10-QPeriod: Q3 FY2019

BROWN & BROWN, INC. Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 30, 2019For Securities:BRO

Summary

Brown & Brown, Inc. (BRO) reported strong financial results for the nine months ended September 30, 2019, with total revenues increasing by 20.4% to $1.81 billion and net income rising by 18.9% to $321.995 million compared to the same period in 2018. This growth was primarily driven by acquisitions, which contributed significantly to the increase in commissions and fees. Organic revenue, a key measure of underlying business growth, also showed positive trends, increasing by 3.1% for the nine-month period. The company's profitability remained robust, with a healthy income before income taxes margin of 23.4%. Significant investments were made in the business, as evidenced by a 64.1% increase in capital expenditures, largely related to technology and acquisitions. The company's balance sheet strengthened, with total assets growing by 32.4% to $7.68 billion, largely due to acquisitions, which increased goodwill and amortizable intangible assets. Long-term debt also increased to support growth initiatives, but the company maintained adequate liquidity, with significant cash and cash equivalents. Management expressed confidence in the company's ability to meet its financial obligations and pursue its growth strategy.

Financial Highlights

50 data points
Beta

Revenue

$530.85M

Net Income

$106.05M

20.0% Net Margin

EPS (Diluted)

$0.38

Total Assets

$5.80B

Cash & Equivalents

$422.97M

Free Cash Flow

$68.64M

Financial Statements
Beta
Revenue$530.85M
Operating Expenses$388.35M
Interest Expense$8.96M
Net Income$106.05M
EPS (Basic)$0.38
EPS (Diluted)$0.38
Shares Outstanding (Basic)271.01M
Shares Outstanding (Diluted)275.28M

Key Highlights

  • 1Total revenues for the nine months ended September 30, 2019, increased by 20.4% to $1.81 billion, driven by a 20.1% increase in core commissions and fees.
  • 2Net income for the nine months grew by 18.9% to $321.995 million, with diluted earnings per share of $0.96.
  • 3Organic Revenue growth was 3.1% for the nine months, indicating underlying business expansion beyond acquisitions.
  • 4The company completed 18 acquisitions (excluding books of business) during the nine months ended September 30, 2019, contributing significantly to revenue growth.
  • 5Total assets increased by 32.4% to $7.68 billion, primarily due to goodwill and intangible assets from acquisitions.
  • 6Employee compensation and benefits increased by 23.1% for the nine months, largely due to acquisitions and increased stock-based compensation.
  • 7Interest expense rose by 66.6% for the nine months, reflecting increased debt levels associated with recent acquisitions.

Frequently Asked Questions

The primary driver of revenue growth was a significant increase in commissions and fees, which rose by 20.1% to $1.75 billion for the nine months. This increase was largely attributable to 18 acquisitions completed during the period, contributing $251.9 million in core commissions and fees.

Profitability improved significantly, with net income increasing by 18.9% to $321.995 million for the nine months ended September 30, 2019. The income before income taxes margin remained strong at 23.4%, slightly up from 24.0% in the prior year.

Acquisitions are a core part of Brown & Brown's growth strategy. The company completed 18 acquisitions in the first nine months of 2019, which significantly boosted revenues and contributed to the increase in goodwill and amortizable intangible assets. These acquisitions also led to higher employee compensation, amortization, and interest expenses due to increased headcount, acquired intangibles, and associated debt.

The company maintains a strong liquidity position, with cash and cash equivalents, including restricted cash, totaling $874.6 million as of September 30, 2019. Additionally, it has access to an $800 million revolving credit facility, indicating sufficient resources to meet its financial obligations.