Brown & Brown Announces Q2 Results, Revenue Tops $1B

Revenues for the second quarter of 2023 under U.S. generally accepted accounting principles (“GAAP”) were $1,047.3 million, increasing $207.6 million, or 24.7%, compared to the second quarter of the prior year, with commissions and fees increasing by 23.5% and Organic Revenue increasing by 11.2%. Income before income taxes was $254.4 million, increasing 28.0% from the second quarter of the prior year with Income Before Income Taxes Margin increasing to 24.3% from 23.7%. EBITDAC – Adjusted was $358.4 million, increasing 30.5% from the second quarter of the prior year with EBITDAC Margin – Adjusted increasing to 34.2% from 32.7%. Net income was $190.4 million, increasing $45.2 million, or 31.1%, and diluted net income per share increased to $0.67, or 31.4%, with Diluted Net Income Per Share – Adjusted increasing to $0.68, or 33.3%, each as compared to the second quarter of the prior year.

Revenues for the six months ended June 30, 2023 under GAAP were $2,163.3 million, increasing $418.8 million, or 24.0%, as compared to the same period in 2022, with commissions and fees increasing by 23.0%, and Organic Revenue increasing by 11.9%. Income before income taxes was $548.6 million, increasing 18.3% with Income Before Income Taxes Margin decreasing to 25.4% from 26.6% as compared to the same period in 2022. EBITDAC – Adjusted was $756.6 million, which was an increase of 26.5% and EBITDAC Margin – Adjusted increased to 35.0% from 34.3% as compared to the same period in 2022. Net income was $425.9 million, increasing $60.4 million, or 16.5%, with diluted net income per share increasing to $1.50, or 16.3%, and Diluted Net Income Per Share – Adjusted increasing to $1.52, or 18.8%, each as compared to the same period in 2022.

J. Powell Brown, president and chief executive officer of the company, noted, “We delivered another outstanding quarter of strong and profitable growth. This performance capped off a great first half of the year with significant momentum going into the second half.”

Conference call, webcast and slide presentation

A conference call to discuss the results of the second quarter of 2023 will be held on Tuesday, July 25, 2023, at 8:00 AM (EDT). 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 bbinsurance.com.

Reconciliation of Commissions and Fees to Organic Revenue
(in millions, unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Commissions and fees $ 1,035.9 $ 838.7 $ 2,143.9 $ 1,743.1
Profit-sharing contingent commissions (33.6 ) (22.1 ) (60.4 ) (50.7 )
Core commissions and fees $ 1,002.3 $        816.6 $ 2,083.5 $ 1,692.4
Acquisitions (108.0 ) (221.9 )
Dispositions (12.0 ) (27.6 )
Foreign Currency Translation (0.1 ) (0.8 )
Organic Revenue $ 894.3 $        804.5 $ 1,861.6 $ 1,664.0
Organic Revenue growth $ 89.8 $ 197.6
Organic Revenue growth % 11.2 % 11.9 %

See information regarding non-GAAP measures presented later in this press release.

Reconciliation of Diluted Net Income Per Share to Diluted Net Income Per Share – Adjusted (unaudited)
Three Months Ended
Six Months Ended
June 30,
Change
June 30,
Change
2023
2022
$
%
2023
2022
$
%
Diluted net income per share $         0.67 $         0.51 $ 0.16 31.4 %  $ 1.50 $ 1.29 $ 0.21 16.3 %
Change in estimated acquisition earn-out payables (0.01 ) (0.02 ) 0.01
(Gain)/loss on disposal (0.02 ) (0.02 )
Acquisition/Integration Costs 0.01 0.01 0.02 0.01 0.01
1Q23 Nonrecurring Cost 0.03 0.03
Foreign Currency Translation (1)
Diluted Net Income Per Share – Adjusted $         0.68 $         0.51 $ 0.17 33.3 % $ 1.52 $ 1.28 $ 0.24 18.8 %

(1) Immaterial Foreign Currency Translation for the three and six months ended June 30.

See information regarding non-GAAP measures presented later in this press release.

