Brown & Brown, Inc. (NYSE:BRO) (the "Company") today announced
its unaudited financial results for the third quarter of 2020.
Revenues for the third quarter of 2020 under
U.S. generally accepted accounting principles ("GAAP") were $674.0
million, increasing $55.3 million, or 8.9%, compared to the third
quarter of the prior year, with commissions and fees increasing by
8.7% and Organic Revenue(1) increasing by 4.3%. Net income was
$134.0 million, increasing $18.4 million, or 15.9%, and diluted net
income per share increased to $0.47, or 14.6% as compared to the
third quarter of the prior year. Diluted Net Income Per Share -
Adjusted(2) increased to $0.52, or 33.3%, compared to the third
quarter of the prior year.
Revenues for the nine months ended
September 30, 2020 under GAAP were $1,971.3 million,
increasing $158.1 million, or 8.7%, as compared to the same period
in 2019, with commissions and fees increasing by 8.8%, and Organic
Revenue increasing by 3.5%. Net income was $383.2 million,
increasing $61.2 million, or 19.0%, and diluted net income per
share for the period increased to $1.35, or 18.4%, each as compared
to the same period of 2019. Diluted Net Income Per Share - Adjusted
increased to $1.36 or 21.4% compared to the same period of
2019.
J. Powell Brown, President and Chief Executive
Officer of the Company, noted “We are really pleased with our
performance for the quarter. These results are due to the hard work
of all our teammates on behalf of our customers. I am proud of our
team in light of this challenging operating environment.”
Reconciliation of Commissions and
Feesto Organic
RevenueThree and
Nine Months Ended
September 30, 2020 and
2019(in millions, unaudited)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
09/30/2020 |
|
09/30/2019 |
|
09/30/2020 |
|
09/30/2019 |
Commissions and fees |
|
$ |
671.4 |
|
|
$ |
617.4 |
|
|
$ |
1,966.1 |
|
|
$ |
1,807.8 |
|
Profit-sharing contingent commissions |
|
|
(13.7 |
) |
|
|
(14.2 |
) |
|
|
(56.3 |
) |
|
|
(41.5 |
) |
Guaranteed supplemental commissions |
|
|
(4.4 |
) |
|
|
(4.6 |
) |
|
|
(12.6 |
) |
|
|
(21.0 |
) |
Core commissions and
fees |
|
$ |
653.3 |
|
|
$ |
598.6 |
|
|
$ |
1,897.2 |
|
|
$ |
1,745.3 |
|
Acquisitions |
|
|
(32.0 |
) |
|
|
— |
|
|
|
(100.7 |
) |
|
|
— |
|
Dispositions |
|
|
— |
|
|
|
(2.7 |
) |
|
|
— |
|
|
|
(10.0 |
) |
Organic
Revenue |
|
$ |
621.3 |
|
|
$ |
595.9 |
|
|
$ |
1,796.5 |
|
|
$ |
1,735.3 |
|
Organic Revenue
growth |
|
$ |
25.4 |
|
|
|
|
|
|
$ |
61.2 |
|
|
|
|
|
Organic Revenue growth
% |
|
|
4.3 |
% |
|
|
|
|
|
|
3.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) "Organic Revenue," a non-GAAP measure, is
defined as commissions and fees less (i) the first twelve months of
commission and fee revenues generated from acquisitions, less (ii)
profit-sharing contingent commissions (revenues from insurance
companies based upon the volume and the growth and/or profitability
of the business placed with such companies during the prior year -
"contingents"), less (iii) guaranteed supplemental commissions
(commissions from insurance companies based solely upon the volume
of the business placed with such companies during the current year
- "GSCs"), and less (iv) divested business (net commissions and
fees generated from offices and books of business sold by the
Company) with the associated revenue removed from the corresponding
period of the prior year. Organic Revenue can be expressed as a
dollar amount or a percentage rate when describing Organic Revenue
growth. We view Organic Revenue and Organic Revenue growth as
important indicators when assessing and evaluating our performance
on a consolidated basis and for each of our segments, because it
allows us to determine a comparable, but non-GAAP, measurement of
revenue growth that is associated with the revenue sources that
were a part of our business in both the current and prior year and
that are expected to continue in the future.
