10-QPeriod: Q3 FY2020

Arthur J. Gallagher & Co. Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 30, 2020For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) reported a solid third quarter and a strong nine-month performance ending September 30, 2020, demonstrating resilience amidst economic challenges. Total revenues increased year-over-year for both periods, driven primarily by the brokerage segment's strong commission and fee growth, which benefited from favorable insurance rate increases. The company's risk management segment showed stable performance, while the corporate segment's results were impacted by lower clean energy revenues. Diluted EPS showed significant year-over-year improvement, reflecting effective cost management and operational execution. AJG's robust cash flow from operations and strong liquidity position provide a solid foundation for continued strategic investments and shareholder returns.

Financial Highlights

46 data points
Beta

Revenue

$1.85B

82.7% Gross Margin

Net Income

$176.60M

9.6% Net Margin

EPS (Diluted)

$0.90

Total Assets

$21.81B

Cash & Equivalents

$629.90M

Free Cash Flow

$585.40M

Financial Statements
Beta
Revenue$1.85B
Cost of Revenue$319.20M
Gross Profit$1.53B
Operating Expenses$1.64B
Interest Expense$48.10M
Net Income$176.60M
EPS (Basic)$0.92
EPS (Diluted)$0.90
Shares Outstanding (Basic)191.90M

Key Highlights

  • 1Total revenues increased to $1.85 billion for Q3 2020 and $5.30 billion for the nine-month period, up from $1.83 billion and $5.47 billion respectively in the prior year.
  • 2Diluted EPS grew to $0.90 in Q3 2020 and $3.48 for the nine-month period, compared to $0.66 and $3.01 in the prior year, respectively.
  • 3The brokerage segment demonstrated strong performance with revenues up 8% year-over-year for Q3 and 6% for the nine-month period, driven by organic growth and acquisitions.
  • 4The company reported strong Adjusted EBITDAC growth in the brokerage segment, up 32% for Q3 and 21% for the nine-month period.
  • 5Net cash provided by operating activities was $1.39 billion for the nine-month period, a significant increase from $769.1 million in the prior year.
  • 6AJG's total debt was $4.6 billion at the end of the period, with a substantial cash and cash equivalents balance of $630 million.
  • 7The company continued to make strategic acquisitions, with 17 acquisitions closed in the first nine months of 2020, adding approximately $151 million in annualized revenues.

Frequently Asked Questions

Arthur J. Gallagher & Co. reported a strong financial performance in the third quarter and first nine months of 2020. Total revenues increased year-over-year, driven by growth in the brokerage segment. Diluted Earnings Per Share (EPS) also saw significant improvement, reflecting effective cost management and operational execution. The company generated substantial cash flow from operations and maintained a healthy liquidity position.

The brokerage segment was the primary driver of growth, with revenues increasing due to higher commissions and fees, supported by rising insurance rates and strategic acquisitions. The risk management segment showed stable performance, while the corporate segment's results were impacted by lower clean energy revenues. The company also highlighted effective cost savings initiatives implemented across the organization.

AJG maintained a strong liquidity position with a significant cash and cash equivalents balance of $630 million at the end of the period. Total debt stood at $4.6 billion. The company's robust cash flow from operations provides ample resources to meet its obligations and fund strategic initiatives, including acquisitions and potential shareholder returns.

Yes, AJG continued its acquisition strategy, completing 17 acquisitions in the first nine months of 2020, which contributed approximately $151 million in annualized revenues. The company had minimal dispositions during this period. The acquisitions are expected to further strengthen its market position and expand its service offerings.