false000007928200000792822023-04-242023-04-24

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 24, 2023

BROWN & BROWN, INC.

(Exact name of registrant as specified in its charter)

 

Florida		001-13619		59-0864469
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

300 North Beach Street, Daytona Beach, Florida 32114

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (386) 252-9601

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.10 Par Value	BRO	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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Item 2.02 Results of Operations and Financial Condition.

On April 24, 2023, Brown & Brown, Inc. issued a press release announcing its results of operations for the first quarter ended March 31, 2023. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.

The information furnished herewith pursuant to Item 2.02 of this Current Report, including Exhibit 99.1, shall not be deemed to be filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this current report shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

The following exhibit is furnished herewith:

 

Exhibit No.		Description
99.1		Press Release dated April 24, 2023.
104		Cover Page Interactive Data File (formatted as inline XBRL).

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: April 24, 2023

 

BROWN & BROWN, INC.

(Registrant)

By:

/s/ R. Andrew Watts

R. Andrew Watts, Executive Vice President, Chief Financial Officer and Treasurer

 

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Exhibit 99.1

 

 

 

Brown & Brown, Inc. announces first quarter 2023 results,

including total revenues of $1,116.0 million, an increase of 23.4%; Organic Revenue growth of 12.6%;

diluted net income per share of $0.83; Diluted Net Income Per Share - Adjusted of $0.84;

and a quarterly dividend of $0.1150 per share

DAYTONA BEACH, Fla., April 24, 2023 - Brown & Brown, Inc. (NYSE:BRO) (the "Company") today announced its unaudited financial results for the first quarter of 2023.

Revenues for the first quarter of 2023 under U.S. generally accepted accounting principles ("GAAP") were $1,116.0 million, increasing $211.3 million, or 23.4%, compared to the first quarter of the prior year, with commissions and fees increasing by 22.5% and Organic Revenue increasing by 12.6%. Income before income taxes was $294.2 million, increasing 11.0% from the first quarter of the prior year with Income Before Income Taxes Margin decreasing to 26.4% from 29.3%. EBITDAC - Adjusted was $398.2 million, increasing 23.2% from the first quarter of the prior year with EBITDAC Margin - Adjusted of 35.7% for both periods. Net income was $235.5 million, increasing $15.2 million, or 6.9%, and diluted net income per share increased to $0.83, or 7.8%, with Diluted Net Income Per Share - Adjusted increasing to $0.84, or 7.7%, as compared to the first quarter of the prior year.

 

J. Powell Brown, president and chief executive officer of the Company, noted, “The first quarter was an outstanding start to the year, and we delivered good profitable growth. We continue to leverage the collective capabilities of Brown & Brown to deliver innovative solutions for our customers. I want to thank all of our teammates for their great efforts in delivering these results.”

 

In addition, the Company today announced that the Board of Directors has declared a regular quarterly cash dividend of $0.1150 per share. The dividend is payable on May 17, 2023, to shareholders of record on May 8, 2023.

 

 

 

 

 

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Reconciliation of Commissions and Fees

to Organic Revenue

(in millions, unaudited)

 

		Three Months Ended March 31,
		2023				2022
Commissions and fees		$	1,108.0			$	904.3
Profit-sharing contingent commissions			(26.8	)			(28.6	)
Core commissions and fees		$	1,081.2			$	875.7
Acquisitions			(113.9	)			—
Dispositions			—				(15.6	)
Foreign Currency Translation							(0.7	)
Organic Revenue		$	967.3			$	859.4
Organic Revenue growth		$	107.9
Organic Revenue growth %			12.6	%

 

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 March 31,								Change
		2023				2022				$				%
Diluted net income per share		$	0.83			$	0.77			$	0.06				7.8	%
Change in estimated acquisition earn-out payables			(0.01	)			(0.01	)			—
(Gain)/loss on disposal			(0.02	)			—				(0.02	)
Acquisition/Integration Costs			0.01				0.02				(0.01	)
1Q23 Nonrecurring Cost			0.03								0.03
Foreign Currency Translation							—				—
Diluted Net Income Per Share - Adjusted		$	0.84			$	0.78			$	0.06				7.7	%

 

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

 

 

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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 March 31,
		2023				2022
Total revenues		$	1,116.0			$	904.7
Foreign Currency Translation							(0.7	)
Total Revenues - Adjusted		$	1,116.0			$	904.0
Income before income taxes		$	294.2			$	265.0
Income Before Income Taxes Margin			26.4	%			29.3	%
Amortization			41.4				31.1
Depreciation			9.9				8.1
Interest			46.7				18.3
Change in estimated acquisition earn-out payables			(2.3	)			(3.4	)
EBITDAC		$	389.9			$	319.1
EBITDAC Margin			34.9	%			35.3	%
(Gain)/loss on disposal			(5.7	)			(0.2	)
Acquisition/Integration Costs			3.0				4.4
1Q23 Nonrecurring Cost			11.0
Foreign Currency Translation							(0.2	)
EBITDAC - Adjusted		$	398.2			$	323.1
EBITDAC Margin - Adjusted			35.7	%			35.7	%

 

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

 

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Brown & Brown, Inc.

