Baldwin (BWIN) Q2 2026 Earnings Call Transcript

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DATE

Thursday, July 30, 2026 at 5:00 p.m. ET

CALL PARTICIPANTS

• Executive Director of Investor Relations - Bonnie Bishop
• Chief Executive Officer - Trevor Lowry Baldwin
• Chief Financial Officer - Bradford Lenzie Hale

TAKEAWAYS

• Revenue -- $493 million, representing 2% total organic revenue growth during the period.
• Adjusted EBITDA -- $117 million, compared to $86 million in the prior-year period.
• Adjusted EBITDA Margin -- 23.7%, an increase of 110 basis points driven by accretive contributions from CAC and margin expansion in the Mainstreet Insurance Solutions segment.
• Adjusted Diluted EPS -- $0.48, compared to adjusted net income of $68 million.
• Normalized Organic Revenue Growth -- 8%, when excluding idiosyncratic accounting and integration headwinds and including January partnerships on an as-if basis.
• Adjusted Free Cash Flow -- $46 million, an increase of 437% year over year reflecting growth in adjusted EBITDA and favorable working capital dynamics.
• Insurance Advisory Solutions (IAS) Organic Revenue Growth -- -2%, reflecting a 240-basis-point headwind from client retention and a 150-basis-point headwind from a procedural accounting change.
• Underwriting, Capacity & Technology Solutions (UCTS) Organic Revenue Growth -- 6%, driven by strong performance in multifamily and admitted home products.
• Mainstreet Insurance Solutions (MIS) Organic Revenue Growth -- 4%, or 10% when normalizing for QBE commission resets and Medicare underperformance.
• CAC Group Revenue -- $94 million, representing growth of 23% in relation to the second quarter of 2025.
• CAC New Business -- $80 million year to date, representing a 43% increase compared to the same period in the prior year.
• MGA/TPA Organic Revenue Growth -- 56%, though growth was 7% when including OVI on an as-if basis for the prior year.
• Juniper Re Revenue -- $4 million decline year over year, due to risk-adjusted rate decreases exceeding 20% on certain property placements and renewal timing.
• Share Repurchases -- $80 million, representing the deployment of roughly half of the company's authorized $250 million buyback program to retire 4 million shares.
• Net Leverage -- 4.5x, which management identified as the top end of its communicated leverage range.
• AI Productivity (Catalyst Program) -- 47,000 tasks completed via AI over the past 17 weeks, maintaining a quality rate exceeding 99% in recent weeks.
• Operating Cost Reduction -- $400,000 in internal labor costs for direct bill reconciliation, down from $1.2 million, facilitated by AI-driven processing.
• Q3 2026 Revenue Guidance -- $485 million to $495 million, with organic revenue growth expected in the mid single digits.
• Q3 2026 Adjusted EBITDA Guidance -- $105 million to $110 million.
• Q3 2026 Adjusted Diluted EPS Guidance -- $0.42 to $0.46 per share.
• Full-Year 2026 Organic Growth Guidance -- mid single digits, with the company expecting to exit the year at high single digits or greater in the fourth quarter.
• Client Retention -- 92% for CAC and approximately mid-to-high 80s for legacy IAS during the quarter.
• Sales Velocity -- 30% for combined IAS, including CAC and Capstone, compared to 19% for the legacy IAS business.
• M&A Win Volume -- 130 new client accounts won by the CAC private equity team during the quarter.

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RISKS

• Baldwin stated, "client retention... experienced a 240 basis point headwind in the quarter as a result of structural changes we have executed," noting these changes resulted in approximately $8 million of annualized revenue attrition.
• Baldwin indicated that the property insurance market is "very deeply soft," which impacted revenue at Juniper Re due to risk-adjusted rate decreases.
• Hale noted that because of the company's current leverage profile, "we are not able to be in the market buying [shares] currently."

SUMMARY

Management reported that The Baldwin Insurance Group, Inc. (NASDAQ:BWIN) is transitioning past a period of idiosyncratic headwinds, including commission resets and accounting changes, toward a phase of growth acceleration. The company highlighted the successful integration of CAC Group, which is outperforming original cross-sell and synergy targets, and the ongoing execution of the 3D30 Catalyst transformation program. While the property insurance market is experiencing significant soft pricing, management stated that the business is winning market share in large-risk sectors such as private equity and public company mandates. The company is also heavily integrating AI tools to compress cycle times for knowledge work and reduce internal labor costs in standardized processes.

