10-QPeriod: Q3 FY2015

BROWN & BROWN, INC. Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 4, 2015For Securities:BRO

Summary

Brown & Brown, Inc. reported solid financial results for the nine months ended September 30, 2015, with total revenues increasing by 6.2% to $1,255,912 thousand compared to the prior year. Net income also saw a modest increase of 1.6% to $185,383 thousand. The company's core commissions and fees, a key indicator of operational performance, grew by 7.0% for the nine-month period, demonstrating effective organic growth and strategic acquisitions. Key drivers for the revenue growth include contributions from recently acquired businesses, which added approximately $64.9 million in core commissions and fees. Organic growth, measured by core organic commissions and fees, was 2.6% for the nine months, indicating the company's ability to expand its existing business. Expenses, particularly employee compensation and benefits, rose in line with revenue growth and acquisitions, but overall expense management appears effective as income before taxes grew by 2.1% year-over-year. The company continues to manage its debt effectively, with total debt decreasing slightly and remaining well within its credit facility capacity.

Financial Highlights

50 data points
Beta

Revenue

$421.42M

Net Income

$68.33M

16.2% Net Margin

EPS (Diluted)

$0.23

Total Assets

$4.95B

Cash & Equivalents

$382.09M

Free Cash Flow

$100.14M

Financial Statements
Beta
Revenue$421.42M
Operating Expenses$308.73M
Interest Expense$7.30M
Net Income$68.33M
EPS (Basic)$0.23
EPS (Diluted)$0.23
Shares Outstanding (Basic)281.83M
Shares Outstanding (Diluted)285.93M

Key Highlights

  • 1Total revenues increased by 6.2% to $1,255,912 thousand for the nine months ended September 30, 2015.
  • 2Net income grew by 1.6% to $185,383 thousand for the nine months ended September 30, 2015.
  • 3Core commissions and fees revenue increased by 7.0% to $1,199,180 thousand for the nine-month period.
  • 4Organic growth, as measured by core organic commissions and fees, was 2.6% for the nine months, indicating steady expansion of existing business.
  • 5The company completed nine acquisitions during the nine-month period, contributing significantly to revenue growth.
  • 6Interest expense increased by 60.0% for the nine months, primarily due to increased debt borrowings associated with recent acquisitions and financing activities.
  • 7Total assets grew to $5,002,192 thousand as of September 30, 2015, up from $4,956,458 thousand at the end of 2014.

Frequently Asked Questions

Acquisitions played a significant role in the company's financial performance. Brown & Brown completed nine acquisitions during the nine months ended September 30, 2015, contributing approximately $64.9 million to core commissions and fees revenue. These acquisitions are a key part of the company's growth strategy and are expected to continue driving revenue increases.

Profitability, as measured by net income, saw a modest increase of 1.6% for the nine-month period. While total revenues and core commissions and fees showed solid growth, the increase in net income was somewhat tempered by a significant rise in interest expenses (60.0% for nine months) related to recent debt issuances and an increase in employee compensation and benefits expenses. However, the company maintained its overall expense ratios and managed other operating expenses effectively.

The company maintains a conservative balance sheet and liquidity profile. As of September 30, 2015, cash and cash equivalents stood at $448.8 million. Total long-term debt was $1,118.6 million, with a portion classified as current. The company's credit facilities provide substantial available cash, and it believes its current cash, operating cash flow, and available credit lines are sufficient to meet its liquidity needs for at least the next twelve months. The company also noted that it was in compliance with all debt covenants.

Brown & Brown defines organic growth primarily through 'core organic commissions and fees,' which excludes revenues from newly acquired operations within their first year and divested businesses. For the nine months ended September 30, 2015, the company reported a core organic commissions and fees growth rate of 2.6%. This metric is important for investors as it reflects the growth generated from the company's existing operations.