Brown & Brown, Inc. (NYSE:BRO) (the "Company") today announced
its unaudited financial results for the fourth quarter and full
year of 2020.
Revenues for the fourth quarter of 2020 under
U.S. generally accepted accounting principles ("GAAP") were $642.1
million, increasing $63.1 million, or 10.9%, compared to the fourth
quarter of the prior year, with commissions and fees increasing by
10.9% and Organic Revenue(1) increasing by 4.7%. Net income was
$97.3 million, increasing $20.8 million, or 27.2%, and diluted net
income per share increased to $0.34, or 25.9% as compared to the
fourth quarter of the prior year. Diluted Net Income Per Share -
Adjusted(2) increased to $0.32, or 14.3%, compared to the fourth
quarter of the prior year.
Revenues for the twelve months ended
December 31, 2020 under GAAP were $2,613.4 million, increasing
$221.2 million, or 9.2%, as compared to 2019, with commissions and
fees increasing by 9.3%, and Organic Revenue increasing by 3.8%.
Net income was $480.5 million, increasing $82.0 million, or 20.6%,
and diluted net income per share for the year increased to $1.69,
or 20.7%, each as compared to 2019. Diluted Net Income Per Share -
Adjusted increased to $1.67 or 19.3% compared to 2019.
J. Powell Brown, President and Chief Executive
Officer of the Company, noted, “We are very proud of our results in
a year that challenged everyone globally. We delivered good organic
growth and margin expansion for the quarter and the full year. Our
results are driven by nearly 11,000 dedicated teammates delivering
solutions to our customers worldwide. I would like to thank all of
our teammates for everything they did during the year.”
Reconciliation of Commissions and
Feesto Organic RevenueThree and
Twelve Months Ended December 31,
2020 and 2019(in millions, unaudited)
|
Three Months Ended |
|
Twelve Months Ended |
|
12/31/2020 |
|
12/31/2019 |
|
12/31/2020 |
|
12/31/2019 |
Commissions and fees |
$ |
640.0 |
|
|
$ |
577.0 |
|
|
$ |
2,606.1 |
|
|
$ |
2,384.7 |
|
Profit-sharing contingent commissions |
|
(14.6 |
) |
|
|
(17.7 |
) |
|
|
(70.9 |
) |
|
|
(59.2 |
) |
Guaranteed supplemental commissions |
|
(3.6 |
) |
|
|
(2.1 |
) |
|
|
(16.2 |
) |
|
|
(23.1 |
) |
Core commissions and
fees |
$ |
621.8 |
|
|
$ |
557.2 |
|
|
$ |
2,519.0 |
|
|
$ |
2,302.4 |
|
Acquisitions |
|
(40.4 |
) |
|
|
— |
|
|
|
(141.1 |
) |
|
|
— |
|
Dispositions |
|
— |
|
|
|
(2.1 |
) |
|
|
— |
|
|
|
(12.1 |
) |
Organic
Revenue |
$ |
581.4 |
|
|
$ |
555.1 |
|
|
$ |
2,377.9 |
|
|
$ |
2,290.3 |
|
Organic Revenue
growth |
$ |
26.3 |
|
|
|
|
|
|
$ |
87.6 |
|
|
|
|
|
Organic Revenue growth
% |
|
4.7 |
% |
|
|
|
|
|
|
3.8 |
% |
|
|
|
|
(1) "Organic Revenue," a non-GAAP measure, is
defined as commissions and fees less (i) the first twelve months of
commission and fee revenues generated from acquisitions, less (ii)
profit-sharing contingent commissions (revenues from insurance
companies based upon the volume and the growth and/or profitability
of the business placed with such companies during the prior year -
"contingents"), less (iii) guaranteed supplemental commissions
(commissions from insurance companies based solely upon the volume
of the business placed with such companies during the current year
- "GSCs"), and less (iv) divested business (net commissions and
fees generated from offices and books of business sold by the
Company) with the associated revenue removed from the corresponding
period of the prior year. Organic Revenue can be expressed as a
dollar amount or a percentage rate when describing Organic Revenue
growth. We view Organic Revenue and Organic Revenue growth as
important indicators when assessing and evaluating our performance
on a consolidated basis and for each of our segments, because it
allows us to determine a comparable, but non-GAAP, measurement of
revenue growth that is associated with the revenue sources that
were a part of our business in both the current and prior year and
that are expected to continue in the future.