• CEO Baldwin emphasized the scale of current AI deployment, stating, "the model's running at production scale, not pilot scale," with 27 processes already optimized across commercial and benefit service lines.
• Management attributed significant wins to the CAC merger, noting that the financial lines team "successfully won multiple large new IPO mandates, including a couple of the largest IPOs of the year."
• The company reported that its inaugural reciprocal insurance exchange, Brev, is now licensed in 13 states and has begun migrating business outside of its initial Texas market.
• Baldwin characterized the company's competitive position against global brokers as strong, stating, "we are competing and we are winning," particularly in the M&A and transaction liability sectors.
• CFO Hale clarified that while the Fairway Independent Mortgage partnership is ahead of plan, it will not contribute to organic growth until April 2027 due to its initial classification as an agency purchase.
• CEO Baldwin estimated that the path to the $3 billion revenue goal by 2030 remains split between organic growth and inorganic partnerships, with the company currently at approximately two-thirds of that target.
• The company confirmed that the QBE commission rate reduction headwind was fully lapped as of May 1, which contributed to margin expansion in the Mainstreet Insurance Solutions segment.

INDUSTRY GLOSSARY

• 3D30: Baldwin's strategic Catalyst program aiming to reach $3 billion in revenue by 2030.
• AIF: Attorney-in-Fact, the entity that manages a reciprocal insurance exchange.
• Brev: Baldwin's proprietary reciprocal insurance exchange.
• CAC Group: A specialty insurance brokerage and partnership acquired by Baldwin in early 2026.
• IAS: Insurance Advisory Solutions, the segment providing commercial risk management and employee benefits.
• Juniper Re: Baldwin's reinsurance brokerage platform.
• MIS: Mainstreet Insurance Solutions, the segment focusing on personal and community-based business insurance.
• Sales Velocity: A ratio measuring new business generated as a percentage of the prior year's commissions and fees.
• UCTS: Underwriting, Capacity & Technology Solutions, the segment encompassing MGA, TPA, and technology-enabled insurance products.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Baldwin Group Second Quarter 26 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bonnie Bishop, Executive Director of Investor Relations. Please go ahead.

Bonnie Bishop: Thank you. Welcome to the Baldwin Group Second Quarter 26 Earnings Call. Today's call is being recorded. Second quarter financial results, supplemental information, and the company's Form 10 Q were issued earlier this afternoon and are available on the company's website at ir.baldwin.com. Please note that remarks made today may include forward looking statements subject to various assumptions risks and uncertainties. Including, for example, our strategy with respect to our capital allocation in the future. The company's actual results may differ materially from those contemplated by such statements.

For a more detailed discussion, please refer to the note regarding forward looking statements the company's earnings release and our most recent Form 10 Q both of which are available on the Baldwin website. During the call today, the company may also discuss certain non GAAP financial measures. For a more detailed discussion of these non GAAP financial measures, and historical reconciliation to the most closely comparable GAAP measures, please refer to the company's earnings release and supplemental information both of which have been posted on the company's website at ir.baldwin.com. I will now turn the call over to Trevor Lowry Baldwin, chief executive officer of The Baldwin Group.

Trevor Lowry Baldwin: Good afternoon, and thank you for joining us to discuss our second quarter results reported earlier today. I am joined by Bradford L. Hale, Chief Financial Officer and Bonnie Bishop, Executive Director of Investor Relations. We saw continued momentum into the second quarter from the strong start to the year. We delivered total revenue of $493 million adjusted EBITDA of $117 million adjusted EBITDA margin of 24% and adjusted diluted earnings per share of $0.48 Total organic revenue growth was 2%.

Layering in the impact of the 3 January partnerships as if they had been owned by the Baldwin Group in the prior comparable period and normalizing to the idiosyncratic headwinds which were largely passed as of the end of the quarter, total organic revenue growth would have been 8%. Collectively, the 3 partnerships grew 25% in the second quarter and 34% through the first 6 months of the year. A truly remarkable performance. Adjusted free cash flow of $46 million was up 437% year over year. In insurance advisory solutions, overall organic revenue growth was down 2%.