Reconciliation of Diluted Net Income Per
Share toDiluted Net Income Per Share -
AdjustedThree and
Nine Months Ended
September 30, 2020 and
2019(unaudited)
|
|
Three Months Ended |
|
|
Change |
|
|
Nine Months Ended |
|
|
Change |
|
|
|
09/30/2020 |
|
09/30/2019 |
|
$ |
|
% |
|
09/30/2020 |
|
09/30/2019 |
|
$ |
|
% |
Diluted net income per share |
|
$ |
0.47 |
|
|
$ |
0.41 |
|
|
$ |
0.06 |
|
|
14.6 |
% |
|
$ |
1.35 |
|
|
$ |
1.14 |
|
|
$ |
0.21 |
|
|
18.4 |
% |
Change in estimated acquisition earn-out payables |
|
|
0.05 |
|
|
|
(0.02 |
) |
|
|
0.07 |
|
|
|
|
|
|
0.01 |
|
|
|
(0.02 |
) |
|
|
0.03 |
|
|
|
|
Diluted Net Income Per
Share - Adjusted |
|
$ |
0.52 |
|
|
$ |
0.39 |
|
|
$ |
0.13 |
|
|
33.3 |
% |
|
$ |
1.36 |
|
|
$ |
1.12 |
|
|
$ |
0.24 |
|
|
21.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) "Diluted Net Income Per Share - Adjusted," a
non-GAAP measure, is defined as diluted net income per share,
excluding the change in estimated acquisition earn-out payables. We
believe Diluted Net Income Per Share - Adjusted provides a
meaningful representation of our operating performance and improves
the comparability of our results between periods by excluding the
impact of the change in estimated acquisition earn-out payables and
certain other non-recurring or infrequently occurring items that
have a high degree of variability from period-to-period and that we
believe are not indicative of the Company’s ongoing
performance.
Income before income taxes for the third quarter
of 2020 was $158.5 million, an increase of $6.6 million, or 4.3%,
and Income Before Income Taxes Margin(3) decreased to 23.5% from
24.6% as compared to the third quarter of the prior year.
In order to provide a better understanding of
our business, we evaluate EBITDAC(4) performance. We view EBITDAC
and EBITDAC Margin(5) as important indicators when assessing and
evaluating our performance, as they present more comparable, but
non-GAAP, measurements of our operating margins in a meaningful and
consistent manner. EBITDAC for the third quarter of 2020 was $220.8
million, an increase of $25.8 million, or 13.2%, compared to the
third quarter of the prior year. EBITDAC Margin increased to 32.8%
in the third quarter of 2020, as compared to 31.5% in the third
quarter of the prior year.
Income before income taxes for nine months ended
September 30, 2020 was $493.2 million, an increase of $69.3
million, or 16.3%, compared to the same period of the prior year.
Income Before Income Taxes Margin increased to 25.0% from 23.4%, as
compared to the third quarter of the prior year. EBITDAC for the
nine months ended September 30, 2020 was $639.5 million, an
increase of $78.8 million, or 14.1% as compared to the same period
in 2019. EBITDAC Margin increased to 32.4% for the nine months
ended September 30, 2020, as compared to 30.9% in same period
of 2019.