Reconciliation of Diluted Net Income Per
Share toDiluted Net Income Per Share -
AdjustedThree and Twelve Months Ended December 31,
2020 and 2019(unaudited)
|
Three Months Ended |
|
Change |
|
Twelve Months Ended |
|
Change |
|
12/31/2020 |
|
12/31/2019 |
|
$ |
|
% |
|
12/31/2020 |
|
12/31/2019 |
|
$ |
|
% |
Diluted net income per share |
$ |
0.34 |
|
|
$ |
0.27 |
|
|
$ |
0.07 |
|
|
|
25.9 |
% |
|
$ |
1.69 |
|
|
$ |
1.40 |
|
|
$ |
0.29 |
|
|
|
20.7 |
% |
Change in estimated acquisition earn-out payables |
|
(0.02 |
) |
|
|
0.01 |
|
|
|
(0.03 |
) |
|
|
|
|
|
|
(0.02 |
) |
|
|
— |
|
|
|
(0.02 |
) |
|
|
|
|
Diluted Net Income Per
Share - Adjusted |
$ |
0.32 |
|
|
$ |
0.28 |
|
|
$ |
0.04 |
|
|
|
14.3 |
% |
|
$ |
1.67 |
|
|
$ |
1.40 |
|
|
$ |
0.27 |
|
|
|
19.3 |
% |
(2) "Diluted Net Income Per Share - Adjusted," a
non-GAAP measure, is defined as diluted net income per share,
excluding the change in estimated acquisition earn-out payables. We
believe Diluted Net Income Per Share - Adjusted provides a
meaningful representation of our operating performance and improves
the comparability of our results between periods by excluding the
impact of the change in estimated acquisition earn-out payables and
certain other non-recurring or infrequently occurring items that
have a high degree of variability from period-to-period and that we
believe are not indicative of the Company’s ongoing
performance.
Income before income taxes for the fourth
quarter of 2020 was $130.9 million, an increase of $28.9 million,
or 28.3%, and Income Before Income Taxes Margin(3) increased to
20.4% from 17.6% as compared to the fourth quarter of the prior
year.
In order to provide a better understanding of
our business, we evaluate EBITDAC(4) performance. We view EBITDAC
and EBITDAC Margin(5) as important indicators when assessing and
evaluating our performance, as they present more comparable, but
non-GAAP, measurements of our operating margins in a meaningful and
consistent manner. EBITDAC for the fourth quarter of 2020 was
$173.9 million, an increase of $17.7 million, or 11.3%, compared to
the fourth quarter of the prior year. EBITDAC Margin increased to
27.1% in the fourth quarter of 2020, as compared to 27.0% in the
same period of 2019.
Income before income taxes for twelve months
ended December 31, 2020 was $624.1 million, an increase of
$98.2 million, or 18.7%, compared to the same period of the prior
year. Income Before Income Taxes Margin increased to 23.9% from
22.0%, as compared to the fourth quarter of the prior year. EBITDAC
for the twelve months ended December 31, 2020 was $813.4
million, an increase of $96.5 million, or 13.5% as compared to
2019. EBITDAC Margin increased to 31.1% for the twelve months ended
December 31, 2020, as compared to 30.0% in 2019.