Deconstructing that figure, sales velocity in the legacy IS business accelerated in the quarter to 19%, bringing year to date sales velocity to 16%. Combined sales velocity, including CAC and Capstone, was 30% for the quarter and 27% year to date. Rate and exposure was a 240 basis point headwind in line with our expectations. As we have shared previously, we expect Q2 to be at or near the trough for rate and exposure headwinds. The procedural accounting change which we fully lapped on sixthirty, was a 150-basis-point headwind.

With respect to client retention, we experienced a 240 basis point headwind in the quarter as a result of structural changes we have executed in the legacy IS business as a part of our CAC integration work to align compensation plans, go to market capabilities, and eliminate redundancies across our platform. These changes have resulted in approximately $8 million of annualized revenue attrition, tied to a small group of individuals who were impacted and are no longer with the firm.

We anticipate that these changes will impact revenue and organic growth for the legacy IS business in the back half of the year by approximately $4 million to $5 million This is more than offset by the realized outperformance across CAC as a result of the go to market structural alignment. In Q2, CAC generated total revenue of $94 million continuing the strong momentum from the first quarter with growth of 23% in relation to the second quarter of 25. Year to date, CAC has delivered over $80 million in booked new business. up 43% compared to the same period in the prior year.

Closed 1 new business, including future effective dates, is over $100 million. sales velocity in the quarter was 59% across all product lines, and 19% for recurring lines of business. While retention was north of 92%. Net growth of transaction related product lines, consist primarily of our transaction liability and certain project specific lines of business, was 44%. Our integration work and synergy captures continues to track ahead of schedule and we remain confident in our ability to deliver the synergy targets laid out. On Slide 14 of our earnings supplement.

Taking a step back to look at the underlying momentum in the IS business, including the contribution from our new partnerships, and excluding the idiosyncratic noise associated with the revenue recognition accounting change, and integration related revenue impacts, organic revenue growth would have been 8% in the second quarter. We believe this is far more indicative of the organic growth momentum of our franchise. We continue to see impressive trends in new business in IAS and the thesis supporting the CAC merger is playing out in a faster, and more meaningful way than we anticipated. IS poised for a step function increase in organic growth. MGA/TPA organic revenue growth was 56% in the quarter.

Including OVI, as if that business had been owned in the prior year period, organic revenue growth was 7%. We saw strong performance across our multifamily, admitted home and real estate investor products. Partially offset by continued softness in our E and S home book and lower reinsurance brokerage revenue at Juniper Re tied to a softer 6/1 renewal pricing environment which also drove improved commission rates for MSI's E and S homeowners programs that will benefit organic revenue in the back half of the year. Our inaugural reciprocal insurance exchange, Brev, is now licensed in 13 states. And we have begun migrating business in several states outside of Texas.

We are making great progress on our second proprietary builder program, with Hippo and Spinnaker and currently expect that to launch in select states by the end of the year. Serving as an exciting growth vector for the business heading into 2027. In our Main Street Insurance Solutions segment, organic revenue growth was 4% in the quarter, improving from a decline of roughly 5% in the first quarter as we lapped the QBE commission rate reduction headwind on May 1. Normalizing to the impacts of QBE and Medicare underperformance, overall organic revenue growth was approximately 10%.

Our embedded mortgage business continues to ramp with Fairway Independent Mortgage, our most recent top-10 independent mortgage originator embedded partner, tracking ahead of plan in its first 3 months on the platform. Execution of our 3D30 Catalyst program remains on track, and we are beginning to see the flow through impact associated with the Phase I actions taken in the first quarter. You can find additional information on Slide 13 of our earnings supplement. We believe the timing of this program aligns nicely with the evolution of AI tools and expect AI to be a meaningful driver of reaching our 3D30 aspirational goal.

In May, we announced our expanded enterprise relationship with Anthropic, and our firm wide rollout of Claude to enhance colleague productivity, streamline complex workflows, and ultimately drive considerable client impact. While we are still in early innings here, we are already beginning to see measurable results and firmly believe the use of these tools will have profound impacts on our business over the long term. In summary, we are pleased with our second quarter results and the growing momentum that is building in the business as we move past the idiosyncratic headwinds that persisted over the past 12 months.

