10-QPeriod: Q3 FY2020

BROWN & BROWN, INC. Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 27, 2020For Securities:BRO

Summary

Brown & Brown, Inc. (BRO) reported solid financial results for the nine months ended September 30, 2020, with total revenues increasing by 8.7% to $1.97 billion and net income growing by 19.0% to $383.2 million, or $1.35 per diluted share. This growth was primarily driven by a robust increase in commissions and fees, reflecting both strong organic revenue growth of 3.5% and strategic acquisitions. The company demonstrated effective expense management, with employee compensation and benefits growing at a slower pace than revenues and other operating expenses decreasing. Key financial highlights include a significant increase in cash and cash equivalents, reaching over $1 billion by the end of the period, supported by strong operating cash flows. The company also successfully executed a $700 million senior notes issuance, reinforcing its liquidity position and financing its growth initiatives. Despite the ongoing economic uncertainty due to COVID-19, Brown & Brown maintained its commitment to returning value to shareholders through consistent dividend payments and share repurchases.

Financial Highlights

50 data points
Beta

Revenue

$618.68M

Net Income

$115.51M

18.7% Net Margin

EPS (Diluted)

$0.41

Total Assets

$7.68B

Cash & Equivalents

$874.60M

Free Cash Flow

$129.23M

Financial Statements
Beta
Revenue$618.68M
Operating Expenses$466.85M
Interest Expense$16.31M
Net Income$115.51M
EPS (Basic)$0.41
EPS (Diluted)$0.41
Shares Outstanding (Basic)272.96M
Shares Outstanding (Diluted)275.07M

Key Highlights

  • 1Total revenues grew 8.7% to $1.97 billion for the nine months ended September 30, 2020, compared to the prior year.
  • 2Net income increased by 19.0% to $383.2 million ($1.35 per diluted share) for the nine months ended September 30, 2020.
  • 3Organic Revenue grew by 3.5% for the nine months ended September 30, 2020, indicating consistent underlying business growth.
  • 4The company successfully raised $700 million in senior notes, strengthening its liquidity position.
  • 5Cash and cash equivalents, including restricted cash, significantly increased to $1.5 billion by September 30, 2020.
  • 6Acquisitions remain a key growth driver, with the company completing 16 acquisitions during the first nine months of 2020.
  • 7Employee compensation and benefits, while increasing, grew at a slower pace relative to total revenues, indicating effective cost management.

Frequently Asked Questions

The COVID-19 pandemic negatively impacted business activity, reducing the volume of business from new customers and insurable exposure units. However, the company mitigated some of these effects through expense management and effective cost control. The company also noted that certain governmental entities proposed 'grace periods' for insurance premium payments, which could potentially delay revenue receipt, and legislation that might require premium returns, impacting commission revenue.

Acquisitions are a core part of Brown & Brown's continuing business strategy. During the nine months ended September 30, 2020, the company acquired sixteen insurance intermediaries and three books of business, for a total of $402.4 million in cash paid. These acquisitions are integrated to drive growth across its various segments.

Brown & Brown maintains a conservative balance sheet and strong liquidity. Total debt increased to $2.1 billion by September 30, 2020, primarily due to the issuance of $700 million in senior notes to fund acquisitions and for general corporate purposes. The company has access to an $800 million revolving credit facility and believes its cash reserves, operating cash flow, and available credit lines are sufficient to meet its liquidity needs.

Organic Revenue is a non-GAAP financial measure that represents core commissions and fees less the revenue from newly acquired operations in their first 12 months and from divested businesses. It is used to provide a more comparable measurement of revenue growth by excluding the impact of acquisitions and divestitures, reflecting the performance of the existing business.