10-QPeriod: Q1 FY2015

BROWN & BROWN, INC. Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 11, 2015For Securities:BRO

Summary

Brown & Brown, Inc. (BRO) reported a solid first quarter for 2015, demonstrating consistent growth driven by both acquisitions and organic initiatives. Total revenues increased by 11.2% year-over-year, reaching $404.3 million, with commissions and fees being the primary driver. Net income saw a healthy increase of 8.7% to $57.0 million, translating to diluted earnings per share of $0.39, up from $0.36 in the prior year's first quarter. The company's strategic focus on expanding its core business through acquisitions continues to yield positive results, contributing significantly to revenue growth across its segments. While expenses also rose, largely due to integration costs from recent acquisitions and increased employee compensation, the company managed to improve its profit margins, with income before income taxes growing 8.0%. Investors can take confidence in the company's sustained revenue growth and profitability, underscoring its resilient business model in the insurance intermediary sector.

Financial Highlights

46 data points
Beta

Revenue

$363.59M

Net Income

$52.41M

14.4% Net Margin

EPS (Diluted)

$0.00

Total Assets

$3.67B

Cash & Equivalents

$250.02M

Free Cash Flow

$62.42M

Financial Statements
Beta
Revenue$363.59M
Operating Expenses$276.76M
Interest Expense$4.07M
Net Income$52.41M
EPS (Basic)$0.00
EPS (Diluted)$0.00
Shares Outstanding (Basic)283.22M
Shares Outstanding (Diluted)286.62M

Key Highlights

  • 1Total revenues increased 11.2% to $404.3 million in Q1 2015 compared to Q1 2014.
  • 2Net income rose 8.7% to $57.0 million, with diluted EPS growing to $0.39 from $0.36.
  • 3Core commissions and fees revenue, the main revenue driver, increased by 13.2%.
  • 4The company achieved a positive core organic commission and fees growth rate of 3.8% for the consolidated entity.
  • 5Significant investments were made in acquisitions, with $36.2 million spent on new businesses during the quarter.
  • 6Employee compensation and benefits increased by 11.5%, reflecting growth from acquisitions and operational investments.
  • 7Interest expense more than doubled (up 141.9%) due to increased debt for acquisitions.

Frequently Asked Questions

The substantial increase in interest expense, up 141.9% year-over-year, is primarily attributed to increased debt borrowings. This includes the JPMorgan Credit Facility term loan of $550.0 million used partly to fund the Wright acquisition, and the $500.0 million Senior Notes issued in September 2014.

Acquisitions were a major driver of growth in the first quarter of 2015. Approximately $36.0 million of the core commissions and fees revenue increase was from agencies acquired since the first quarter of 2014. Consequently, employee compensation and benefits, other operating expenses, amortization, and depreciation also saw increases due to the integration of these new businesses.

Management expressed optimism for continued positive quarterly internal revenue growth in 2015, contingent on the continuation of gradual increases in insurable exposure units seen in previous years. The company's strategy of pursuing net new business growth and strategic acquisitions is expected to remain a key growth catalyst.

The company noted ongoing litigation concerning Wright National Flood Insurance Company (Wright Flood) related to Superstorm Sandy claims handling procedures. While management believes these claims are unlikely to be material to the company's financial position or liquidity, they acknowledge the unpredictability of litigation and the potential for adverse effects on quarterly or annual results, as well as reputational risk. However, they stated that the disposition of these claims is not expected to have a material adverse effect on the consolidated financial position.