We are confident that the underlying fundamentals of the business, when combined with what are now tailwinds, will accelerate our performance in the back half of 26 and beyond. As the insurance market evolves at a rapid pace, we want to thank our nearly 5 thousand colleagues for adapting and embracing new technologies as we build a dynamic workplace designed to maximize outcomes for our colleagues, clients, and stakeholders. Before I turn it over to Bradford, I wanna acknowledge the rumors in the marketplace around our potential exploration of capital structure alternatives. Consistent with how we have operated in the past we do not comment on market rumors or speculation, and will not be addressing related questions today.

With that, I will now turn it over to Bradford who will detail our financial results.

Bradford Lenzie Hale: Thanks, Trevor, and good afternoon, everyone. For the second quarter, we generated organic revenue growth of 2%, and total revenue of $493 million Looking at the segment level, organic revenue growth was down 2% in IAS, up 6% in UCTS, and up 4% in MIS. Adjusting for the transitory items Trevor walked through, along with layering in the impact of the 1 partnerships on an as if basis, underlying organic revenue growth would have been 8%.

We recorded GAAP net loss attributable to Baldwin for the second quarter of $39 million or GAAP diluted loss per share of $0.42 Adjusted net income for the second quarter which excludes share based compensation, amortization and other onetime expenses, was $68 million or $0.48 per fully diluted share. A table reconciling GAAP net loss attributable to Baldwin to adjusted net income can be found in our earnings release and our 10 Q filed with the SEC. Adjusted EBITDA for the second quarter grew 37% to $117 million compared to $86 million in the prior year period. Adjusted EBITDA margin increased approximately 110 basis points year over year to 23.7% for the quarter.

Compared to 22.6% in the prior year period. The approximately 110 basis point margin increase can be attributed to the accretive contribution from CAC inclusive of the cost synergies realized to date and strong margin expansion at MIS as we lap the QBE commission reset and benefited from the Hippo homebuilder distribution network partnership. Adjusted free cash flow for the second quarter was $46 million compared to $9 million in Q2 25, driven by growth in adjusted EBITDA and favorable working capital dynamics. In relation to our guidance of double digit growth for the full year, adjusted free cash flow is up 34% year to date.

CAC benefited from an $11 million working capital tailwind in the quarter, a reversal of the roughly $30 million headwind in the first quarter that resulted from assumed bonus and commissions liabilities in the merger. Our full year cash flow trajectory remains on track for double digit growth in 2026. We ended the quarter with net leverage at approximately 4.5x, as we deployed an additional $80 million to repurchase approximately 4 million shares. Therefore, as of the end of Q2, approximately half of our authorized $250 million buyback program has been deployed. Moving on to our third quarter guide, We expect revenue of $485 million to $495 million and organic revenue growth in the mid single digits.

We anticipate adjusted EBITDA between $105 million and $110 million and adjusted diluted EPS of $0.42 to $0.46 per share. Looking ahead, our full year consolidated guidance remains largely unchanged, We now anticipate organic revenue growth in the mid single digits for the full year, and exiting the year with Q4 at high single digits or greater. This update to organic growth expectations is tied to the revenue impacts from the structural changes at legacy IS as part of our CAC integration work. To conclude, we are encouraged by the growing momentum we see across the business and the meaningful contribution from our recent partner firms.

As we have lapped the idiosyncratic headwinds that persisted over the last 12 months, we anticipate a natural inflection in the second half of 26. Our focus remains on accelerating execution across the platform. Integrating our recent partnerships, and leveraging innovative technology and AI driven solutions to enhance client outcomes and drive long term shareholder value.

Trevor Lowry Baldwin: We will now take questions. Operator?

Operator: Thank you. Press *11 on your telephone and wait for your name to be announced. And our first question comes from Tommy McJoynt of KBW. Your line is open.

Tommy McJoynt-Griffith: Hey, good evening. Thanks for taking our questions. The first 1 here is on the CAC Group performance there. The growth rate has been incredibly strong in the first half of the year. First off, could you just remind us what industries JAC Group is most focused on? And then help us think about the sustainability of the strength in the first half of the year and using that to help us frame, should we expect a potential headwind from that business normalizing like next year? Just against tough comps? Thanks.

