10-QPeriod: Q2 FY2016

BROWN & BROWN, INC. Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 5, 2016For Securities:BRO

Summary

Brown & Brown, Inc. (BRO) reported solid financial results for the second quarter and first half of 2016. Total revenues increased by 6.5% to $446.5 million for the quarter and 5.7% to $870.7 million for the first half, primarily driven by growth in commissions and fees. Net income saw a healthy increase of 8.6% to $66.3 million for the quarter and 8.8% to $128.3 million for the first half, demonstrating strong operational performance. The company continued its strategic acquisition strategy, completing five acquisitions in the first half of the year. This contributed to revenue growth, though it also impacted expenses. Despite integration costs and a notable increase in "Change in estimated acquisition earn-out payables," the company managed its expenses effectively, with employee compensation and benefits as a percentage of total revenues remaining relatively stable. The company's liquidity remains strong, with significant cash and cash equivalents, and access to a substantial revolving credit facility.

Financial Highlights

50 data points
Beta

Revenue

$419.45M

Net Income

$61.01M

14.5% Net Margin

EPS (Diluted)

$0.21

Total Assets

$5.02B

Cash & Equivalents

$412.61M

Free Cash Flow

$171.81M

Financial Statements
Beta
Revenue$419.45M
Operating Expenses$318.53M
Interest Expense$9.67M
Net Income$61.01M
EPS (Basic)$0.21
EPS (Diluted)$0.21
Shares Outstanding (Basic)275.04M
Shares Outstanding (Diluted)279.66M

Key Highlights

  • 1Total revenues grew 6.5% year-over-year to $446.5 million in Q2 2016 and 5.7% to $870.7 million in the first half.
  • 2Net income increased by 8.6% to $66.3 million in Q2 2016 and 8.8% to $128.3 million in the first half.
  • 3Core commissions and fees revenue increased by 5.8% in Q2 and 5.3% in the first half, with organic growth contributing significantly.
  • 4The company completed five acquisitions in the first half of 2016, contributing to revenue growth.
  • 5Employee compensation and benefits, while increasing in absolute terms due to acquisitions, remained stable as a percentage of total revenues.
  • 6The company maintained strong liquidity with $453.9 million in cash and cash equivalents as of June 30, 2016, and significant availability under its credit facilities.
  • 7Dividends declared per share increased to $0.12 for the quarter and $0.25 for the first half, reflecting a commitment to shareholder returns.

Frequently Asked Questions

Total revenues increased by 6.5% to $446.5 million in the second quarter of 2016, primarily driven by a 5.8% increase in core commissions and fees. This growth was a result of both new business (organic growth) and contributions from recent acquisitions.

While acquisitions led to higher absolute expenses, especially in employee compensation and benefits, Brown & Brown managed these effectively. Employee compensation and benefits as a percentage of total revenues remained stable at approximately 51.8% for the quarter. The 'Change in estimated acquisition earn-out payables' did increase significantly, but overall operating expenses were well-controlled relative to revenue growth.

Brown & Brown maintained a strong liquidity position with $453.9 million in cash and cash equivalents. Additionally, the company has access to a $800 million revolving credit facility, providing substantial financial flexibility for its ongoing operations and strategic initiatives.

Profit-sharing contingent commissions and GSCs saw a significant increase of 75.6% in the second quarter of 2016, largely driven by higher profit-sharing contingent commissions in the National Programs segment. This contributed positively to the overall revenue growth.