How strong was Brown & Brown's organic growth in Q2 2024?

Organic Revenue grew 10.0% in Q2 2024 to $1.074 billion, versus $976 million a year earlier. For the first six months, Organic Revenue grew 9.3% to $2.223 billion. Organic Revenue excludes acquisitions, divestitures, and foreign currency translation, so it is the best measure of underlying growth from the existing book of business.

Did profitability improve, and what drove it?

Yes. Income before income taxes rose 36.2% to $346 million, and the pre-tax margin expanded to 29.4% from 24.3%. EBITDAC - Adjusted margin increased to 35.7% from 34.2%. Part of the GAAP improvement came from a $31 million gain on disposal in the quarter, which the company excludes from its adjusted measures. Adjusted EPS growth of 17.7% is the better gauge of operating performance.

Why are the adjusted and GAAP EPS growth rates different?

GAAP diluted EPS rose 34.3% to $0.90, while adjusted diluted EPS rose 17.7% to $0.93. The gap is mainly due to the $0.08 per-share gain on disposal, which is excluded from adjusted EPS. Adjusted EPS also excludes amortization of intangible assets, a non-cash charge that is now excluded starting January 1, 2024, with prior periods recast for comparability.

Did the company change how it reports non-GAAP results?

Yes. Effective January 1, 2024, Brown & Brown stopped excluding foreign currency translation from EBITDAC - Adjusted, EBITDAC Margin - Adjusted, and Diluted EPS - Adjusted. It also began excluding amortization of intangibles from Diluted EPS - Adjusted. Prior periods were restated on the same basis, so the reported growth rates are comparable, but investors should compare these figures with older company disclosures carefully.

How did the balance sheet and cash flow change in the first half of 2024?

Total assets grew to $15.9 billion from $14.9 billion at year-end 2023, with goodwill rising to $7.4 billion. Total debt increased to about $4.1 billion, partly from $599 million of new long-term debt proceeds. Operating cash flow was $373 million, slightly lower than $388 million a year earlier, and cash dividends paid were $75 million.

BRO 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed July 22, 2024. Cited figures are marked; the original filing is the authoritative source.

Brown & Brown, Inc. (NYSE: BRO) reported second quarter 2024 results on July 22, 2024, showing strong top-line and profitability growth.

GAAP total revenues were $1.18 billion^a, up 12.5% year over year, with commissions and fees up 11.4% and Organic Revenue growth of 10.0%. Income before income taxes rose 36.2% to $346 million, and the pre-tax margin expanded to 29.4% from 24.3%. Net income attributable to the company increased 35.3% to $257 million, and diluted EPS rose to $0.90 from $0.67.

Adjusted diluted EPS was $0.93^b, up 17.7%, and EBITDAC - Adjusted rose 17.3% to $420 million with the margin improving to 35.7% from 34.2%. For the first six months of 2024, revenues were $2.44 billion (up 12.6%), Organic Revenue grew 9.3%, and diluted EPS was $1.92 (up 28.0%). Adjusted diluted EPS was $2.07, up 18.3%.

Part of the reported growth is driven by acquisitions and by a gain on disposal of $31 million^c in the quarter, which the company excludes from its adjusted measures. Management also changed its non-GAAP definitions effective January 1, 2024: it no longer excludes foreign currency translation from adjusted EBITDAC or adjusted EPS, and it now excludes amortization of intangibles from adjusted EPS. Prior periods were recast to match, so the comparisons remain like-for-like.

Investors should note that the company's CEO highlighted that all three segments delivered strong quarters. Balance sheet and cash flow data show a larger asset base, with total assets of $15.9 billion^d at June 30, 2024, up from $14.9 billion at year-end 2023, driven partly by higher goodwill and cash. Total debt (current plus long-term) rose to about $4.1 billion from $3.8 billion, reflecting $599 million of new long-term debt proceeds in the first half.

Operating cash flow was $373 million for the six months, down from $388 million a year earlier. Cash dividends paid were $75 million.

Management scheduled a conference call for July 23, 2024, at 8:00 AM EDT. This filing is a Form 8-K furnishing earnings information under Item 2.02, so the results are not deemed filed under Section 18 of the Exchange Act.

02—Key points

Key Highlights

Q2 2024 GAAP total revenues of $1.18 billion, up 12.5% year over year; Organic Revenue growth of 10.0%
Income before income taxes of $346 million, up 36.2%, with pre-tax margin expanding to 29.4% from 24.3%
Diluted EPS of $0.90 (up 34.3%); Diluted EPS - Adjusted of $0.93 (up 17.7%)
EBITDAC - Adjusted of $420 million (up 17.3%), with margin improving to 35.7% from 34.2%
First-half 2024 Organic Revenue growth of 9.3%, with diluted EPS of $1.92 (up 28.0%)
Non-GAAP definition changes effective January 1, 2024: foreign currency translation no longer excluded from adjusted metrics, and amortization excluded from adjusted EPS (prior periods recast)
Total debt rose to about $4.1 billion, including $599 million of new long-term debt proceeds in the first half, while operating cash flow was $373 million for the six months

03—Questions

Frequently Asked Questions

How strong was Brown & Brown's organic growth in Q2 2024?
Organic Revenue grew 10.0% in Q2 2024 to $1.074 billion, versus $976 million a year earlier. For the first six months, Organic Revenue grew 9.3% to $2.223 billion. Organic Revenue excludes acquisitions, divestitures, and foreign currency translation, so it is the best measure of underlying growth from the existing book of business.
Did profitability improve, and what drove it?
Yes. Income before income taxes rose 36.2% to $346 million, and the pre-tax margin expanded to 29.4% from 24.3%. EBITDAC - Adjusted margin increased to 35.7% from 34.2%. Part of the GAAP improvement came from a $31 million gain on disposal in the quarter, which the company excludes from its adjusted measures. Adjusted EPS growth of 17.7% is the better gauge of operating performance.
Why are the adjusted and GAAP EPS growth rates different?
GAAP diluted EPS rose 34.3% to $0.90, while adjusted diluted EPS rose 17.7% to $0.93. The gap is mainly due to the $0.08 per-share gain on disposal, which is excluded from adjusted EPS. Adjusted EPS also excludes amortization of intangible assets, a non-cash charge that is now excluded starting January 1, 2024, with prior periods recast for comparability.
Did the company change how it reports non-GAAP results?
Yes. Effective January 1, 2024, Brown & Brown stopped excluding foreign currency translation from EBITDAC - Adjusted, EBITDAC Margin - Adjusted, and Diluted EPS - Adjusted. It also began excluding amortization of intangibles from Diluted EPS - Adjusted. Prior periods were restated on the same basis, so the reported growth rates are comparable, but investors should compare these figures with older company disclosures carefully.
How did the balance sheet and cash flow change in the first half of 2024?
Total assets grew to $15.9 billion from $14.9 billion at year-end 2023, with goodwill rising to $7.4 billion. Total debt increased to about $4.1 billion, partly from $599 million of new long-term debt proceeds. Operating cash flow was $373 million, slightly lower than $388 million a year earlier, and cash dividends paid were $75 million.

04—Continue

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