Trevor Lowry Baldwin: Hey, Tommy, this is Trevor. Yes, I mean, CAC is having an extraordinary start to the year. And there is a number of things that are ultimately driving that. First, I would just point to the industrial logic that we and the leaders across CAC saw when we brought these businesses together in the merger. Combining the depth breadth of expertise in large and complex end client markets, including industries like natural resources, large and complex public companies, transaction liability solutions, private equity, and large risk management oriented accounts. And then plugging that into the broader distribution network and sales organization that we have here at Baldwin and it is an incredible combination.

We have done a tremendous amount of work very quickly to bring these business together in a thoughtful manner where we have aligned around go to market, We have organized around end-client capability and risk product solution. And the results have been profound. So as we look at, you know, what is driving the growth across CAC, it is broad based. In the quarter, the private equity team won over 130 new client accounts. Our financial lines team successfully won multiple large new IPO mandates, including a couple of the largest IPOs of the year. And we successfully won a number of all lines large complex public company accounts through combined Baldwin and CAC team engagement.

So it is the core CAC business is performing incredibly well. it is a group of colleagues and professionals that are just incredibly talented. And then you combine that with the broader sales organization and resources here at Baldwin and how that enables us to project the broader organization into the market and we are out successfully taking share at a really meaningful clip.

Relative to overall kind of trajectory, it is there is undoubtedly going to be some kind of some variability quarter to quarter in the business because the nature of some of the transactional, product lines, that they play in around private equity M&A solutions, tax solutions, But more broadly, as we look at the pipeline, as we look at closed-won future effective date business, we are feeling really confident about the continued momentum heading into the back half of the year. As we looked at 2027, I would say it is early to know, for us to begin commenting on how we think about overall performance, and there is lots of factors that come into that.

But I would say, you know, broadly, the success at CAC is not driven because of, some kind of outside, you know, idiosyncratic factors. it is a result of underlying pipeline and new business momentum, and that is repeatable.

Tommy McJoynt-Griffith: Thanks for that explanation. And then just 1 more. You called out a new performance headwind, that $8 million of annualized eliminated redundancies Do you guys have confidence that is the extent of the, you know, what I will call dis synergies from the CAC Group transaction? And will that lap at the end of the year or will that extend into the first quarter of next year? Thanks.

Trevor Lowry Baldwin: Yes, Tommy, we feel like that is the extent of, you know, what I would call it, dyssynergies would be. And it is a function of we have moved very quickly to align around practice leaders, product group leaders, you know, combined business structures, We are not gonna have multiple practice groups in the same industry. We are not gonna have multiple product groups in the same product line. And so we aligned around our best out front. We have built the team. We have aligned compensation models. And when you do that, you know, certain people are not gonna necessarily get, you know, the same opportunity that they want, and that is normal.

I would not, though I would say I would not characterize it as a dis synergy per se. it is just it is revenue that is not showing up in the legacy IS P&L but that is more than kind of showing up inside the CAC P and L. And so if you look at aggregate revenue across IES inclusive of CAC, it is exactly where we would have expected it to be. it is just what is showing up and what part of the P and L. James sense. Thanks.

Operator: Thank you. And our next question comes from Hristian Getsov of Wells Fargo. Your line is open.

Hristian Getsov: Hi, good afternoon. Thank you for taking my question. My first question is on the rate and exposure. And I am just trying to gauge your confidence that the rate and exposure headwind has troughed because it seems like across the industry, it seems like the rate and exposure piece could actually get softer from here, but everybody's portfolio is a bit different. But maybe you could kind of just walk me through what you are expecting in the second half that gives you that confidence.

Trevor Lowry Baldwin: Yeah. Hey, Hristian. This is Trevor. So I would say broadly, the market is softening. And while casualty rates on an absolute basis are positive, they are ebbing. Property is very deeply soft. And our confidence around Q2 being the trough is less about the rate of travel of underlying insurance rate and more a reflection of the composition of our portfolio on a quarter to quarter basis. So the second quarter is when you know, we renew the preponderance of our cat exposed property, our largest cat property reinsurance renewals, And so that, you know, aspect, the cat property part of the market is very clearly, you know, deeply soft.

