GlobeNewswire Inc | Jan 24, 2022 05:00PM EST

January 24, 2022

DAYTONA BEACH, Fla., Jan. 24, 2022 (GLOBE NEWSWIRE) -- Brown & Brown, Inc. (NYSE:BRO) (the "Company") today announced its unaudited financial results for the fourth quarter and full year of 2021.

Revenues for the fourth quarter of 2021 under U.S. generally accepted accounting principles ("GAAP") were $738.5 million, increasing $96.4 million, or 15.0%, compared to the fourth quarter of the prior year, with commissions and fees increasing by 15.3% and Organic Revenue(1) increasing by 9.0%. Net income was $101.7 million, increasing $4.4 million, or 4.5%, and diluted net income per share increased to $0.36, or 5.9% as compared to the fourth quarter of the prior year. Diluted Net Income Per Share - Adjusted(2) increased to $0.42, or 31.3%, compared to the fourth quarter of the prior year.

Revenues for the twelve months ended December31, 2021 under GAAP were $3,051.4 million, increasing $438.0 million, or 16.8%, as compared to 2020, with commissions and fees increasing by 16.9%, and Organic Revenue increasing by 10.4%. Net income was $587.1 million, increasing $106.6 million, or 22.2%, and diluted net income per share for the year increased to $2.07, or 22.5%, each as compared to 2020. Diluted Net Income Per Share - Adjusted increased to $2.19 or 31.1% compared to 2020.

J. Powell Brown, president and chief executive officer of the Company, noted, The fourth quarter was another strong performance for the team and is a capstone for a great 2021. I want to thank all of our outstanding teammates for winning more new business and retaining our great customers.

Reconciliation of Commissions and Feesto Organic RevenueThree and Twelve Months EndedDecember 31, 2021 and 2020(in millions, unaudited)

Three Months Ended Twelve Months Ended 12/31/ 12/31/ 12/31/ 12/31/ 2021 2020 2021 2020Commissions and fees $ 737.9 $ 640.0 $ 3,047.5 $ 2,606.1 Profit-sharing contingent (19.1 ) (14.6 ) (82.2 ) (70.9 )commissionsGuaranteed supplemental (4.4 ) (3.6 ) (19.0 ) (16.2 )commissionsCore commissions and fees $ 714.4 $ 621.8 $ 2,946.3 $ 2,519.0 Acquisitions (38.9 ) ? (170.1 ) ? Dispositions ? (2.2 ) ? (5.2 )Foreign currency 0.2 1.2 translationOrganic Revenue $ 675.5 $ 619.8 $ 2,776.2 $ 2,515.0 Organic Revenue growth $ 55.7 $ 261.2 Organic Revenue growth % 9.0 % 10.4 %

(1) "Organic Revenue," a non-GAAP measure, is our core commissions and fees less: (i)the core commissions and fees earned for the first 12 months by newly-acquired operations; (ii)divested business (core commissions and fees generated from offices, books of business or niches sold or terminated during the comparable period); and (iii) the period-over-period impact of foreign currency translation, which is calculated by applying current-year foreign exchange rates to the same period in the prior year. The term core commissions and fees excludes profit-sharing contingent commissions and guaranteed supplemental commissions, and therefore represents the revenues earned directly from specific insurance policies sold and specific fee-based services rendered. Organic Revenue can be expressed as a dollar amount or a percentage rate when describing Organic Revenue growth. We have historically viewed 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.

Reconciliation of Diluted Net Income Per Share toDiluted Net Income Per Share - AdjustedThree and Twelve Months Ended December 31, 2021 and 2020(unaudited)

Three Months Ended Change Twelve Months Ended Change 12/31/ 12/31/ $ % 12/31/ 12/31/ $ % 2021 2020 2021 2020Diluted netincome per $ 0.36 $ 0.34 $ 0.02 5.9 % $ 2.07 $ 1.69 $ 0.38 22.5 %shareChange inestimatedacquisition 0.06 (0.02 ) 0.08 0.12 (0.02 ) 0.14 earn-outpayablesDiluted NetIncome Per $ 0.42 $ 0.32 $ 0.10 31.3 % $ 2.19 $ 1.67 $ 0.52 31.1 %Share -Adjusted

(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 Companys ongoing performance.

Income before income taxes for the fourth quarter of 2021 was $140.8 million, an increase of $9.9 million, or 7.6%, and Income Before Income Taxes Margin(3) decreased to 19.1% from 20.4% 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 2021 was $215.7 million, an increase of $41.8 million, or 24.0%, compared to the fourth quarter of the prior year. EBITDAC Margin increased to 29.2% in the fourth quarter of 2021, as compared to 27.1% in the fourth quarter of 2020.