Reconciliation of Income Before Income
Taxes to EBITDACThree
and Nine Months
Ended September 30, 2020
and 2019(in millions,
unaudited)
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
09/30/2020 |
|
09/30/2019 |
|
09/30/2020 |
|
09/30/2019 |
Income before income taxes |
|
$ |
158.5 |
|
|
$ |
151.9 |
|
|
$ |
493.2 |
|
|
$ |
423.9 |
|
Income Before Income
Taxes Margin |
|
|
23.5 |
% |
|
|
24.6 |
% |
|
|
25.0 |
% |
|
|
23.4 |
% |
Amortization |
|
|
27.1 |
|
|
|
26.3 |
|
|
|
80.2 |
|
|
|
78.4 |
|
Depreciation |
|
|
6.7 |
|
|
|
5.8 |
|
|
|
18.8 |
|
|
|
17.5 |
|
Interest |
|
|
13.2 |
|
|
|
16.3 |
|
|
|
42.3 |
|
|
|
47.8 |
|
Change in estimated acquisition earn-out payables |
|
|
15.3 |
|
|
|
(5.3 |
) |
|
|
5.0 |
|
|
|
(6.9 |
) |
EBITDAC |
|
|
220.8 |
|
|
|
195.0 |
|
|
|
639.5 |
|
|
|
560.7 |
|
EBITDAC
Margin |
|
|
32.8 |
% |
|
|
31.5 |
% |
|
|
32.4 |
% |
|
|
30.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3) "Income Before Income Taxes Margin" is
defined as income before income taxes divided by total revenues.(4)
"EBITDAC," a non-GAAP measure, is defined as income before
interest, income taxes, depreciation, amortization and the change
in estimated acquisition earn-out payables.(5) "EBITDAC Margin," a
non-GAAP measure, is defined as EBITDAC divided by total
revenues.
Brown & Brown,
Inc.Consolidated Statements of Income(in
millions, except per share data; unaudited)
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions and fees |
|
$ |
671.4 |
|
|
$ |
617.4 |
|
|
$ |
1,966.1 |
|
|
$ |
1,807.8 |
|
Investment income |
|
|
0.4 |
|
|
|
1.7 |
|
|
|
1.8 |
|
|
|
4.3 |
|
Other income, net |
|
|
2.2 |
|
|
|
(0.4 |
) |
|
|
3.4 |
|
|
|
1.1 |
|
Total revenues |
|
|
674.0 |
|
|
|
618.7 |
|
|
|
1,971.3 |
|
|
|
1,813.2 |
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and
benefits |
|
|
362.8 |
|
|
|
331.1 |
|
|
|
1,059.0 |
|
|
|
973.6 |
|
Other operating expenses |
|
|
91.4 |
|
|
|
96.4 |
|
|
|
274.1 |
|
|
|
283.2 |
|
(Gain) on disposal |
|
|
(1.0 |
) |
|
|
(3.8 |
) |
|
|
(1.3 |
) |
|
|
(4.3 |
) |
Amortization |
|
|
27.1 |
|
|
|
26.3 |
|
|
|
80.2 |
|
|
|
78.4 |
|
Depreciation |
|
|
6.7 |
|
|
|
5.8 |
|
|
|
18.8 |
|
|
|
17.5 |
|
Interest |
|
|
13.2 |
|
|
|
16.3 |
|
|
|
42.3 |
|
|
|
47.8 |
|
Change in estimated acquisition
earn-out payables |
|
|
15.3 |
|
|
|
(5.3 |
) |
|
|
5.0 |
|
|
|
(6.9 |
) |
Total expenses |
|
|
515.5 |
|
|
|
466.8 |
|
|
|
1,478.1 |
|
|
|
1,389.3 |
|
Income before income taxes |
|
|
158.5 |
|
|
|
151.9 |
|
|
|
493.2 |
|
|
|
423.9 |
|
Income taxes |
|
|
24.5 |
|
|
|
36.3 |
|
|
|
110.0 |
|
|
|
101.9 |
|
Net income |
|
$ |
134.0 |
|
|
$ |
115.6 |
|
|
$ |
383.2 |
|
|
$ |
322.0 |
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.47 |
|
|
$ |
0.41 |
|
|
$ |
1.35 |
|
|
$ |
1.14 |
|
Diluted |
|
$ |
0.47 |
|
|
$ |
0.41 |
|
|
$ |
1.35 |
|
|
$ |
1.14 |
|
Weighted average number of shares
outstanding - in thousands: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
275,515 |
|
|
|
272,962 |
|
|
|
273,803 |
|
|
|
272,425 |
|
Diluted |
|
|
276,933 |
|
|
|
275,075 |
|
|
|
275,338 |
|
|
|
274,529 |
|
Dividends declared per share |
|
$ |
0.085 |
|
|
$ |
0.080 |
|
|
$ |
0.255 |
|
|
$ |
0.240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brown & Brown,