Far more so than any other part of the insurance market today. And so as we look at mix of business going forward, that gives us a strong degree of confidence around those headwinds abating.

Hristian Getsov: Got it. Thank you. And then for my second question, totally understand you cannot comment on the rumors, but given the move in shares in the last, you know, month and a half, how should we kind of think about buybacks from here just given versus the More elevated $80 million in the Q2?

Bradford Lenzie Hale: Yeah. Thanks, Hristian. it is Bradford. So we took the opportunity given what we saw as dislocation in the price to repurchase about 4 million shares for about $80 million in Q2. As we have said previously, we are not just an indiscriminate buyer. But we do continue to see dislocation in our stock price. That being said, we are not able to be in the market buying currently. And we will balance that future buyback decision against the leverage profile and the leverage range of 4 to 4.5x that we have communicated.

Hristian Getsov: Great. Thank you, guys.

Operator: Thank you. Thank you. And our next question comes from Charles Lederer of BMO. Your line is open. Hey, thanks.

Charles Lederer: Good evening. On the UCTS business, it sounds like even though the second quarter organic came in a little below where you had guided that you think you have a bounce back in the back half of the year because of the lower reinsurance costs for the E and S home book. Did I understand that correctly? And, I guess, how should we think about the renter's book in the back half of the year? I think 3Q is, you know, a seasonally strong quarter there. Thanks.

Trevor Lowry Baldwin: Yes. Charles, yes, overall, pleased with the momentum and the trajectory we are seeing out of UCTS. Second quarter was impacted by about $4 million of year-over-year decline in revenue at Juniper, tied to, you know, risk adjusted rate decreases in excess of 20% on some of our largest property placements. And as well as a stub cover that we had placed on behalf of Brev in the second quarter of last year that, you know, will be a calendar year renewal going forward. So that both impacted, organic as well as absolute EBITDA dollars to the tune of about $4 million. Now just to be clear, the momentum at Juniper is incredibly strong.

We expect organic growth from Juniper for the year in excess of 20%. And so this is really more of a timing dynamic. And as I mentioned earlier in my prepared remarks, you know, we do meaningfully benefit from the reduction in risk adjusted reinsurance pricing as it enables us to increase the ceding commission on those programs where we were able to realize the reinsurance savings. Specific to renters, the renters portfolio continues to perform quite well, double digit organic growth in the quarter, strong momentum, you know, a new large property management software provider. Recently went live, you know, with us on the platform and is driving pretty meaningful growth trajectory.

And our largest software partner, we have recently rolled out a new co-developed group renters product that we are incredibly excited about. So I would say, you know, our strategic and competitive position and renters and the underlying momentum in that portfolio continues to be quite strong.

Charles Lederer: And then maybe moving over to the MIS business. You know, the QBE impact rolled off. In the middle of the quarter. I guess as we think about organic accelerating from here in the back half, can you kind of break that down between the homebuilder business, you know, the mortgage servicer business, or, and, you know, what kind of impacts you are thinking from the Medicare business in the back half of the year? Thanks.

Trevor Lowry Baldwin: Yeah. So we think we have got the, you know, vast majority of the impacts from the Medicare slowdown behind us, and anticipate, you know, the Medicare impact to be kind of close to neutral. In the back half of the year, not something that you know, arises to the scale where it is worth you know, I would say calling out on a go forward basis. We continue to have incredibly strong momentum in the mortgage origination market. You know, we called out the success we are seeing with our most recent large partner, Fairway. And the momentum that they are carrying.

And you are seeing, you know, both the momentum and operating leverage in the mortgage business as well as the continued growth and success from integrating the Hippo acquisition into Westwood show up in you know, real margin accretion. In that segment as well. So we are super pleased with how performance continues to track there. We continue to think that, you know, it is a winner takes most type opportunity in both the mortgage and the builder space, and we are really excited about how we are positioned as a as a winner there.

So normalized for the, you know, Medicare and the QBE commission reduction headwinds, organic for the segment would have been 10% in the quarter and 10% year to date. You know, we are not going to provide segment-level guidance, and, you know, there can be kind of quarter-to-quarter timing differences, but overall feeling good about the overall trajectory of that business.