Consolidated Statements of Income

(in millions, except per share data; unaudited)

 

		Three Months Ended March 31,
		2023				2022
REVENUES
Commissions and fees		$	1,108.0			$	904.3
Investment income			7.0				0.2
Other			1.0				0.2
Total revenues			1,116.0				904.7
EXPENSES
Employee compensation and benefits			571.1				459.0
Other operating expenses			160.7				126.8
(Gain)/loss on disposal			(5.7	)			(0.2	)
Amortization			41.4				31.1
Depreciation			9.9				8.1
Interest			46.7				18.3
Change in estimated acquisition earn-out payables			(2.3	)			(3.4	)
Total expenses			821.8				639.7
Income before income taxes			294.2				265.0
Income taxes			58.7				44.7
Net income		$	235.5			$	220.3
Net income per share:
Basic		$	0.83			$	0.78
Diluted		$	0.83			$	0.77
Weighted average number of shares outstanding:
Basic			278.6				277.1
Diluted			279.4				278.6
Dividends declared per share		$	0.115			$	0.103

 

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Brown & Brown, Inc.

Consolidated Balance Sheets

(in millions, except per share data, unaudited)

 

		March 31, 2023				December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents		$	563.5			$	650.0
Fiduciary cash			1,380.0				1,383.2
Short-term investments			9.3				12.0
Commission, fees, and other receivable			776.0				642.9
Fiduciary receivables			914.2				881.4
Reinsurance recoverable			142.7				831.0
Prepaid reinsurance premiums			379.6				393.2
Other current assets			190.8				202.3
Total current assets			4,356.1				4,996.0
Fixed assets, net			241.6				239.9
Operating lease assets			210.0				214.9
Goodwill			6,730.2				6,674.2
Amortizable intangible assets, net			1,581.6				1,595.2
Investments			25.4				22.4
Other assets			255.0				230.9
Total assets		$	13,399.9			$	13,973.5
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Fiduciary liabilities		$	2,294.3			$	2,264.6
Losses and loss adjustment reserve			154.1				841.1
Unearned premiums			399.7				412.3
Accounts payable			342.7				286.5
Accrued expenses and other liabilities			375.8				541.5
Current portion of long-term debt			246.3				250.6
Total current liabilities			3,812.9				4,596.6
Long-term debt			3,680.0				3,691.5
Operating lease liabilities			191.0				195.9
Deferred income taxes, net			563.5				584.0
Other liabilities			307.5				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			907.9				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			(101.0	)			(148.4	)
Retained earnings			4,755.9				4,553.0
Total shareholders’ equity			4,845.0				4,606.6
Total liabilities and shareholders’ equity		$	13,399.9			$	13,973.5

 

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Brown & Brown, Inc.

Consolidated Statements of Cash Flows

(in millions, unaudited)

 

		Three Months Ended March 31,
		2023				2022
Cash flows from operating activities:
Net income		$	235.5			$	220.3
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization			41.4				31.1
Depreciation			9.9				8.1
Non-cash stock-based compensation			24.4				20.1
Change in estimated acquisition earn-out payables			(2.3	)			(3.4	)
Deferred income taxes			0.6				15.2
Amortization of debt discount and disposal of deferred financing costs			1.0				0.7
Net (gain)/loss on sales/disposals of investments, fixed assets and customer accounts			(5.4	)			(0.1	)
Payments on acquisition earn-outs in excess of original estimated payables			—				(13.5	)
Effect of changes in foreign exchange rate			—				(0.1	)
Changes in operating assets and liabilities, net of effect from acquisitions and divestitures:
Commissions and fees receivable (increase)/decrease			(130.7	)			(87.8	)
Reinsurance recoverables (increase)/decrease			688.3				24.8
Prepaid reinsurance premiums (increase)/decrease			13.6				29.8
Other assets (increase)/decrease			(6.1	)			31.0
Losses and loss adjustment reserve increase/(decrease)			(687.0	)			(24.8	)
Unearned premiums increase/(decrease)			(12.7	)			(29.7	)
Accounts payable increase/(decrease)			71.5				22.2
Accrued expenses and other liabilities increase/(decrease)			(169.8	)			(143.1	)
Other liabilities increase/(decrease)			(12.4	)			2.8
Net cash provided by operating activities			59.8				103.6
Cash flows from investing activities:
Additions to fixed assets			(11.8	)			(10.0	)
Payments for businesses acquired, net of cash acquired			(37.6	)			(436.0	)
Proceeds from sales of fixed assets and customer accounts			6.1				0.2
Purchases of investments			(3.6	)			—
Proceeds from sales of investments			3.7				—
Net cash used in investing activities			(43.2	)			(445.8	)
Cash flows from financing activities:
Fiduciary receivables and liabilities, net			(22.6	)			(85.2	)
Payments on acquisition earn-outs			(16.1	)			(33.4	)
Proceeds from long-term debt			—				1,200.0
Payments on long-term debt			(16.9	)			(10.6	)
Deferred debt issuance costs			—				(23.4	)
Borrowings on revolving credit facilities			—				350.0
Repurchase shares to fund tax withholdings for non-cash stock-based compensation			(36.2	)			(46.0	)
Purchase of treasury stock			(0.1	)			(24.1	)
Cash dividends paid			(32.6	)			(28.9	)
Net cash (used in)/provided by financing activities			(120.6	)			1,298.4
Effect of foreign exchange rate changes in cash and cash equivalents inclusive of fiduciary cash			14.3				(0.3	)
Net (decrease)/increase in cash and cash equivalents inclusive of fiduciary cash			(89.7	)			955.9
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		$	1,943.5			$	2,426.1

 

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Conference call, webcast and slide presentation

A conference call to discuss the results of the first quarter of 2023 will be held on Tuesday, April 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.