Inc.Consolidated Balance Sheets(in
millions, except per share data, unaudited)
|
|
September 30,2020 |
|
December 31,2019 |
ASSETS |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,070.1 |
|
|
$ |
542.2 |
|
Restricted cash and investments |
|
|
431.7 |
|
|
|
420.8 |
|
Short-term investments |
|
|
18.2 |
|
|
|
12.3 |
|
Premiums, commissions and fees receivable |
|
|
1,020.5 |
|
|
|
942.9 |
|
Reinsurance recoverable |
|
|
107.5 |
|
|
|
58.5 |
|
Prepaid reinsurance premiums |
|
|
397.6 |
|
|
|
366.0 |
|
Other current assets |
|
|
118.1 |
|
|
|
152.1 |
|
Total current assets |
|
|
3,163.7 |
|
|
|
2,494.8 |
|
Fixed
assets, net |
|
|
187.6 |
|
|
|
148.6 |
|
Operating lease assets |
|
|
186.3 |
|
|
|
184.3 |
|
Goodwill |
|
|
4,124.0 |
|
|
|
3,746.1 |
|
Amortizable intangible assets, net |
|
|
977.2 |
|
|
|
916.8 |
|
Investments |
|
|
24.7 |
|
|
|
27.4 |
|
Other
assets |
|
|
131.9 |
|
|
|
104.8 |
|
Total assets |
|
$ |
8,795.4 |
|
|
$ |
7,622.8 |
|
LIABILITIES AND SHAREHOLDERS’
EQUITY |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Premiums payable to insurance companies |
|
$ |
1,092.5 |
|
|
$ |
1,014.3 |
|
Losses and loss adjustment reserve |
|
|
107.5 |
|
|
|
58.5 |
|
Unearned premiums |
|
|
397.6 |
|
|
|
366.0 |
|
Premium deposits and credits due customers |
|
|
116.9 |
|
|
|
113.8 |
|
Accounts payable |
|
|
147.2 |
|
|
|
100.0 |
|
Accrued expenses and other liabilities |
|
|
312.5 |
|
|
|
337.7 |
|
Current portion of long-term debt |
|
|
66.2 |
|
|
|
55.0 |
|
Total current liabilities |
|
|
2,240.4 |
|
|
|
2,045.3 |
|
Long-term debt |
|
|
2,042.7 |
|
|
|
1,500.3 |
|
Operating lease liabilities |
|
|
172.6 |
|
|
|
167.9 |
|
Deferred
income taxes, net |
|
|
332.9 |
|
|
|
328.3 |
|
Other
liabilities |
|
|
304.8 |
|
|
|
230.7 |
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
Common stock, par value $0.10 per share; authorized 560,000 shares;
issued 299,371 shares and outstanding 283,745 at 2020, issued
297,106 shares and outstanding 281,655 shares at 2019 - in
thousands. |
|
|
29.9 |
|
|
|
29.7 |
|
Additional paid-in capital |
|
|
763.8 |
|
|
|
716.0 |
|
Treasury stock, at cost 15,626 shares at 2020, 15,451 at 2019,
respectively - in thousands. |
|
|
(543.6 |
) |
|
|
(536.2 |
) |
Retained earnings |
|
|
3,451.9 |
|
|
|
3,140.8 |
|
Total shareholders’ equity |
|
|
3,702.0 |
|
|
|
3,350.3 |
|
Total liabilities and shareholders’ equity |
|
$ |
8,795.4 |
|
|
$ |
7,622.8 |
|
|
|
|
|
|
|
|
|
|
Brown & Brown,
Inc.Consolidated Statements of Cash
Flows(in millions, unaudited)
|
|
Nine Months Ended
September 30, |
|
|
2020 |
|
2019 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net
income |
|
$ |
383.2 |
|
|
$ |
322.0 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Amortization |
|
|
80.2 |
|
|
|
78.4 |
|
Depreciation |
|
|
18.8 |
|
|
|
17.5 |
|
Non-cash stock-based compensation |
|
|
43.5 |
|
|
|
34.7 |
|
Change in estimated acquisition earn-out payables |
|
|
5.0 |
|
|
|
(6.9 |
) |
Deferred income taxes |
|
|
4.6 |
|
|
|
6.2 |
|
Amortization of debt discount and disposal of deferred financing
costs |
|
|
1.6 |
|
|
|
1.5 |
|
Net (gain)/loss on sales of investments, fixed assets and customer
accounts |
|
|
(0.7 |
) |
|
|
(4.1 |
) |
Payments on acquisition earn-outs in excess of original estimated
