.
• IAS: Sales velocity top decile at 20% in Q3, YTD 19%; backlog of new business including 7-figure client wins at historic high.
• UCTS: Organic revenue growth 16%; migration of builder book renewals to reciprocal exchange BRIE; work on second builder homeowners insurance program with Hippo.
• MIS: Organic revenue slightly negative, but removing onetime commission reset, organic revenue growth 8%; onetime commission reset impact persists until April 2026.
• Embedded home insurance: Launched new technology platform, 3 new mortgage/real estate channel partners; top 20 mortgage originator proof points with 150%+ volume vs previous partner.
• Announced 3B30 Catalyst program: ~$40M transformation charge by 2028, ~$50M cumulative savings, projected run rate savings $40M by 2028; savings to ramp with no material savings in 2025, $3M-$5M in 2026, $10M-$15M in 2027.

Segment Performance

• Insurance Advisory Solutions (IAS): Overall organic revenue growth flat Y/Y. Removing procedural accounting change, overall organic revenue growth was 4% and organic growth on core commissions and fees was 6%. Sales velocity was 20% in Q3, YTD 19%; backlog of won but not yet booked new business at historic high. Absolute organic revenue growth flat Y/Y; revenue contribution % flat Y/Y but with adjustments.
• Underwriting Capacity & Technology Solutions (UCTS): Organic revenue growth 16%, driven by multifamily portfolio (16% commissions and fees growth) and commercial umbrella portfolio (15% organic revenue growth). 400 basis point drag from E&S homeowners book. Absolute organic revenue growth 16%; revenue contribution % up.
• Mainstreet Insurance Solutions (MIS): Organic revenue growth slightly negative, driven by onetime commission reset on QBE Builder book and medicare attrition. Removing onetime commission reset, overall organic revenue growth was 8%. Absolute organic revenue growth slightly negative; revenue contribution % down.

Guidance

• Q4 2025: Revenue $345 million to $355 million; organic revenue growth in mid-single digits; adjusted EBITDA $68 million to $73 million; adjusted diluted EPS $0.28 to $0.32 per share.
• 2026: Revenue $1.66 billion to $1.7 billion; organic growth in high single digits; adjusted EBITDA $380 million to $400 million; adjusted diluted earnings per share $1.95 to $2.10; double-digit growth in operating free cash flow; acceleration in organic revenue growth in back half of 2026 once idiosyncratic headwinds are lapped.

Risks

• Temporary headwinds from procedural accounting change in IAS and reduced QBE commission persisting through H1 2026.
• Renewal premium change headwind of -5.7% due to client caution and macro uncertainty, expected to be a floor but not fully reversing to tailwind in near term.
• Macro uncertainty and transition in the insurance marketplace impacting business results.

Question and Answer

• Q: So I think I'd like to start with the results in the IAS segment... **A: Yes. Greg, it's Trevor. So let's -- unpack a few points there... Sales velocity of 20% in the quarter, 19% year-to-date, strong results... The accounting procedural change is a $7M headwind to revenue and $5M to EBITDA, timing issue... Renewal premium change was a 5.7% headwind, floor going forward with incremental improvement.
• Q: Quick one on your preliminary outlook for 2026 organic of high single digits. What are you, if anything, embedding for the attorney-in-fact fees and BRIE and also the embedded mortgage channel revenue? **A: Yes. Charlie, this is Trevor. I would tell you that we have nominal assumptions built in for the attorney-in-fact, and while I wouldn't quite call it nominal on embedded, it's not -- it's certainly not heroic... We're super excited about the momentum there...
• Q: Just big picture back on the capital management, and I appreciate the color, Brad, you gave on getting below -- comfortably below 4x before you buy back stock. But just given where your stock is trading right now and it feels like it's obviously below its intrinsic value. Why wouldn't you use some of the free cash flow you're generating right now and buy back some stock a little bit right now? It seems like a pretty good return on investment. A: Yes. Thanks, Brian. So look, we do, as we mentioned in the prepared remarks, intend to authorize a buyback program once our leverage is comfortably below 4x... We don't intend to use buybacks programmatically... It is very clearly a third option for us for capital deployment after, as we talked about organic investments and M&A...