Brown & Brown(BRO) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements for Brown & Brown, Inc. for Q2 2025, with detailed notes Condensed Consolidated Statements of Income Six-month revenues increased to $2.69 billion, net income to $563 million; Q2 net income decreased Condensed Consolidated Statements of Income (Six Months Ended June 30) | (in millions, except per share data) | 2025 | 2024 | | :--- | :--- | :--- | | Total revenues | $2,689 | $2,435 | | Total expenses | $1,951 | $1,723 | | Income before income taxes | $738 | $712 | | Net income attributable to the Company | $563 | $550 | | Diluted net income per share | $1.93 | $1.92 | Condensed Consolidated Statements of Income (Three Months Ended June 30) | (in millions, except per share data) | 2025 | 2024 | | :--- | :--- | :--- | | Total revenues | $1,285 | $1,178 | | Total expenses | $974 | $832 | | Income before income taxes | $311 | $346 | | Net income attributable to the Company | $231 | $257 | | Diluted net income per share | $0.78 | $0.90 | Condensed Consolidated Balance Sheets Total assets increased to $25.6 billion due to higher cash and debt, with equity growing to $11.6 billion Balance Sheet Highlights (as of June 30, 2025 vs. Dec 31, 2024) | (in millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $8,893 | $675 | | Goodwill | $8,365 | $7,970 | | Total assets | $25,636 | $17,612 | | Long-term debt | $7,470 | $3,599 | | Total equity | $11,617 | $6,437 | | Total liabilities and equity | $25,636 | $17,612 | Condensed Consolidated Statements of Cash Flows Operating cash flow increased to $538 million; financing provided $7.98 billion for acquisitions, leading to $8.4 billion cash increase Cash Flow Summary (Six Months Ended June 30, 2025) | (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $538 | $373 | | Net cash used in investing activities | ($187) | ($77) | | Net cash provided by financing activities | $7,981 | $375 | | Net increase in cash and cash equivalents | $8,417 | $671 | - Major financing activities included $4.315 billion from a common stock issuance and $4.192 billion from new long-term debt, primarily to fund the pending Accession acquisition26 Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, segment operations, revenue, business combinations (Accession acquisition), goodwill, debt, and equity - The company's business is divided into three reportable segments: Retail, Programs, and Wholesale Brokerage. These segments market and sell property, casualty, and employee benefits insurance products and services28 - On June 10, 2025, the Company entered into an agreement to acquire RSC Topco, Inc. ("Accession") for an aggregate purchase price of $9.825 billion. The transaction is expected to close in Q3 202548 - To fund the Accession acquisition, the company issued $4.2 billion in new senior notes and raised $4.315 billion in net proceeds from a common stock offering in June 202560 92 - During the first six months of 2025, the company completed 29 smaller acquisitions for a total consideration of $210 million47 53 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 and H1 2025 financial results, highlighting revenue growth, Q2 income decrease due to Accession acquisition costs, segment performance, and liquidity Q2 2025 Key Performance Metrics | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Revenues | $1,285M | $1,178M | | Income Before Income Taxes | $311M | $346M | | Organic Revenue Growth | 3.6% | 10.0% | | EBITDAC Margin - Adjusted | 36.7% | 35.7% | - Q2 2025 total commissions and fees grew 8.2%, with a consolidated Organic Revenue growth rate of 3.6%102 - Q2 2025 income before income taxes decreased by 10.1% year-over-year, impacted by a $31 million gain on disposal in Q2 2024 and $37 million in Acquisition/Integration Costs for the pending Accession deal in Q2 2025104 105 120 Results of Operations — Segment Information Details Q2 2025 segment performance: Retail organic growth 3.0%, Programs 4.6%, Wholesale Brokerage 3.9%; Programs had highest EBITDAC Margin - Adjusted Q2 2025 Organic Revenue Growth by Segment | Segment | Organic Revenue Growth Rate | | :--- | :--- | | Retail | 3.0% | | Programs | 4.6% | | Wholesale Brokerage | 3.9% | | Total | 3.6% | Q2 2025 EBITDAC Margin - Adjusted by Segment | Segment | EBITDAC Margin - Adjusted | | :--- | :--- | | Retail | 27.5% | | Programs | 52.8% | | Wholesale Brokerage | 34.1% | | Total | 36.7% | Liquidity and Capital Resources Liquidity strengthened with cash increasing to $8.9 billion due to $8.5 billion raised from debt and equity for Accession acquisition; total debt rose - Cash and cash equivalents increased by $8.2 billion during the first six months of 2025, reaching $8.9 billion178 - Total debt increased by $3.7 billion to $7.5 billion as of June 30, 2025, primarily from the issuance of $4.2 billion in senior notes to fund the Accession acquisition191 195 - The company raised net proceeds of $4.315 billion from a common stock offering of 43.1 million shares in June 2025197 Contractual Cash Obligations as of June 30, 2025 | (in millions) | Total | Less than 1 year | 1-3 years | 4-5 years | After 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt | $7,619 | $75 | $1,394 | $1,150 | $5,000 | | Interest obligations | $4,369 | $379 | $682 | $588 | $2,720 | | Maximum future acquisition contingent payments | $429 | $133 | $291 | $5 | $— | | Total | $12,972 | $656 | $2,490 | $1,829 | $7,997 | Item 3. Quantitative and Qualitative Disclosures About Market Risk Company faces market risk from interest rates, foreign exchange, and equity prices, but management deems these risks immaterial - The company has $569 million in outstanding debt tied to the Secured Overnight Financing Rate (SOFR), exposing it to floating interest rate risk207 - The company is subject to translational foreign exchange rate risk from operations in currencies like the British pound, Canadian dollar, and euro, but does not believe the risk is material208 Item 4. Controls and Procedures CEO and CFO concluded disclosure controls and procedures are effective as of June 30, 2025, with no material changes to internal control - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025209 - No material changes to internal control over financial reporting were identified during the quarter ended June 30, 2025210 PART II. OTHER INFORMATION Item 1. Legal Proceedings No new material legal proceedings or developments occurred in Q2 2025, and existing proceedings are not expected to materially affect financials - No new material legal proceedings or developments occurred in the quarter ended June 30, 2025215 Item 1A. Risk Factors New material risks related to Accession acquisition include non-completion, failure to realize benefits, increased indebtedness, and specific business risks - The acquisition of Accession may not be completed within the expected timeframe, or at all, which could adversely affect business and financial results217 - Financing the transaction will significantly increase the company's indebtedness from its June 30, 2025 level of $7.5 billion, potentially reducing business flexibility and increasing interest expense219 - The company will be subject to risks from Accession's business, including underwriting risk from its captive insurance companies and potential litigation or regulatory scrutiny from the IRS regarding its 831(b) captive advisory services222 223 225 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Company repurchased 5,046 shares at $111.16 in Q2 2025 for tax withholding, with $249 million remaining for repurchases Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | — | $— | | May 2025 | 4,963 | $111.16 | | June 2025 | 83 | $111.53 | | Total | 5,046 | $111.16 | - All shares purchased were attributable to shares withheld for taxes related to vesting of employee stock awards230 - The company has approximately $249 million available for share repurchases under its authorized plan230 Item 5. Other Information No officers or directors adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in Q2 2025 - No officers or directors adopted or terminated any Rule 10b5-1 trading arrangements in Q2 2025228 Item 6. Exhibits Lists exhibits filed with Form 10-Q, including Accession Merger Agreement, debt indentures, and CEO/CFO certifications