payables |
|
|
(1.2 |
) |
|
|
(0.3 |
) |
Changes
in operating assets and liabilities, net of effect from
acquisitions and divestitures: |
|
|
|
|
|
|
|
|
Premiums, commissions and fees receivable (increase)/decrease |
|
|
(63.1 |
) |
|
|
(41.1 |
) |
Reinsurance recoverables (increase)/decrease |
|
|
(49.0 |
) |
|
|
(244.4 |
) |
Prepaid reinsurance premiums (increase)/decrease |
|
|
(31.6 |
) |
|
|
(45.6 |
) |
Other assets (increase)/decrease |
|
|
4.1 |
|
|
|
(23.1 |
) |
Premiums payable to insurance companies increase/(decrease) |
|
|
59.0 |
|
|
|
43.1 |
|
Premium deposits and credits due customers increase/(decrease) |
|
|
1.8 |
|
|
|
12.3 |
|
Losses and loss adjustment reserve increase/(decrease) |
|
|
49.0 |
|
|
|
244.6 |
|
Unearned premiums increase/(decrease) |
|
|
31.6 |
|
|
|
45.6 |
|
Accounts payable increase/(decrease) |
|
|
53.0 |
|
|
|
22.1 |
|
Accrued expenses and other liabilities increase/(decrease) |
|
|
(22.5 |
) |
|
|
(22.6 |
) |
Other liabilities increase/(decrease) |
|
|
(27.7 |
) |
|
|
7.2 |
|
Net cash provided by operating activities |
|
|
539.6 |
|
|
|
447.1 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Additions to fixed assets |
|
|
(55.8 |
) |
|
|
(47.3 |
) |
Payments
for businesses acquired, net of cash acquired |
|
|
(402.4 |
) |
|
|
(288.4 |
) |
Proceeds
from sales of fixed assets and customer accounts |
|
|
8.6 |
|
|
|
3.5 |
|
Purchases of investments |
|
|
(10.1 |
) |
|
|
(15.8 |
) |
Proceeds
from sales of investments |
|
|
7.4 |
|
|
|
8.4 |
|
Net cash used in investing activities |
|
|
(452.3 |
) |
|
|
(339.6 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Payments
on acquisition earn-outs |
|
|
(9.9 |
) |
|
|
(7.6 |
) |
Proceeds
from long-term debt |
|
|
700.0 |
|
|
|
350.0 |
|
Payments
on long-term debt |
|
|
(41.3 |
) |
|
|
(36.3 |
) |
Deferred
debt issuance costs |
|
|
(6.8 |
) |
|
|
(3.7 |
) |
Borrowings on revolving credit facilities |
|
|
250.0 |
|
|
|
100.0 |
|
Payments
on revolving credit facilities |
|
|
(350.0 |
) |
|
|
(350.0 |
) |
Issuances of common stock for employee stock benefit plans |
|
|
30.0 |
|
|
|
25.0 |
|
Repurchase shares to fund tax withholdings for non-cash stock-based
compensation |
|
|
(41.1 |
) |
|
|
(10.8 |
) |
Purchase
of treasury stock |
|
|
(7.3 |
) |
|
|
(29.7 |
) |
Settlement of accelerated share repurchase program |
|
|
— |
|
|
|
20.0 |
|
Cash
dividends paid |
|
|
(72.1 |
) |
|
|
(67.4 |
) |
Net cash provided by/(used in) financing
activities |
|
|
451.5 |
|
|
|
(10.5 |
) |
Net increase in cash and cash equivalents inclusive of
restricted cash |
|
|
538.8 |
|
|
|
97.0 |
|
Cash and
cash equivalents inclusive of restricted cash at beginning of
period |
|
|
963.0 |
|
|
|
777.6 |
|
Cash and cash equivalents inclusive of restricted cash at
end of period |
|
$ |
1,501.8 |
|
|
$ |
874.6 |
|
|
|
|
|
|
|
|
|
|
Conference call, webcast and slide
presentation
A conference call to discuss the results of the
third quarter of 2020 will be held on Tuesday, October 27, 2020 at
8:00 AM (EST). The Company may refer to a slide presentation during
its conference call. You can access the webcast and the slides from
the "Investor Relations" section of the Company’s website at
www.bbinsurance.com.