Income before income taxes for twelve months ended December31, 2021 was $762.8 million, an increase of $138.7 million, or 22.2%, compared the prior year. Income Before Income Taxes Margin increased to 25.0% from 23.9%, as compared to the prior year. EBITDAC for the twelve months ended December31, 2021 was $1,021.1 million, an increase of $207.7 million, or 25.5% as compared to the 2020. EBITDAC Margin increased to 33.5% for the twelve months ended December31, 2021, as compared to 31.1% in 2020.

Reconciliation of Income Before Income Taxes to EBITDAC and Income Before Income Taxes Margin to EBITDAC MarginThree and Twelve Months Ended December 31, 2021 and 2020(in millions, unaudited)

Three Months Ended Twelve Months Ended 12/31/ 12/31/ 12/31/2021 12/31/ 2021 2020 2020Income before $ 140.8 $ 130.9 $ 762.8 $ 624.1 income taxesIncome BeforeIncome Taxes 19.1 % 20.4 % 25.0 % 23.9 %MarginAmortization 31.0 28.3 119.6 108.5 Depreciation 7.9 7.5 33.3 26.3 Interest 16.2 16.7 65.0 59.0 Change inestimated 19.8 (9.5 ) 40.4 (4.5 )acquisitionearn-out payablesEBITDAC $ 215.7 $ 173.9 1,021.1 813.4 EBITDAC Margin 29.2 % 27.1 % 33.5 % 31.1 %

(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 December31, December31, 2021 2020 2021 2020 REVENUES Commissions $ 737.9 $ 640.0 $ 3,047.5 $ 2,606.1 and feesInvestment 0.2 1.0 1.1 2.8 incomeOther 0.4 1.1 2.8 4.5 Total 738.5 642.1 3,051.4 2,613.4 revenuesEXPENSES Employeecompensation 416.8 377.4 1,636.9 1,436.4 and benefitsOtheroperating 111.3 91.9 403.0 366.0 expenses(Gain)/loss (5.3 ) (1.1 ) (9.6 ) (2.4 )on disposalAmortization 31.0 28.3 119.6 108.5 Depreciation 7.9 7.5 33.3 26.3 Interest 16.2 16.7 65.0 59.0 Change inestimatedacquisition 19.8 (9.5 ) 40.4 (4.5 )earn-outpayablesTotal 597.7 511.2 2,288.6 1,989.3 expensesIncomebefore 140.8 130.9 762.8 624.1 income taxesIncome taxes 39.1 33.6 175.7 143.6 Net income $ 101.7 $ 97.3 $ 587.1 $ 480.5 Net income per share:Basic $ 0.36 $ 0.34 $ 2.08 $ 1.70 Diluted $ 0.36 $ 0.34 $ 2.07 $ 1.69 Weightedaveragenumber ofshares outstanding- inthousands:Basic 276,571 275,914 276,024 274,334 Diluted 278,128 277,398 277,414 275,867 Dividendsdeclared per $ 0.103 $ 0.093 $ 0.380 $ 0.348 share

Brown & Brown, Inc.Consolidated Balance Sheets (in millions, except per share data, unaudited)

December31, December31, 2021 2020ASSETS Current assets: Cash and cash equivalents $ 887.1 $ 817.4 Restricted cash 583.2 454.5 Short-term investments 12.9 18.3 Premiums, commissions and fees receivable 1,216.2 1,099.2 Reinsurance recoverable 63.1 43.5 Prepaid reinsurance premiums 392.2 377.6 Other current assets 175.6 147.7 Total current assets 3,330.3 2,958.2 Fixed assets, net 212.0 201.1 Operating lease assets 197.0 187.0 Goodwill 4,736.8 4,395.9 Amortizable intangible assets, net 1,081.5 1,049.7 Investments 31.0 25.0 Other assets 206.8 149.6 Total assets $ 9,795.4 $ 8,966.5 LIABILITIES AND SHAREHOLDERS? EQUITY Current liabilities: Premiums payable to insurance companies $ 1,384.6 $ 1,198.5 Losses and loss adjustment reserve 63.1 43.5 Unearned premiums 392.2 377.6 Premium deposits and credits due customers 122.4 102.5 Accounts payable 206.4 190.5 Accrued expenses and other liabilities 456.2 371.8 Current portion of long-term debt 42.5 70.0 Total current liabilities 2,667.4 2,354.4 Long-term debt 1,980.4 2,025.9 Operating lease liabilities 180.0 172.9 Deferred income taxes, net 386.8 344.2 Other liabilities 383.9 314.9 Shareholders? equity: Common stock, par value $0.10 per share;authorized 560,000 shares; issued 300,993shares and outstanding 282,496 at 2021, 30.1 30.0 issued 299,689 shares and outstanding 283,004shares at 2020 - in thousands.Additional paid-in capital 849.4 794.9 Treasury stock, at cost 18,497 shares at2021, 16,685 at 2020, respectively - in (673.9 ) (591.3 )thousands.Accumulated other comprehensive loss (9.4 ) ? Retained earnings 4,000.7 3,520.6 Total shareholders? equity 4,196.9 3,754.2 Total liabilities and shareholders? equity $ 9,795.4 $ 8,966.5

