10-QPeriod: Q3 FY2019

Arthur J. Gallagher & Co. Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 25, 2019For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) reported strong performance in its Q3 2019 10-Q filing, with total revenues increasing by 3% year-over-year to $1.83 billion. The brokerage segment, representing the largest portion of revenue, saw a 14% increase in total revenues to $1.2 billion, driven by robust organic growth and strategic acquisitions. Net earnings attributable to controlling interests remained relatively flat for the quarter at $126.1 million compared to $127.6 million in the prior year period. Diluted EPS for the quarter was $0.66, a slight decrease from $0.68 in Q3 2018. The company highlighted significant progress in its acquisition strategy, with substantial investments made in the first nine months of the year, totaling $951.1 million. These acquisitions are aimed at expanding geographic reach and service offerings. The balance sheet shows a notable increase in total assets to $19.17 billion from $16.33 billion at the end of 2018, largely due to goodwill and intangible assets arising from acquisitions. The company also maintained a strong cash flow from operations, which increased to $769.1 million for the nine-month period.

Financial Highlights

45 data points
Beta

Revenue

$1.83B

78.2% Gross Margin

Net Income

$126.10M

6.9% Net Margin

EPS (Diluted)

$0.66

Total Assets

$19.17B

Cash & Equivalents

$578.90M

Free Cash Flow

$349.50M

Financial Statements
Beta
Revenue$1.83B
Cost of Revenue$397.40M
Gross Profit$1.43B
Operating Expenses$1.71B
Interest Expense$46.60M
Net Income$126.10M
EPS (Basic)$0.68
EPS (Diluted)$0.66
Shares Outstanding (Basic)186.30M

Key Highlights

  • 1Total revenues increased by 3% year-over-year to $1.83 billion for the three-month period ended September 30, 2019.
  • 2Brokerage segment revenues grew by 14% to $1.2 billion, driven by organic growth and acquisitions.
  • 3Net earnings attributable to controlling interests were $126.1 million for the quarter, a slight decrease from $127.6 million in the prior year.
  • 4Diluted Earnings Per Share (EPS) was $0.66, down from $0.68 in the prior year's third quarter.
  • 5Acquisition activity was substantial, with $951.1 million invested in the first nine months of 2019.
  • 6Total assets increased to $19.17 billion, reflecting growth from acquisitions.
  • 7Cash flow from operating activities improved significantly, reaching $769.1 million for the first nine months of 2019.

Frequently Asked Questions

Revenue growth was primarily driven by the brokerage segment, which saw a 14% increase in total revenues. This growth was fueled by both organic increases in commissions and fees, as well as the impact of numerous acquisitions completed during the period.

The company actively pursued its acquisition strategy, investing $951.1 million in acquisitions during the first nine months of 2019. This led to a significant increase in total assets to $19.17 billion, primarily due to the recognition of goodwill and intangible assets from these business combinations.

The company expects its clean energy investments to generate between $97.5 million and $102.5 million in adjusted net earnings in 2019. These earnings are anticipated to be used to fund further mergers and acquisitions in its core brokerage and risk management operations. However, the company notes that these investments are subject to various risks, including regulatory changes and operational uncertainties.

The company's total corporate and other debt increased to $4.48 billion. However, it maintains a strong liquidity position with $2.61 billion in cash, cash equivalents, and restricted cash as of September 30, 2019. The company also has a substantial $1.2 billion revolving credit facility available, with $793.1 million unutilized at the end of the quarter, indicating ample access to capital.