About Brown & Brown
Brown & Brown, Inc. (NYSE: BRO) is a leading
insurance brokerage firm, providing risk management solutions to
individuals and businesses. With more than 80 years of proven
success and thousands of teammates, we offer knowledge you can
trust and strive to deliver superior customer service. For more
information, please visit www.bbinsurance.com.
Forward-looking statements
This press release may contain certain
statements relating to future results which are forward-looking
statements, including those relating to the Company's anticipated
financial results for the third quarter of 2020 and the potential
effects of the COVID-19 pandemic (“COVID-19”) on the Company’s
business, operations, financial performance and prospects. These
statements are not historical facts, but instead represent only the
Company's current belief regarding future events, many of which, by
their nature, are inherently uncertain and outside of the Company's
control. It is possible that the Company's actual results,
financial condition and achievements may differ, possibly
materially, from the anticipated results, financial condition and
achievements contemplated by these forward-looking statements.
Further, statements about the effects of COVID-19 on our business,
operations, financial performance and prospects may constitute
forward-looking statements and are subject to the risk that the
actual impacts may differ, possibly materially, from what is
reflected in those forward-looking statements due to factors and
future developments that are uncertain, unpredictable and in many
cases beyond our control, including the scope and duration of
COVID-19, actions taken by governmental authorities in response to
COVID-19, and the direct and indirect impact of COVID-19 on our
customers, insurance carriers, third parties and us. These risks
and uncertainties include, but are not limited to, COVID-19 and the
resulting governmental and societal responses, the severity and
duration of COVID-19, and the resulting impact on the U.S. economy,
the global economy, and the Company's business, liquidity,
customers, insurance carriers and third parties; the Company's
determination as it finalizes its financial results for the third
quarter of 2020 that its financial results differ from the current
preliminary unaudited numbers set forth herein; the upcoming U.S.
presidential election; the inability to retain or hire qualified
employees, as well as the loss of any of our executive officers or
other key employees; acquisition-related risks that could
negatively affect the success of our growth strategy, including the
possibility that we may not be able to successfully identify
suitable acquisition candidates, complete acquisitions, integrate
acquired businesses into our operations and expand into new
markets; a cybersecurity attack or any other interruption in
information technology and/or data security and/or outsourcing
relationships; the requirement for additional resources and time to
adequately respond to dynamics resulting from rapid technological
change; changes in data privacy and protection laws and regulations
or any failure to comply with such laws and regulations; the loss
of or significant change to any of our insurance company
relationships, which could result in additional expense, loss of
market share or material decrease in our profit-sharing contingent
commissions, guaranteed supplemental commissions or incentive
commissions; adverse economic conditions, natural disasters, or
regulatory changes in states where we have a high concentration of
our business; the inability to maintain our culture or a change in
management, management philosophy or our business strategy; risks
facing us in our Services Segment, including our third-party claims
administration operations, that are distinct from those we face in
our insurance intermediary operations; our failure to comply with
any covenants contained in our debt agreements; the possibility
that covenants in our debt agreements could prevent us from
engaging in certain potentially beneficial activities; changes in
estimates, judgments or assumptions used in the preparation of our
financial statements; improper disclosure of confidential
information; the limitations of our system of disclosure and
internal controls and procedures in preventing errors or fraud, or
in informing management of all material information in a timely
manner; the potential adverse effect of certain actual or potential
claims, regulatory actions or proceedings on our businesses,
results of operations, financial condition or liquidity; changes in
the U.S.-based credit markets that might adversely affect our
business, results of operations and financial condition; the
significant control certain existing shareholders have over the
Company; risks related to our international operations, which may
require more time and expense than our domestic operations to
achieve or maintain profitability; risks associated with the
current interest rate environment and to the extent we use debt to
finance our investments, changes in interest rates will affect our
cost of capital and net investment income; disintermediation within
the insurance industry, including increased competition from
insurance companies, technology companies and the financial
services industry, as well as the shift away from traditional
insurance markets; changes in current U.S. or global economic
conditions; effects related to pandemics, epidemics, or outbreaks
of infectious diseases; conditions that result in reduced insurer
capacity; quarterly and annual variations in our commissions that
result from the timing of policy renewals and the net effect of new
and lost business production; the possibility that one of the
financial institutions we use fails or is taken over by the U.S.