Reconciliation of Total Revenues to Total Revenues – Adjusted, Income Before Income Taxes to EBITDAC and EBITDAC – Adjusted and Income Before Income Taxes Margin to EBITDAC Margin and EBITDAC Margin – Adjusted
(in millions, unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Total revenues $         1,047.3 $         839.7 $         2,163.3 $         1,744.5
Foreign Currency Translation (0.7 )
Total Revenues – Adjusted $         1,047.3 $         839.7 $         2,163.3 $         1,743.8
Income before income taxes $         254.4 $         198.8 $         548.6 $         463.9
Income Before Income Taxes Margin 24.3 % 23.7 % 25.4 % 26.6 %
Amortization 41.2 33.6 82.6 64.7
Depreciation 10.2 8.9 20.1 17.1
Interest 47.9 36.0 94.6 54.3
Change in estimated acquisition earn-out payables 1.8 (3.0 ) (0.5 ) (6.4 )
EBITDAC $         355.5 $         274.3 $         745.4 $         593.6
EBITDAC Margin 33.9 % 32.7 % 34.5 % 34.0 %
(Gain)/loss on disposal (0.4 ) (0.7 ) (6.1 ) (0.9 )
Acquisition/Integration Costs 3.3 1.1 6.3 5.5
1Q23 Nonrecurring Cost 11.0
Foreign Currency Translation (0.2 )
EBITDAC – Adjusted $         358.4 $         274.7 $         756.6 $         598.0
EBITDAC Margin – Adjusted 34.2 % 32.7 % 35.0 % 34.3 %

See information regarding non-GAAP measures presented later in this press release.

