10-QPeriod: Q1 FY2016

BROWN & BROWN, INC. Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 6, 2016For Securities:BRO

Summary

Brown & Brown, Inc. (BRO) reported a solid first quarter for 2016, demonstrating consistent growth and profitability. Total revenues increased by 4.9% to $424.2 million, driven primarily by a 4.8% rise in commissions and fees. Net income grew by 9.0% to $62.1 million, resulting in diluted earnings per share of $0.44, an increase from $0.39 in the prior year's comparable quarter. The company's strategic focus on acquisitions continues to be a key driver of its top-line growth, with acquired operations contributing significantly to the increase in commissions and fees. Despite rising employee compensation and benefits expenses, which increased by 5.9%, the company managed to improve its profitability through effective expense management and favorable changes in acquisition earn-out payables. Brown & Brown maintained a strong balance sheet with total assets of $4.99 billion and robust liquidity, positioning it well for continued growth.

Financial Highlights

49 data points
Beta

Revenue

$404.30M

Net Income

$56.95M

14.1% Net Margin

EPS (Diluted)

$0.20

Total Assets

$4.84B

Cash & Equivalents

$340.73M

Free Cash Flow

$46.98M

Financial Statements
Beta
Revenue$404.30M
Operating Expenses$310.52M
Interest Expense$9.85M
Net Income$56.95M
EPS (Basic)$0.20
EPS (Diluted)$0.20
Shares Outstanding (Basic)278.72M
Shares Outstanding (Diluted)282.97M

Key Highlights

  • 1Total revenues increased by 4.9% year-over-year to $424.2 million for the first quarter of 2016.
  • 2Net income rose by 9.0% to $62.1 million, with diluted EPS improving to $0.44 from $0.40 in Q1 2015.
  • 3Commissions and fees, the primary revenue driver, grew by 4.8% to $422.3 million.
  • 4Acquisitions continue to be a significant growth contributor, with recent acquisitions adding $14.3 million in core commissions and fees.
  • 5Core organic commissions and fees (excluding acquisitions and divestitures) grew by 1.3%, indicating underlying business strength.
  • 6Employee compensation and benefits expense increased by 5.9%, impacted by acquisitions, but managed effectively in relation to revenue growth.
  • 7The company maintained a strong liquidity position with $401.8 million in cash and cash equivalents at quarter-end.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in commissions and fees, which rose by 4.8% to $422.3 million. This increase was significantly influenced by contributions from recently acquired operations, along with a 1.3% growth in core organic commissions and fees, indicating underlying business expansion.

While employee compensation and benefits increased by 5.9% due to acquisitions and investments in personnel, the company managed its overall expenses effectively. The ratio of employee compensation and benefits to total revenues remained relatively stable at 52.8% compared to 52.4% in the prior year. The company also benefited from a favorable change in estimated acquisition earn-out payables, which resulted in a credit to income.

'Core organic commissions and fees' is a non-GAAP measure that represents the growth of the company's core business, excluding the impact of recent acquisitions and divested businesses. A positive growth rate in this metric (1.3% in Q1 2016) indicates that the company's existing operations are expanding and performing well, providing investors with a clearer view of the underlying business momentum.

Brown & Brown's acquisition strategy is a significant contributor to its revenue growth. Acquired businesses added approximately $14.3 million in core commissions and fees during the quarter. While acquisitions increase operating expenses, particularly in compensation, the company's ability to integrate these businesses and achieve organic growth demonstrates the effectiveness of its strategy in expanding its market reach and revenue base.