10-QPeriod: Q1 FY2021

Arthur J. Gallagher & Co. Quarterly Report for Q1 Ended Mar 31, 2021

Filed April 30, 2021For Securities:AJG

Summary

Arthur J. Gallagher & Co. (AJG) reported strong financial performance for the first quarter of 2021, demonstrating significant year-over-year growth in key metrics. Total revenues increased by 16% to $2.17 billion, driven by robust growth in both the brokerage and risk management segments. Net earnings attributable to controlling interests rose by 10.5% to $382.1 million, translating to a diluted EPS of $1.92, up from $1.79 in the prior year's quarter. The company's strategic focus on mergers and acquisitions continues to fuel expansion, with substantial cash paid for acquisitions during the period. AJG also highlighted ongoing initiatives to manage costs effectively and maintain strong liquidity, positioning the company for continued growth.

Financial Highlights

45 data points
Beta

Revenue

$2.17B

85.7% Gross Margin

Net Income

$382.10M

17.6% Net Margin

EPS (Diluted)

$1.92

Total Assets

$24.41B

Cash & Equivalents

$526.30M

Free Cash Flow

$218.70M

Financial Statements
Beta
Revenue$2.17B
Cost of Revenue$309.10M
Gross Profit$1.86B
Operating Expenses$1.76B
Interest Expense$48.10M
Net Income$382.10M
EPS (Basic)$1.96
EPS (Diluted)$1.92
Shares Outstanding (Basic)194.60M

Key Highlights

  • 1Total revenues increased by 16% to $2.17 billion compared to Q1 2020, indicating strong top-line growth.
  • 2Net earnings attributable to controlling interests grew by 10.5% to $382.1 million, demonstrating improved profitability.
  • 3Diluted Earnings Per Share (EPS) increased to $1.92 from $1.79 year-over-year, showing enhanced shareholder value.
  • 4The company actively pursued its acquisition strategy, with $395.6 million invested in acquisitions during the quarter.
  • 5The Brokerage segment, the largest revenue contributor, saw a 12% increase in revenues to $1.61 billion.
  • 6The Corporate segment benefited from clean energy investments, contributing $300.6 million in revenue.
  • 7AJG maintained a strong liquidity position with $3.36 billion in cash, cash equivalents, and restricted cash.

Frequently Asked Questions

Revenue growth was primarily driven by increased commissions and fees in the Brokerage segment, which benefited from acquisitions and organic growth. The Risk Management segment also saw a modest increase in fees, while the Corporate segment's revenue was boosted by clean energy investments.

The company continued its active acquisition strategy, investing $395.6 million in acquisitions during the quarter. These acquisitions contributed to revenue growth, particularly in the Brokerage segment, and are a key part of the company's expansion strategy.

The clean energy investments, primarily focused on refined coal production qualifying for tax credits, generated significant revenue and contributed positively to earnings. The company anticipates these investments to continue generating positive net cash flow and expects adjusted net earnings between $70.0 million and $80.0 million for 2021.

Arthur J. Gallagher & Co. maintained a strong liquidity position with substantial cash and cash equivalents. The company has access to a credit facility and also utilizes debt issuances to fund operations and acquisitions. They also noted that they were in compliance with all financial covenants at the end of the quarter.