Brown & Brown, Inc.
Consolidated Statements of Income
(in millions, except per share data; unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2023
2022
2023
2022
REVENUES
Commissions and fees $ 1,035.9 $ 838.7 $ 2,143.9 $ 1,743.1
Investment income 10.3 0.4 17.3 0.6
Other 1.1 0.6 2.1 0.8
Total revenues 1,047.3 839.7 2,163.3 1,744.5
EXPENSES
Employee compensation and benefits 530.2 412.1 1,101.3 871.0
Other operating expenses 162.0 154.0 322.7 280.8
(Gain)/loss on disposal (0.4 ) (0.7 (6.1 ) (0.9 )
Amortization 41.2 33.6 82.6 64.7
Depreciation 10.2 8.9 20.1 17.1
Interest 47.9 36.0 94.6 54.3
Change in estimated acquisition earn-out payables 1.8 (3.0 ) (0.5 ) (6.4 )
Total expenses 792.9 640.9 1,614.7 1,280.6
Income before income taxes 254.4 198.8 548.6 463.9
Income taxes 64.0 53.6 122.7 98.4
Net income $ 190.4 $ 145.2 $ 425.9 $ 365.5
Net income per share:
Basic $ 0.67 $ 0.51 $ 1.50 $ 1.29
Diluted $ 0.67 $ 0.51 $ 1.50 $ 1.29
Weighted average number of shares outstanding:
Basic 279.4 277.2 279.0 277.1
Diluted 280.5 278.2 279.9 278.4
Dividends declared per share $ 0.115 $ 0.103 $ 0.230 $ 0.205
Brown & Brown, Inc.
Consolidated Balance Sheets
(in millions, except per share data, unaudited)
June 30,
2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents $ 627.9 $ 650.0
Fiduciary cash 1,635.5 1,383.2
Short-term investments 10.1 12.0
Commission, fees, and other receivable 751.3 642.9
Fiduciary receivables 1,005.0 881.4
Reinsurance recoverable 187.2 831.0
Prepaid reinsurance premiums 450.6 393.2
Other current assets 227.3 202.3
Total current assets 4,894.9 4,996.0
Fixed assets, net 244.7 239.9
Operating lease assets 204.9 214.9
Goodwill 6,865.1 6,674.2
Amortizable intangible assets, net 1,562.5 1,595.2
Investments 27.5 22.4
Other assets 271.9 230.9
Total assets $ 14,071.5 $ 13,973.5
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Fiduciary liabilities $ 2,640.5 $ 2,264.6
Losses and loss adjustment reserve 198.8 841.1
Unearned premiums 487.5 412.3
Accounts payable 329.1 286.5
Accrued expenses and other liabilities 448.6 541.5
Current portion of long-term debt 53.1 250.6
Total current liabilities 4,157.6 4,596.6
Long-term debt 3,762.4 3,691.5
Operating lease liabilities 186.0 195.9
Deferred income taxes, net 571.9 584.0
Other liabilities 321.1 298.9
Shareholders’ equity:
Common stock, par value $0.10 per share; authorized 560.0 shares; issued 303.3 shares and outstanding 283.6 shares at 2023, issued 302.9 shares and outstanding
283.2 shares at 2022, respectively
30.3 30.3
Additional paid-in capital 927.1 919.7
Treasury stock, at cost 19.7 shares at 2023, 19.7 shares at 2022, respectively. (748.1 ) (748.0 )
Accumulated other comprehensive loss (50.5 ) (148.4 )
Retained earnings 4,913.7 4,553.0
Total shareholders’ equity 5,072.5 4,606.6
Total liabilities and shareholders’ equity $ 14,071.5 $ 13,973.5
Brown & Brown, Inc.
Consolidated Statements of Cash Flows
(in millions, unaudited)
Six Months Ended June 30,
2023 2022
Cash flows from operating activities:
Net income $ 425.9 $ 365.5
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization 82.6 64.7
Depreciation 20.1 17.1
Non-cash stock-based compensation 45.2 34.0
Change in estimated acquisition earn-out payables (0.5 ) (6.4 )
Deferred income taxes 2.4 26.6
Amortization of debt discount and disposal of deferred financing costs 2.2 1.8
Net (gain)/loss on sales/disposals of investments, fixed assets and customer accounts (5.5 ) (0.5 )
Payments on acquisition earn-outs in excess of original estimated payables (17.7 ) (23.4 )
Effect of changes in foreign exchange rate 0.2 (0.2 )
Changes in operating assets and liabilities, net of effect from acquisitions and
divestitures:
Commissions and fees receivable (increase)/decrease (103.0 ) (78.3 )
Reinsurance recoverables (increase)/decrease 643.8 28.4
Prepaid reinsurance premiums (increase)/decrease (57.4 ) 6.8
Other assets (increase)/decrease (56.1 ) (52.8 )
Losses and loss adjustment reserve increase/(decrease) (642.3 ) (28.4 )
Unearned premiums increase/(decrease) 75.1 16.2
Accounts payable increase/(decrease) 101.4 101.3
Accrued expenses and other liabilities increase/(decrease) (100.0 ) (46.9 )
Other liabilities increase/(decrease) (27.9 ) (79.3 )
Net cash provided by operating activities 388.5 346.2
Cash flows from investing activities:
Additions to fixed assets (25.1 ) (18.3 )
Payments for businesses acquired, net of cash acquired (115.3 ) (457.2 )
Proceeds from sales of fixed assets and customer accounts 6.0 4.4
Purchases of investments (6.2 )
Proceeds from sales of investments 5.9 3.6
Net cash used in investing activities (134.7 ) (467.5 )
Cash flows from financing activities:
Fiduciary receivables and liabilities, net 223.9 89.3
Payments on acquisition earn-outs (45.9 ) (43.1 )
Proceeds from long-term debt 2,000.0
Payments on long-term debt (228.8 ) (27.5 )
Deferred debt issuance costs (23.3 )
Borrowings on revolving credit facilities 170.0 350.0
Payments on revolving credit facilities (70.0 ) (100.0 )
Issuances of common stock for employee stock benefit plans 1.6 0.9
Repurchase shares to fund tax withholdings for non-cash stock-based compensation (39.0 ) (48.4 )
Purchase of treasury stock (0.1 ) (74.1 )
Cash dividends paid (65.2 ) (57.9 )
Net cash (used in)/provided by financing activities (53.5 ) 2,065.9
Effect of foreign exchange rate changes in cash and cash equivalents inclusive of fiduciary cash

29.9

(127.3

)

Net increase in cash and cash equivalents inclusive of fiduciary cash 230.2 1,817.3
Cash and cash equivalents inclusive of fiduciary cash at beginning of period 2,033.2 1,470.2
Cash and cash equivalents inclusive of fiduciary cash at end of period $ 2,263.4 $ 3,287.5

Source: https://rvbusiness.com/brown-brown-announces-q2-results-revenue-tops-1b/