BRO - Earnings call transcript Q1 2020

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Operator

Good morning and welcome to the Brown & Brown Inc.

First Quarter Earnings Call. Today’s call is being recorded. Please note that certain information discussed during today's call including information contained in the slide presentation posted in connection with this call and including answers given in response to your questions, may relate to future results and events or otherwise be forward-looking in nature. Such statements reflect our current views with respect to future events, including those relating to the company’s anticipated financial results for the first quarter and are intended to fall within the Safe Harbor provisions of the securities laws.

referenced in uncertainties are from of and anticipated desired events of to those number or statements or and forward-looking risks may or of results factors. the a subject future matter currently made Actual as any result in differ materially Such the set release the from current as un-audited numbers company’s it results press its financial differ factors the financial first yesterday. results in include forth issued the for quarter determination finalizes thus its preliminary have reports not risks Exchange may identified the company or from those the that factors and and currently and time-to-time quantified Other Securities Commission. in filed identified uncertainties the company’s with

Additional as slide in further connection discussion company’s company’s well additional as the the information affecting or with this intention regarding forward-looking to presentation in posted Exchange and call is with result Securities and a disclaim of of the or other and statements, forward-looking factors filings Commission. in revise any as We business information, and update prospects, events any statements these whether otherwise. or obligation the contained new

Calendar certain found financial earnings release these most by are this for measures company’s or at GAAP on the the the website conference can any non-GAAP non-GAAP reconciliation www.bbinsurance.com, company’s Events. clicking addition, measures financial to this used Relations comparable measures investor presentation financial call. in of In then the A be in of in and press call on Investor

Brown, With and that said, I Officer. the to now will President over turn Chief Executive call Powell

begin. may You

Powell Brown

earnings joining quarter thank everyone. Good for us our call. morning, XXXX Lisa. you, for And Thank first you

our of and would results directly COVID-XX. our indirectly those like affected prayers we are Before to at Brown first all about & quarter we by or people with Brown thoughts say talk

to for customers lines We also home like successfully all these and they're and doing transitioning XX,XXX to for challenging the those times thank from those everything our a finally front of I'd all plus want teammates thank of everything work doing on they're for during our people to for environment.

and thoughts give quarters. we'll our Today you results the next few in QX our discuss

you Here for points are a couple keep key in to mind.

a quarter. had we very First, good

have a access strong of conversion traded dollars cash highest liquidity. publicly approximately have to peers In balance sheet, a billion and among addition, we the our

philosophy Our business to run providing on our how operating on has a to and conservative indicative that's are the of focused capital-light continue our We're be term will business. and unique we every long day. customers solutions focused

of growing in was seeing January Northwest. and quarter started The A February were March. then We Cities. the and on first impact Two Tale on nicely torque our hit early of customers Pacific we the

As emphasis we've believe upper around with country for seeing are the an middle said We on economy mid-March. the in our we before, the market. the began proxy a impact on middle and customers we

of many assess customers the support difficult our One will of what today systems. efforts things through government from is Government mitigation the U.S. to for due

from home During helped these in a very their to of XX,XXX time. a of us period environment we're and the short teammates investments in security transition plus our work of on previous our safety times, Many technology and unusual families. teammates have very focused

your well advantage customers Act, Relief or combined how loans, B&B restaurant how received SBA a on have everything meals certain Our continue solutions for from on our furloughs to get supplies. take and can These been supplies. layoffs audience. on updates for discounts from the insights you and search others the prospects Center with have alike of to use customers been our to deliver CARES vehicle by to and certain We and customers intended opened to actions weekly personal

dedication determination, have our what our customers. for I'm by commitment teammates humbled of the addition, In and they

for to the transition the quarter. let's results Now

I'm Slide X. on

and X.X% into very performance more few total $XXX.X delivered we about each organic pleased growth For I'll this at quarter, strong with the a first organically. our minutes XX.X% in revenue of get of We're detail in million the growing and revenue segments.

the of quarter Our EBITDA basis ‘XX. which was up margin $XX.X, XXX points first is versus

income quarter XX.X% the XX% amount increasing first adjusted for is per $X.XX change XXXX same period in excluding per On adjusted to income compared the year. share the net for per net prior net QX. $X.XX share delivered Our the basis share the in we payables income an acquisition as growing of over

$XX approximately the another businesses During revenues acquired quarter annual we five million. of

presentation we our quarter. the In was and grew summary, line in XXXX. line bottom will Later really how a strong It the top results quarter discuss financial delivering a we're very this detail. Andy great in pleased after more