Federal Deposit Insurance Corporation (FDIC); uncertainty in our
business practices and compensation arrangements due to potential
changes in regulations; regulatory changes that could reduce our
profitability or growth by increasing compliance costs, technology
compliance, restricting the products or services we may sell, the
markets we may enter, the methods by which we may sell our products
and services, or the prices we may charge for our services and the
form of compensation we may accept from our customers, carriers and
third-parties; intangible asset risk, including the possibility
that our goodwill may become impaired in the future; a decrease in
demand for liability insurance as a result of tort reform
litigation; changes in our credit ratings; volatility in our stock
price; other risks and uncertainties as may be detailed from time
to time in our public announcements and Securities and Exchange
Commission filings; and other factors that the Company may not have
currently identified or quantified. All forward-looking statements
made herein are made only as of the date of this release, and the
Company does not undertake any obligation to publicly update or
correct any forward-looking statements to reflect events or
circumstances that subsequently occur or of which the Company
hereafter becomes aware.
Non-GAAP supplemental financial
information
This press release contains references to the
following non-GAAP financial measures as defined in Regulation G of
SEC rules: Organic Revenue, Diluted Net Income Per Share -
Adjusted, EBITDAC and EBITDAC Margin.
Reconciliations of these supplemental non-GAAP
financial information to the Company's GAAP information are
contained in this earnings release. These measures are not in
accordance with, or an alternative to the GAAP information provided
in the Company's condensed consolidated financial statements.
We present such non-GAAP supplemental financial information
because we believe such information is of interest to the
investment community and because we believe it provides additional
meaningful methods of evaluating certain aspects of the Company's
operating performance from period to period on a basis that may not
be otherwise apparent on a GAAP basis. We believe these non-GAAP
measures improve the comparability of results between periods by
excluding the impact of certain items that have a high degree of
variability. We believe that Organic Revenue provides a
meaningful representation of the Company's operating performance;
the Company has historically viewed Organic Revenue growth as an
important indicator when assessing and evaluating the performance
of its four segments. We believe Diluted Net Income Per Share
- Adjusted provides a meaningful representation of our operating
performance and improves the comparability of our results between
periods by excluding the impact of the change in estimated
acquisition earn-out payables and certain other non-recurring or
infrequently occurring items that have a high degree of variability
from period-to-period and that we believe are not indicative of the
Company's ongoing performance. We view EBITDAC and EBITDAC Margin
as important indicators when assessing and evaluating our
performance, as they present more comparable measurements of our
operating margins in a meaningful and consistent manner. As
disclosed in our most recent proxy statement, we use Organic
Revenue and EBITDAC Margin for incentive compensation
determinations for executive officers and other key employees.
Our industry peers may provide similar
supplemental non-GAAP information with respect to one or
more of these measures, although they may not use the same or
comparable terminology and may not make identical adjustments.
This supplemental non-GAAP financial information should be
considered in addition to, and not in lieu of, the Company's
condensed consolidated financial statements.
R. Andrew WattsChief Financial Officer(386)
239-5770
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