Reconciliation of Income Before Income
Taxes to EBITDAC andIncome Before Income Taxes
Margin to EBITDAC MarginThree and Twelve Months
Ended December 31, 2020 and 2019(in millions,
unaudited)
|
Three Months Ended |
|
Twelve Months Ended |
|
12/31/2020 |
|
12/31/2019 |
|
12/31/2020 |
|
12/31/2019 |
Income before income taxes |
$ |
130.9 |
|
|
$ |
102.0 |
|
|
$ |
624.1 |
|
|
$ |
525.9 |
|
Income Before Income
Taxes Margin |
|
20.4 |
% |
|
|
17.6 |
% |
|
|
23.9 |
% |
|
|
22.0 |
% |
Amortization |
|
28.3 |
|
|
|
26.9 |
|
|
|
108.5 |
|
|
|
105.3 |
|
Depreciation |
|
7.5 |
|
|
|
5.9 |
|
|
|
26.3 |
|
|
|
23.4 |
|
Interest |
|
16.7 |
|
|
|
15.9 |
|
|
|
59.0 |
|
|
|
63.7 |
|
Change in estimated acquisition earn-out payables |
|
(9.5 |
) |
|
|
5.5 |
|
|
|
(4.5 |
) |
|
|
(1.4 |
) |
EBITDAC |
|
173.9 |
|
|
|
156.2 |
|
|
|
813.4 |
|
|
|
716.9 |
|
EBITDAC
Margin |
|
27.1 |
% |
|
|
27.0 |
% |
|
|
31.1 |
% |
|
|
30.0 |
% |
(3) "Income Before Income Taxes Margin" is
defined as income before income taxes divided by total revenues.(4)
"EBITDAC," a non-GAAP measure, is defined as income before
interest, income taxes, depreciation, amortization and the change
in estimated acquisition earn-out payables.(5) "EBITDAC Margin," a
non-GAAP measure, is defined as EBITDAC divided by total
revenues.
Brown & Brown,
Inc.Consolidated Statements of Income(in
millions, except per share data; unaudited)
|
Three Months Ended |
|
Twelve Months Ended |
|
December 31, |
|
December 31, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions and fees |
$ |
640.0 |
|
|
$ |
577.0 |
|
|
$ |
2,606.1 |
|
|
$ |
2,384.7 |
|
Investment income |
|
1.0 |
|
|
|
1.5 |
|
|
|
2.8 |
|
|
|
5.8 |
|
Other income, net |
|
1.1 |
|
|
|
0.5 |
|
|
|
4.5 |
|
|
|
1.7 |
|
Total revenues |
|
642.1 |
|
|
|
579.0 |
|
|
|
2,613.4 |
|
|
|
2,392.2 |
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and
benefits |
|
377.4 |
|
|
|
334.6 |
|
|
|
1,436.4 |
|
|
|
1,308.2 |
|
Other operating expenses |
|
91.9 |
|
|
|
93.9 |
|
|
|
366.0 |
|
|
|
377.1 |
|
(Gain) on disposal |
|
(1.1 |
) |
|
|
(5.7 |
) |
|
|
(2.4 |
) |
|
|
(10.0 |
) |
Amortization |
|
28.3 |
|
|
|
26.9 |
|
|
|
108.5 |
|
|
|
105.3 |
|
Depreciation |
|
7.5 |
|
|
|
5.9 |
|
|
|
26.3 |
|
|
|
23.4 |
|
Interest |
|
16.7 |
|
|
|
15.9 |
|
|
|
59.0 |
|
|
|
63.7 |
|
Change in estimated
acquisition earn-out payables |
|
(9.5 |
) |
|
|
5.5 |
|
|
|
(4.5 |
) |
|
|
(1.4 |
) |
Total expenses |
|
511.2 |
|
|
|
477.0 |
|
|
|
1,989.3 |
|
|
|
1,866.3 |
|
Income before income
taxes |
|
130.9 |
|
|
|
102.0 |
|
|
|
624.1 |
|
|
|
525.9 |
|
Income taxes |
|
33.6 |
|
|
|
25.5 |
|
|
|
143.6 |
|
|
|
127.4 |
|
Net income |
$ |
97.3 |
|
|
$ |
76.5 |
|
|
$ |
480.5 |
|
|
$ |
398.5 |
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.34 |
|
|
$ |
0.27 |
|
|
$ |
1.70 |
|
|
$ |
1.42 |
|
Diluted |
$ |
0.34 |
|
|
$ |
0.27 |
|
|
$ |
1.69 |
|
|
$ |
1.40 |
|
Weighted average number of
shares outstanding - in thousands: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
275,914 |
|
|
|
272,607 |
|
|
|
274,334 |
|
|
|
272,471 |
|
Diluted |
|
277,398 |
|
|
|
274,814 |
|
|
|
275,867 |
|
|
|
274,616 |
|
Dividends declared per
share |
$ |
0.093 |
|
|
$ |