X. Slide on Now

quarter and changed most The the economy ultimately expansion grow in one. employees hire early we to exposure March their interesting an U.S. companies units. everything due Until businesses, continue driving first in invest the March middle was to of many and Then of putting them continued the saw of is on for We've lower stay exposure we're that and driving terminating and organic either units. of at shelter-in-place drivers companies home the first primary growth or furlough or the now mandate our beyond. said employees in GDP past seeing quarter one to

over do quarters. that More we later impact the So on the get when coming an outlook. we expect

up ENS auto coastal quarters. to X% to unknown. XX% expected to XX% an in to increased rates General of lines X% the in X% increased From of property rate From carriers admitted rate liability increases The future we for perspective XX% the low year. a and now versus given to for last to line to the and standards. a prior property rates X% as account. Premium the increased excluding The in were on rate of market for driven is is X% substantially which XX%. to loss XX%. was about pandemic Ultimately, X% the cyber with up we're tightens Professional the impact was XX%. and the generally were continue experience had a few loss what accounts on to first similar we coverage see rates rate primarily perspective quarter by amount underwriting increases modest continue most increase

landscape, the competitive. it very Regarding M&A remained

During five the with transactions closed first we estimated million, quarter an annual another $XX revenue.

are since handle will companies on receive. evaluation their slowdown to impact trying they but talk affect pandemic sellers a therefore as We with a businesses the how and get of lots to continue

on I'm X. Slide

Now, four of let's our talk the segments. about performance

strong organic delivered segment X.X% revenue QX. another Retail quarter in growing with Our

Our Andy in points in economic resulting organic with revenue the $XX.X future not growth more for revenues change have related Retail would detail describe if approximately for million later. to associated from this higher disruption COVID-XX. will XXX been basis a estimate

of for the delivering Retail quarter Our rate new quarter. another We congratulate teammates segment business growth first customers, improvement. and like to our was great in driven for for improved the expansion unit all retention, existing exposure by would

grew ever this Programs quarter. the The XX.X% when of organic one highest flood National we've revenue organically of impact growth claims. was exclude you the delivered delivering great another quarter

Our division. to for to really We're quarters our we growth many all Overall this including years. was opportunities well commercial lender wanted January, that and by personal to our in our completed acquisition driven thank insurance teammates special of our as managers. you over great present with say early a I pleased programs, our it's performance and risk acquisition programs, Canada of our us first earthquake, we continuing and in property national In quarter other our the believe strong a number place, from coming the of as programs. and will

Thank good strong from year. businesses. quarter due solid our Binding team and is pull organic from segment with wildfires growing you performance revenue back all of driven Brokerage we Wholesale quarter. losses X.X% delivered both Our another last even California Brokerage experienced This from lines delivering carriers another while our writing some by Authority personal for to

The processing the one organic Services year X% half Advocacy revenue Services Security decreased being and Social segment for revenue We XX.X% businesses. in the the segment terminated organic our decline driven by by of of business contract it originally for the customer our quarter. in expected first to claims our for

growth the segment was however, Services During lower to claims. our advocacy revenue due social further impacted weather-related organic and security quarter of

can As timing volume based seen revenues the on its activity. claims past Services in more we've volatility segment have the in and of our

detail. financial performance in more me let over Andy turn discuss to Now it our

Andrew Watts

you, excluding with impact the we’re GAAP change morning to our non-GAAP earn-outs. and acquisition financial in everyone. going highlights previous Consistent the Thank results, certain of then results adjusted Good Powell. quarters, discuss our

Slide X. on over I'm

first revenue revenue X.X%. the or $XX.X XX.X% of and of we quarter growth organic million growth delivered For total

with Our base the revenue EBITDAC and the our our increased by of acquisitions higher year XX.X% quarter first commissions contingent revenue leveraging higher growing in faster expense organic revenues in past due all each that than one its from to of recognizes substantially year. the growth, results

than income $XX.X by acquisition million increased decreased our before most XX.X% projections. EBITDAC payables, year-over-year recent on based due the income Our going by which in tax change earn-out faster to

