10-QPeriod: Q1 FY2023

BROWN & BROWN, INC. Quarterly Report for Q1 Ended Mar 31, 2023

Filed April 28, 2023For Securities:BRO

Summary

Brown & Brown, Inc. reported strong first-quarter 2023 results, with total revenues increasing by 23.4% to $1,116.0 million, primarily driven by robust growth in commissions and fees, up 22.5%. This growth was fueled by a combination of net new business and contributions from recent acquisitions, reflected in an Organic Revenue growth rate of 12.6% for the consolidated entity. Net income rose by 6.9% to $235.5 million, leading to diluted earnings per share of $0.83, an increase from $0.77 in the prior year quarter. The company's performance highlights effective integration of acquisitions and continued organic expansion across its Retail and National Programs segments. Despite increased interest expenses due to higher debt levels and rising benchmark rates, the company maintained a stable Adjusted EBITDAC Margin of 35.7%, demonstrating operational resilience. The balance sheet remains solid, with shareholders' equity increasing and effective management of cash flows, although operating cash flow saw a decrease compared to the prior year, largely due to working capital adjustments.

Financial Highlights

51 data points
Beta

Revenue

$904.70M

Net Income

$220.30M

24.4% Net Margin

EPS (Diluted)

$0.77

Total Assets

$11.27B

Cash & Equivalents

$2.43B

Free Cash Flow

$93.60M

Financial Statements
Beta
Revenue$904.70M
Operating Expenses$639.70M
Interest Expense$18.30M
Net Income$220.30M
EPS (Basic)$0.78
EPS (Diluted)$0.77
Shares Outstanding (Basic)277.10M
Shares Outstanding (Diluted)278.60M

Key Highlights

  • 1Total revenues surged by 23.4% year-over-year to $1,116.0 million, driven by a 22.5% increase in commissions and fees.
  • 2Net income grew by 6.9% to $235.5 million, with diluted EPS improving to $0.83 from $0.77 in Q1 2022.
  • 3Organic Revenue growth was a strong 12.6% for the consolidated company, indicating healthy underlying business expansion.
  • 4The Retail segment showed robust revenue growth of 19.6%, while the National Programs segment experienced a significant 41.7% increase in total revenues.
  • 5Interest expense more than doubled (+155.2%) due to higher debt levels and rising interest rates, impacting profitability.
  • 6The company continued its acquisition strategy, completing seven acquisitions in the quarter, contributing $113.9 million to revenue growth.
  • 7Shareholders' equity increased to $4,845.0 million from $4,606.6 million at the end of 2022, supported by retained earnings.

Frequently Asked Questions

The primary driver for the 23.4% increase in total revenues to $1,116.0 million was a 22.5% rise in commissions and fees, reaching $1,108.0 million. This growth was fueled by both organic expansion (12.6% Organic Revenue growth) and contributions from seven recent acquisitions that added $113.9 million in revenue.

Acquisitions played a significant role, contributing $113.9 million to revenue growth and $113.9 million to core commissions and fees. The company completed seven acquisitions in the quarter. While these acquisitions boosted revenue, they also led to increased amortization expenses and employee compensation and benefits costs associated with integrating new businesses.

Interest expense increased significantly by 155.2% to $46.7 million in Q1 2023, primarily due to higher average debt balances resulting from recent financings to fund acquisitions and rising floating-rate benchmark rates. The company's total debt remains substantial at $3,926.3 million. Investors should monitor future interest rate trends and the company's debt management strategies.

Brown & Brown maintains a conservative balance sheet and strong liquidity. As of March 31, 2023, the company had $563.5 million in cash and cash equivalents and access to an $800.0 million revolving credit facility, providing substantial financial flexibility. The company believes its current resources, operational cash flow, and available credit facilities are sufficient to meet its liquidity needs for at least the next 12 months.