0.085 |
|
|
$ |
0.348 |
|
|
$ |
0.325 |
|
|
Brown & Brown,
Inc.Consolidated Balance Sheets(in
millions, except per share data, unaudited)
|
December 31, |
|
December 31, |
|
2020 |
|
2019 |
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
817.4 |
|
|
$ |
542.2 |
|
Restricted cash and investments |
|
454.5 |
|
|
|
420.8 |
|
Short-term investments |
|
18.3 |
|
|
|
12.3 |
|
Premiums, commissions and fees receivable |
|
1,099.2 |
|
|
|
942.9 |
|
Reinsurance recoverable |
|
43.5 |
|
|
|
58.5 |
|
Prepaid reinsurance premiums |
|
377.6 |
|
|
|
366.0 |
|
Other current assets |
|
147.7 |
|
|
|
152.1 |
|
Total current assets |
|
2,958.2 |
|
|
|
2,494.8 |
|
Fixed assets, net |
|
201.1 |
|
|
|
148.6 |
|
Operating lease assets |
|
187.0 |
|
|
|
184.3 |
|
Goodwill |
|
4,395.9 |
|
|
|
3,746.1 |
|
Amortizable intangible assets,
net |
|
1,049.7 |
|
|
|
916.8 |
|
Investments |
|
25.0 |
|
|
|
27.4 |
|
Other assets |
|
149.6 |
|
|
|
104.8 |
|
Total assets |
$ |
8,966.5 |
|
|
$ |
7,622.8 |
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Premiums payable to insurance companies |
$ |
1,198.5 |
|
|
$ |
1,014.3 |
|
Losses and loss adjustment reserve |
|
43.5 |
|
|
|
58.5 |
|
Unearned premiums |
|
377.6 |
|
|
|
366.0 |
|
Premium deposits and credits due customers |
|
102.5 |
|
|
|
113.8 |
|
Accounts payable |
|
190.5 |
|
|
|
100.0 |
|
Accrued expenses and other liabilities |
|
371.8 |
|
|
|
337.7 |
|
Current portion of long-term debt |
|
70.0 |
|
|
|
55.0 |
|
Total current liabilities |
|
2,354.4 |
|
|
|
2,045.3 |
|
Long-term debt |
|
2,025.9 |
|
|
|
1,500.3 |
|
Operating lease
liabilities |
|
172.9 |
|
|
|
167.9 |
|
Deferred income taxes,
net |
|
344.2 |
|
|
|
328.3 |
|
Other liabilities |
|
314.9 |
|
|
|
230.7 |
|
Shareholders’ equity: |
|
|
|
|
|
|
|
Common stock, par value $0.10 per share; authorized 560,000 shares;
issued 299,689 shares and outstanding 283,004 at 2020, issued
297,106 shares and outstanding 281,655 shares at 2019 - in
thousands. |
|
30.0 |
|
|
|
29.7 |
|
Additional paid-in capital |
|
794.9 |
|
|
|
716.0 |
|
Treasury stock, at cost 16,685 shares at 2020, 15,451 at 2019,
respectively - in thousands. |
|
(591.3 |
) |
|
|
(536.2 |
) |
Retained earnings |
|
3,520.6 |
|
|
|
3,140.8 |
|
Total shareholders’ equity |
|
3,754.2 |
|
|
|
3,350.3 |
|
Total liabilities and shareholders’ equity |
$ |
8,966.5 |
|
|
$ |
7,622.8 |
|
|
Brown & Brown,
Inc.Consolidated Statements of Cash
Flows(in millions, unaudited)
|
Twelve Months Ended December 31, |
|
2020 |
|
2019 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income |
$ |
480.5 |
|
|
$ |
398.5 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Amortization |
|
108.5 |
|
|
|
105.3 |
|
Depreciation |
|
26.3 |
|
|
|
23.4 |
|
Non-cash stock-based compensation |
|
59.7 |
|
|
|
47.0 |
|
Change in estimated acquisition earn-out payables |
|
(4.5 |
) |
|
|
(1.4 |
) |
Deferred income taxes |
|
15.9 |
|
|
|
12.3 |
|
Amortization of debt discount and disposal of deferred financing
costs |
|
2.3 |
|
|
|
2.1 |
|
Net (gain)/loss on sales of investments, fixed assets and customer
accounts |
|
(0.8 |
) |
|
|
(9.6 |
) |
Payments on acquisition earn-outs in excess of original estimated