About Brown & Brown

Brown & Brown, Inc. (NYSE: BRO) is a leading insurance brokerage firm, delivering risk management solutions to individuals and businesses since 1939. With more than 15,000 teammates in 500+ locations worldwide, we are committed to providing innovative strategies to help protect what our customers value most. For more information or to find an office near you, please visit 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 information about possible or assumed future results of our operations. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that we expect or anticipate may occur in the future, including those relating to the Company's anticipated financial results for the first quarter 2023, are forward-looking statements. 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. Also, when we use words such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “intend,” “estimate,” “plan” and “continue” or similar words, we are making forward-looking statements. These risks and uncertainties include, but are not limited to, the Company's determination as it finalizes its financial results for the first quarter of 2023 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, successfully 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 that may impact our operations or the operations of third parties that support us; risks related to our international operations, which may result in additional risks or require more management time and expense than our domestic operations to achieve or maintain profitability; the effects of inflation; the requirement for additional resources and time to adequately respond to dynamics resulting from rapid technological change; the loss of or significant change to any of our insurance company relationships, which could result in loss of capacity to write business, additional expense, loss of market share or material decrease in our commissions; the effect of natural disasters on our profit-sharing contingent commissions, insurer capacity and claims expenses from our capitalized captive insurance facilities; adverse economic conditions, natural disasters, or regulatory changes in states or countries where we have a concentration of our business; the inability to maintain our culture or a significant change in management, management philosophy or our business strategy; claims expense resulting from the limited underwriting risk associated with our participation in capitalized captive insurance facilities; risks associated with our automobile and recreational vehicle dealer services (“F&I”) businesses; 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; 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 significant control certain shareholders have over the Company; changes in data privacy and protection laws and regulations or any failure to comply with such laws and regulations; improper disclosure of confidential information; our ability to comply with non-U.S. laws, regulations and policies; the potential adverse effect of certain actual or potential claims, regulatory actions or proceedings on our businesses, results of operations, financial condition or liquidity; uncertainty in our business practices and compensation arrangements with insurance carriers 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; increasing scrutiny and changing expectations from investors and customers with respect to our environmental, social and governance practices; a decrease in demand for liability insurance as a result of tort reform legislation; 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 the U.S.-based credit markets that might adversely affect our business, results of operations and financial condition; 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; changes in current U.S. or global economic conditions, including an extended slowdown in the

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markets in which we operate; 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; 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; intangible asset risk, including the possibility that our goodwill may become impaired in the future; the COVID-19 pandemic, as well as future pandemics, epidemics or outbreaks of infectious diseases, and the resulting governmental and societal responses; other risks and uncertainties as may be detailed from time to time in our public announcements and Securities and Exchange Commission (“SEC”) 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 "non-GAAP financial measures" as defined in SEC Regulation G, consisting of Total Revenues - Adjusted, Organic Revenue, EBITDAC, EBITDAC Margin, EBITDAC - Adjusted, EBITDAC Margin - Adjusted and Diluted Net Income Per Share - Adjusted. We present these measures because we believe such information is of interest to the investment community and because we believe it provides additional meaningful methods to evaluate the Company’s operating performance from period to period on a basis that may not be otherwise apparent on a GAAP basis due to the impact of certain items that have a high degree of variability, that we believe are not indicative of ongoing performance and that are not easily comparable from period to period. This non-GAAP financial information should be considered in addition to, not in lieu of, the Company’s consolidated income statements and balance sheets as of the relevant date. Consistent with Regulation G, a description of such information is provided below and a reconciliation of such items to GAAP information can be found within this press release as well as in our periodic filings with the SEC.

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 four 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. In addition, 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, the impact of foreign currency translation and certain other non-recurring or infrequently occurring items. We also view Total Revenues - Adjusted, EBITDAC, EBITDAC - Adjusted, EBITDAC Margin and EBITDAC Margin - Adjusted 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, Diluted Net Income Per Share - Adjusted and EBITDAC Margin - Adjusted as key performance metrics for our short-term and long-term incentive compensation plans for executive officers and other key employees.

Non-GAAP Revenue Measures

Non-GAAP Earnings Measures

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Definitions Related to Certain Components of Non-GAAP Measures

 

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 and, therefore comparability may be limited. This supplemental non-GAAP financial information should be considered in addition to, and not in lieu of, the Company's condensed consolidated financial statements.

 

 

# # #

 

For more information:

R. Andrew Watts

Chief Financial Officer

(386) 239-5770

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