Brown & Brown, Inc.Consolidated Statements of Cash Flows (in millions, unaudited)

Twelve Months Ended December31, 2021 2020 Cash flows from operating activities: Net income $ 587.1 $ 480.5 Adjustments to reconcile net income to net cash provided by operating activities:Amortization 119.6 108.5 Depreciation 33.3 26.3 Non-cash stock-based compensation 61.0 59.7 Change in estimated acquisition earn-out payables 40.4 (4.5 )Deferred income taxes 33.6 15.9 Amortization of debt discount and disposal of 3.0 2.3 deferred financing costsNet (gain)/loss on sales/disposals of investments, (7.1 ) (0.8 )fixed assets and customer accountsPayments on acquisition earn-outs in excess of (21.1 ) (4.5 )original estimated payablesEffect of changes in foreign exchange rate 0.5 ? Changes in operating assets and liabilities, net of effect from acquisitions and divestitures:Premiums, commissions and fees receivable (72.8 ) (135.4 )(increase)/decreaseReinsurance recoverables (increase)/decrease (19.6 ) 15.0 Prepaid reinsurance premiums (increase)/decrease (14.6 ) (11.6 )Other assets (increase)/decrease (53.7 ) (42.7 )Premiums payable to insurance companies increase/ 128.0 158.8 (decrease)Premium deposits and credits due customers increase 19.6 (12.9 )/(decrease)Losses and loss adjustment reserve increase/ 19.6 (15.0 )(decrease)Unearned premiums increase/(decrease) 14.6 11.6 Accounts payable increase/(decrease) 56.9 107.8 Accrued expenses and other liabilities increase/ 66.8 34.7 (decrease)Other liabilities increase/(decrease) (47.1 ) (72.1 )Net cash provided by operating activities 948.0 721.6 Cash flows from investing activities: Additions to fixed assets (45.0 ) (70.7 )Payments for businesses acquired, net of cash (366.8 ) (694.8 )acquiredProceeds from sales of fixed assets and customer 15.3 9.6 accountsAdditions and collection of notes receivables; net 1.4 ? Purchases of investments (12.4 ) (14.2 )Proceeds from sales of investments 10.8 11.0 Net cash used in investing activities (396.7 ) (759.1 )Cash flows from financing activities: Payments on acquisition earn-outs (68.0 ) (25.0 )Proceeds from long-term debt ? 700.0 Payments on long-term debt (73.1 ) (55.0 )Deferred debt issuance costs (2.6 ) (6.7 )Borrowings on revolving credit facilities ? 250.0 Payments on revolving credit facilities ? (350.0 )Issuances of common stock for employee stock 34.0 30.1 benefit plansRepurchase shares to fund tax withholdings for (49.8 ) (41.3 )non-cash stock-based compensationPurchase of treasury stock (82.6 ) (55.1 )Cash dividends paid (107.2 ) (100.6 )Net cash (used in)/provided by financing activities (349.3 ) 346.4 Effect of foreign exchange rate changes in cash and (3.6 ) ? cash equivalents inclusive of restricted cashNet increase in cash and cash equivalents inclusive 198.4 308.9 of restricted cashCash and cash equivalents inclusive of restricted 1,271.9 963.0 cash at beginning of periodCash and cash equivalents inclusive of restricted $ 1,470.3 $ 1,271.9 cash at end of period

Conference call, webcast and slide presentation

A conference call to discuss the results of the fourth quarter and full year of 2021 will be held on Tuesday, January 25, 2022 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 Companys website at www.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 over 11,000 teammates in more than 300 locations across the U.S. and select global markets, we are committed to providing innovative strategies to help protect what our customers value most. 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 2021 and the potential effects of the COVID-19 pandemic (COVID-19) on the Companys 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. Also, when we use words such as 'anticipate', 'believe', 'estimate', 'expect', 'intend', 'plan', 'probably' or similar expressions, we are making forward-looking statements. 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 (including through any new variant strains of the underlying virus), the effectiveness of and accessibility to vaccines, the pace and rate at which vaccines are administered, actions taken by governmental authorities in response to COVID-19, and the direct and indirect impact of COVID-19 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 2021 that its financial results differ from the current preliminary unaudited numbers set forth herein; the effects of inflation; 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; 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 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; 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 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; changes in data privacy and protection laws and regulations or any failure to comply with such laws and regulations; improper disclosure of confidential information; 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 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; a decrease in demand for liability insurance as a result of tort reform litigation; 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; 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; intangible asset risk, including the possibility that our goodwill may become impaired in the future; 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 and Organic Revenue growth as important indicators when assessing and evaluating the performance on a consolidated basis and for each 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 supplementalnon-GAAPinformation 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.

For more information:

R. Andrew Watts Chief Financial Officer (386) 239-5770