payables |
|
(4.5 |
) |
|
|
(0.4 |
) |
Changes in operating assets
and liabilities, net of effect from acquisitions and
divestitures: |
|
|
|
|
|
|
|
Premiums, commissions and fees receivable (increase)/decrease |
|
(135.4 |
) |
|
|
(86.8 |
) |
Reinsurance recoverables (increase)/decrease |
|
15.0 |
|
|
|
6.9 |
|
Prepaid reinsurance premiums (increase)/decrease |
|
(11.6 |
) |
|
|
(28.1 |
) |
Other assets (increase)/decrease |
|
(42.7 |
) |
|
|
(46.5 |
) |
Premiums payable to insurance companies increase/(decrease) |
|
158.8 |
|
|
|
148.7 |
|
Premium deposits and credits due customers increase/(decrease) |
|
(12.9 |
) |
|
|
7.8 |
|
Losses and loss adjustment reserve increase/(decrease) |
|
(15.0 |
) |
|
|
(6.7 |
) |
Unearned premiums increase/(decrease) |
|
11.6 |
|
|
|
28.1 |
|
Accounts payable increase/(decrease) |
|
107.8 |
|
|
|
17.9 |
|
Accrued expenses and other liabilities increase/(decrease) |
|
34.7 |
|
|
|
43.3 |
|
Other liabilities increase/(decrease) |
|
(72.1 |
) |
|
|
16.4 |
|
Net cash provided by operating activities |
|
721.6 |
|
|
|
678.2 |
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
Additions to fixed assets |
|
(70.7 |
) |
|
|
(73.1 |
) |
Payments for businesses
acquired, net of cash acquired |
|
(694.8 |
) |
|
|
(353.0 |
) |
Proceeds from sales of fixed
assets and customer accounts |
|
9.6 |
|
|
|
21.6 |
|
Purchases of investments |
|
(14.2 |
) |
|
|
(17.5 |
) |
Proceeds from sales of
investments |
|
11.0 |
|
|
|
8.4 |
|
Net cash used in investing activities |
|
(759.1 |
) |
|
|
(413.6 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
|
Payments on acquisition
earn-outs |
|
(25.0 |
) |
|
|
(9.6 |
) |
Proceeds from long-term
debt |
|
700.0 |
|
|
|
350.0 |
|
Payments on long-term
debt |
|
(55.0 |
) |
|
|
(50.0 |
) |
Deferred debt issuance
costs |
|
(6.7 |
) |
|
|
(3.7 |
) |
Borrowings on revolving credit
facilities |
|
250.0 |
|
|
|
100.0 |
|
Payments on revolving credit
facilities |
|
(350.0 |
) |
|
|
(350.0 |
) |
Issuances of common stock for
employee stock benefit plans |
|
30.1 |
|
|
|
25.0 |
|
Repurchase shares to fund tax
withholdings for non-cash stock-based compensation |
|
(41.3 |
) |
|
|
(10.9 |
) |
Purchase of treasury
stock |
|
(55.1 |
) |
|
|
(58.7 |
) |
Settlement of accelerated
share repurchase program |
|
— |
|
|
|
20.0 |
|
Cash dividends paid |
|
(100.6 |
) |
|
|
(91.3 |
) |
Net cash provided by/(used in) financing
activities |
|
346.4 |
|
|
|
(79.2 |
) |
Net increase in cash and cash equivalents inclusive of
restricted cash |
|
308.9 |
|
|
|
185.4 |
|
Cash and cash equivalents
inclusive of restricted cash at beginning of period |
|
963.0 |
|
|
|
777.6 |
|
Cash and cash equivalents inclusive of restricted cash at
end of period |
$ |
1,271.9 |
|
|
$ |
963.0 |
|
Conference call, webcast and slide
presentation
A conference call to discuss the results of the
fourth quarter and full year of 2020 will be held on Tuesday,
January 26, 2021 at 8:00 AM (EST). The Company may refer to a slide
presentation during its conference call. You can access the webcast
and the slides from the "Investor Relations" section of the
Company’s website at www.bbinsurance.com.