Bradford Lenzie Hale: And 1 piece to remember, Charles, is the Fairway relationship included the purchase of a small agency that was their agency. So it is a bit of a nuance, but the Fairway relationship that started in April actually does not hit organic throughout the balance of this year until we lap that 4/1/2026 start date. So, while we are seeing a lot of momentum there, it is not giving us an organic lift in year, just a total revenue lift.

Charles Lederer: Okay. Thank you.

Operator: Thank you. And our next question comes from Mitch Rubin of Raymond James. Your line is open.

Mitch: Hey. Good afternoon, guys. This is Mitch on for Greg. I appreciated the commentary on the licensing progress of Brev. On Slide 7 of the presentation, you mentioned expectations for an uplift from AIF economics over time. Can you give us a sense of the magnitude of that uplift and where those economics stand today?

Trevor Lowry Baldwin: So the impact from the AIF economics is relatively de minimis year to date. But what we would say is, you know, the AIF fees are roughly 5% of premium. as that premium is earned ratably over the policy period. And so as Brex continues to renew more in, that will begin to grow and trickle in As a reminder, the AIF entity we are the majority owner of. So you can think about 2/3 of that overall 5% inuring to the benefit of the Baldwin Group. And you know, I would say the other point to just note is it is not coming in through the top line because of the equity method accounting treatment.

With which it is being booked.

Mitch: Got it. Thanks for the color. For my follow-up, this quarter, you attributed the 110 basis points of margin expansion to CAC and MIS with no explicit mention of AI. Though last quarter, you talked about internal AI productivity gains running upwards of 80%. Is that benefit embedded in the numbers, or is it just not showing up in the P&L yet?

Trevor Lowry Baldwin: Oh, it is very much embedded in the numbers. We are continuing to see really exciting momentum and progress across our AI efforts and the Catalyst transformation program. Specific to the Catalyst program, and you know, the role transformation and AI deployments that we have been executing on, you know, since the beginning of the year. We now have converted over 47 thousand tasks which have been completed in the past 17 weeks at a 98%+ quality rate, which has gone to over 99% in recent weeks. So the model's running at production scale, not pilot scale. We have got 27 processes that we have optimized and standardized across our commercial and benefit service lines.

This quarter alone, and we have been deploying AI into those capabilities to continue to enhance and optimize on a recursive basis. You know, another example is we have deployed some AI solutions into our direct fill processing. Part of, you know, that change is tied to the procedural accounting change that we have been talking about for the past 12 months in IES. that is enabled us to improve monthly reconciliation on direct bill from roughly 90% in month to a sustained 98%.

And we have been able to reduce run rate costs from $3 million to $1 million a year to execute on that and cut our own internal labor cost on the process from $1.2 million to roughly $400 thousand. So those are just a handful of examples, but we are seeing really exciting gains from the AI solutions we have been deploying We are still very early days, and, you know, have growing confidence around the broad based profound impact that it is gonna have on our business and for the benefit of both our clients and our colleagues. that is really helpful. Thanks again. Thanks again.

Operator: Absolutely. Thank you. And if you have a question, please press 11. And our next question comes from Andrew Kligerman of TD Cowen. Your line is open.

Andrew: Hey. Good early evening. I wanted to talk about net new business. The generation was super strong this quarter with sales velocity of 30% versus IAS' previous high teens run rate. So maybe you could-- well, let me even throw in retention. To that equation. And, you know, so the part A of it would be you know, are there headwinds to retention given the pricing pressures out there? And then with regard to the new business trends, maybe you could talk about the drivers there that may or may not be getting you excited. This was a big number in the quarter.

Trevor Lowry Baldwin: Yeah. Yeah. Thanks, Andrew. So retention at legacy IS business has been hovering around 90%. Now that was impacted by the onetime integration related revenue impacts that I mentioned earlier in the call. And so bringing that down to, call it, mid to high eighties for the quarter, on a onetime basis. But we have seen multiple quarters now in a row of year over year rescension improvement. So we are feeling really good about the momentum there. And at CAC, as I mentioned on the call, you know, client retention and excess of 92%. So, seeing good success there.