About Brown & Brown
Brown & Brown, Inc. (NYSE: BRO) is a leading
insurance brokerage firm, providing risk management solutions to
individuals and businesses. With more than 80 years of proven
success and thousands of teammates, we offer knowledge you can
trust and strive to deliver superior customer service. For more
information, please visit www.bbinsurance.com.
Forward-looking statements
This press release may contain certain
statements relating to future results which are “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934,
which are intended to be covered by the safe harbors created by
those laws. These forward-looking statements include those relating
to the Company's anticipated financial results for the fourth
quarter and full year of 2020 and the potential effects of the
COVID-19 pandemic (“COVID-19”) on the Company’s business,
operations, financial performance and prospects. These statements
are not historical facts, but instead represent only the Company's
current belief regarding future events, many of which, by their
nature, are inherently uncertain and outside of the Company's
control. It is possible that the Company's actual results,
financial condition and achievements may differ, possibly
materially, from the anticipated results, financial condition and
achievements contemplated by these forward-looking statements.
Further, statements about the effects of COVID-19 on our business,
operations, financial performance and prospects may constitute
forward-looking statements and are subject to the risk that the
actual impacts may differ, possibly materially, from what is
reflected in those forward-looking statements due to factors and
future developments that are uncertain, unpredictable and in many
cases beyond our control, including the scope and duration of
COVID-19, actions taken by governmental authorities in response to
COVID-19, and the direct and indirect impact of COVID-19 on our
customers, insurance carriers, third parties and us. These risks
and uncertainties include, but are not limited to, COVID-19 and the
resulting governmental and societal responses, the severity and
duration of COVID-19, and the resulting impact on the U.S. economy,
the global economy, and the Company's business, liquidity,
customers, insurance carriers and third parties; the Company's
determination as it finalizes its financial results for the fourth
quarter and full year of 2020 that its financial results differ
from the current preliminary unaudited numbers set forth herein;
the inability to retain or hire qualified employees, as well as the
loss of any of our executive officers or other key employees;
acquisition-related risks that could negatively affect the success
of our growth strategy, including the possibility that we may not
be able to successfully identify suitable acquisition candidates,
complete acquisitions, integrate acquired businesses into our
operations and expand into new markets; a cybersecurity attack or
any other interruption in information technology and/or data
security and/or outsourcing relationships; the requirement for
additional resources and time to adequately respond to dynamics
resulting from rapid technological change; changes in data privacy
and protection laws and regulations or any failure to comply with
such laws and regulations; the loss of or significant change to any
of our insurance company relationships, which could result in
additional expense, loss of market share or material decrease in
our profit-sharing contingent commissions, guaranteed supplemental
commissions or incentive commissions; adverse economic conditions,
natural disasters, or regulatory changes in states where we have a
high concentration of our business; the inability to maintain our
culture or a change in management, management philosophy or our
business strategy; risks facing us in our Services Segment,
including our third-party claims administration operations, that
are distinct from those we face in our insurance intermediary
operations; our failure to comply with any covenants contained in
our debt agreements; the possibility that covenants in our debt
agreements could prevent us from engaging in certain potentially
beneficial activities; changes in estimates, judgments or
assumptions used in the preparation of our financial statements;
improper disclosure of confidential information; the limitations of
our system of disclosure and internal controls and procedures in
preventing errors or fraud, or in informing management of all
material information in a timely manner; the potential adverse
effect of certain actual or potential claims, regulatory actions or
proceedings on our businesses, results of operations, financial
condition or liquidity; changes in the U.S.-based credit markets
that might adversely affect our business, results of operations and
financial condition; the significant control certain existing
shareholders have over the Company; risks related to our
international operations, which may require more time and expense
than our domestic operations to achieve or maintain profitability;
risks associated with the current interest rate environment and to
the extent we use debt to finance our investments, changes in
interest rates will affect our cost of capital and net investment
income; disintermediation within the insurance industry, including
increased competition from insurance companies, technology
companies and the financial services industry, as well as the shift
away from traditional insurance markets; changes in current U.S. or
global economic conditions; effects related to pandemics,
epidemics, or outbreaks of infectious diseases; conditions that
result in reduced insurer capacity; quarterly and annual variations
in our commissions that result from the timing of policy renewals
and the net effect of new and lost business production; the
possibility that one of the financial institutions we use fails or
is taken over by the U.S. Federal Deposit Insurance Corporation
(FDIC); uncertainty in our business practices and compensation
arrangements due to potential changes in regulations; regulatory
changes that could reduce our profitability or growth by increasing
compliance costs, technology compliance, restricting the products
or services we may sell, the markets we may enter, the methods by
which we may sell our products and services, or the prices we may
charge for our services and the form of compensation we may accept
from our customers, carriers and third-parties; intangible asset
risk, including the possibility that our goodwill may become
impaired in the future; a decrease in demand for liability
insurance as a result of tort reform litigation; changes in our
credit ratings; volatility in our stock price; other risks and
uncertainties as may be detailed from time to time in our public
announcements and Securities and Exchange Commission filings; and
other factors that the Company may not have currently identified or
quantified. All forward-looking statements made herein are made
only as of the date of this release, and the Company does not
undertake any obligation to publicly update or correct any
forward-looking statements to reflect events or circumstances that
subsequently occur or of which the Company hereafter becomes
aware.
Non-GAAP supplemental financial
information
This press release contains references to the
following non-GAAP financial measures as defined in Regulation G of
SEC rules: Organic Revenue, Diluted Net Income Per Share -
Adjusted, EBITDAC and EBITDAC Margin.
Reconciliations of these supplemental non-GAAP
financial information to the Company's GAAP information are
contained in this earnings release. These measures are not in
accordance with, or an alternative to the GAAP information provided
in the Company's condensed consolidated financial statements.
We present such non-GAAP supplemental financial information
because we believe such information is of interest to the
investment community and because we believe it provides additional
meaningful methods of evaluating certain aspects of the Company's
operating performance from period to period on a basis that may not
be otherwise apparent on a GAAP basis. We believe these non-GAAP
measures improve the comparability of results between periods by
excluding the impact of certain items that have a high degree of
variability. We believe that Organic Revenue provides a
meaningful representation of the Company's operating performance;
the Company has historically viewed Organic Revenue growth as an
important indicator when assessing and evaluating the performance
of its four segments. We believe Diluted Net Income Per Share
- Adjusted provides a meaningful representation of our operating
performance and improves the comparability of our results between
periods by excluding the impact of the change in estimated
acquisition earn-out payables and certain other non-recurring or
infrequently occurring items that have a high degree of variability
from period-to-period and that we believe are not indicative of the
Company's ongoing performance. We view EBITDAC and EBITDAC Margin
as important indicators when assessing and evaluating our
performance, as they present more comparable measurements of our
operating margins in a meaningful and consistent manner. As
disclosed in our most recent proxy statement, we use Organic
Revenue and EBITDAC Margin for incentive compensation
determinations for executive officers and other key employees.
Our industry peers may provide similar
supplemental non-GAAP information with respect to one or
more of these measures, although they may not use the same or
comparable terminology and may not make identical adjustments.
This supplemental non-GAAP financial information should be
considered in addition to, and not in lieu of, the Company's
condensed consolidated financial statements.
R. Andrew WattsChief Financial Officer(386)
239-5770
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