On the sales velocity, it is a function of depth of capability, unique product expertise, and, real awareness and recognition across our end client industry sectors that we are deep in. And the risk product lines that we have depths in. And so we are in the market We are winning business, you know, business is being referred. And in sectors like M&A, private equity, transaction related solutions, we are taking meaningful share. While the M&A market is up, our M&A business is up dramatically more than the broader market is. And so it is indicative of, you know, the market share that we are taking and the wins that we are putting on the board.

And I would say, as I look at where we are competing, it is against, you know, all of the bulge-bracket global brokers that you would recognize and we are competing and we are winning. And so the franchise is really healthy. And, it is showing up in those new business results.

Andrew: that is pretty exciting. So, Trevor, team, I-- you know, the elephant in the room question is what we have been hearing in the media about leveraged buyout. I know you cannot specifically address that. We had a great share repurchase in the quarter. Say whatever you can about a potential LBO, but maybe tell us a little bit about how you are thinking about the stock, how it is valued right now, you know, where you think it should be. So I have kind of open-ended it and we would love to hear your thoughts.

Trevor Lowry Baldwin: Yeah, Andrew. So we are not gonna comment on market rumors and speculation, but when we think about the business and the share price, I would say we believe that intrinsic value is in excess of where shares trade today. And, you know, you saw us put our money to work, in the quarter repurchasing, you know, roughly $80 million worth or 4 million shares At the current time, we are not in a position to continue that repurchase program. As you have heard Bradford say in the past, we are not indiscriminate buyers. And, you know, we have taken leverage up to the top end of what we would communicated at 4.5x.

So at the point-- at a point in time where we are able to be back in the market, if, you know, our exit level of activity would be informed by where leverage sits and where the shares are trading. But to be very clear, view intrinsic value to be in excess of where the shares trade today.

Andrew: Thanks for that.

Operator: Thank you. And our next question comes from Pablo Singzon of JPMorgan. Your line is open. Pablo, your line is open. Please check your mute.

Pablo Singzon: Pablo, can you hear us? Hello? Hello? Hello? I hear you now. Go ahead. Hey. Sorry about that. So yeah, actually, just had 1 question. Just wanted to step back from the call to ask about, you know, I suppose, you know, the big program, right, 3D30? I guess, can you give us your updated thoughts on your ability to reach the goals that you had laid out there just given the current market environment and what are the sort of key initiatives that you have to execute in order to get there? And I guess, you know, related to that, just how are you feeling about those goals, and, you know, what timeline do you have in mind?

Thank you.

Trevor Lowry Baldwin: Yeah. Hey, Pablo. I would say we continue to feel really good about the path to 3 b 30. As you heard in my prepared remarks, you know, what we are seeing early days from AI is super encouraging around productivity gains, you know, throughput and cycle time compression of complex knowledge work, and the ability to drive more to the top of the funnel from a revenue generation standpoint. And we have got a lot of early proof points around that. That are quite compelling. You know, from a revenue perspective, you know, we will, you know, we will finish the year around $2 billion of revenue.

And so kind of 2/3 of our way there at the time we announced the program, we thought, you know, we thought about the path there to being kind of equal parts organic and inorganic. You know, the partnerships that we completed earlier this year are a big step forward in that. And if you look at the normalized organic growth of the business, year to date, inclusive of the partnerships that we have completed, it is roughly 10%. So kind of right in line with the level of organic growth that we had penciled in over the time period to be able to get there. So I would say we are feeling good.

We are we are tracking in line to expectations. And, you know, if anything, you know, the growing impacts from AI, from the Catalyst program, and, frankly, the building momentum around new business and the market share gains that we are seeing you know, give us growing confidence.

Pablo Singzon: Thank you.

Operator: I am showing no further questions at this time.

Trevor Lowry Baldwin: I would like to turn it back to Trevor Lowry Baldwin for closing remarks. Thank you all for joining us this evening. As I noted at the open, we are pleased with our second quarter and confident in our trajectory through the balance of the year. The momentum we have built is real in our advisory businesses, our embedded distribution, and our recent partnerships. And it is a direct reflection of our colleagues who show up every day for our clients for 1 another, and for the firm that we are building together.

To our clients and insurance company partners, thank you for your continued trust And to our shareholders, thank you for your support as we continue to deliver against our Catalyst 3B30 goals. Thank you.

Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.

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