$X.XX by our million $XX.X by increased net share income $X.XX. or net XX% income diluted and increased per XX.X% to Our or

was compared life the insurance tax XXXX. our higher and effective the plan. the tax by was prior deferred first quarter first adjustments Our in as tax rates the in change quarter to company for valuation well XX.X% rate owned the lower in of XX.X% driven of related state as rate compensation year The our to market effective

to cents the average weighted compared of our flat compared number or substantially dividends Our prior shares X.X% to were the first increased of to XXXX. $X.XXX quarter share per year and

basis. more This change provides estimated this We Moving the years. for results presents both earn-outs over slide slide our a removing X. acquisition to believe payables after in presentation year-on-year comparable

earn-out payables the our estimated and $X related by performance completed of from million acquisitions for future, adjustment During this estimated the we first million revised $XX three potential quarter impact the COVID-XX. corresponding financial in the we years with last certain to

both years increasing million was XX.X%. diluting income net really million quarter. XX.X%, adjusted and good in Isolating adjusted $XX.X acquisition by $X.XX income or $X.XX our taxes increased earn-outs XX.X% the share before on per or or grew income it income a Overall change net in an was are $XX.X basis

Slide of the to slide key X. performance. presents components our Over This revenue

For XX.X%. and our commissions fees increased the quarter total

received supplemental GSCs did was the anticipated quarter the million we contingent guaranteed as XXXX during as compared higher XXXX for were $X.X than commission's not accrued XXXX contingencies of that as and Our of past. first qualify cash increased first for December to commission certain contingents XX, of the quarter by qualify as the we or

organic activity isolate revenues by X.X% increased Our M&A quarter. impact which of net the the for

Over to Slide XX.

In retail we past Our months lines of of and XX acquisition reduction the XXX of employee XX% million. ASC all activity total we $XX.X estimates to our compensation policies across business. deliver existing growth revenue earn resulting organic by for in lowered X.X% revenue benefits and by revenues the workers driven over growth segment driven to growth revenue with expect accordance from of a

impact These lowered almost growth organic after COVID-XX for their estimates future of assessing of employment current by quarter remainder the our The for the and retail customers on were adjustment basis payrolls of of during projected periods. revised levels points. policy XXX the

higher earlier. all of non-cash through we XXX basis XX.X% total and adjustment when due its revenue stock-based cost, an and by profit by revenue acquisition in increased partially Our the contingent from the last million of the expense EBITDAC $XX.X even first the quarter faster points, EBITDAC our The expansion completed organic margin margin phasing compensation base grew and of quarter our impact of quarter acquisition for in revenues, the we EBITDAC year, on that than IT to flow of offset commissions excluding growth. with the higher cost grew intercompany third substantially the the the year. was mentioned leveraging margin We higher records

the in of performance Our $X.X to charges. years. earn-out the liabilities adjustments primarily higher margin, adjustments last future XXX due primarily percentage million COVID-XX to increased income potential margin tax intercompany upon of and liabilities our basis to income EBITDAC impact acquisitions growth were of year-over-year completed three of the by driven interest The points we earn-out lower before

of and Slide and strong EBITDAC by National over revenues, leveraging by National a was to increased higher Moving commissions or intercompany was total total Program base. offset increased expense It continue margin to from organic XX, IT growing our quarter really by increased revenue substantially EBITDAC XX.X% due increased XXX and charges. million performance due our XX.X% expansion faster our basis good our points number revenues. than segment programs. contingent XX.X% partially revenues by Program higher the our $XX.X for another margin segment The to

XXX were payables estimated expanding lower with by lower before to future Income COVID-XX. XX.X% margin EBITDAC and that performance for interest points expense expansion, increased income or decreased due taxes by million the impacted earn-out $XX.X potential associate intercompany basis

Over to XX. Slide

growth XX organic charges basis margin organic Our growth faster XX Wholesale decreased by revenues and expansion. intercompany commissions. revenue of offset and grew acquisitions offset to delivered partially due underlying and IT contingent higher segment was by lower lower contingent X.X% points we Brokerage that Total grew the to EBITDAC XX.X% total due months in which margin completed of the X.X%. than past commissions

in margin XX grew payables. basis and earn-out lower income and before to amortization points increased the taxes due income XX.X% Our acquisition change a by

for decrease the organic negative to organic closer anticipated revenue by our declined total first acquisition. in Since be benefiting Over impact revenues [XX.X%] and revenue Slide first XX. organic Total segment half declined previous year anticipate the with could revenues for of potential quarter, than any we to the from growth a more Services XX.X% excluding of COVID-XX. our XX% a

estimated increase quarter, income increased the by earn-out basis higher income before organic and driven basis margin margin taxes Income points acquisition the lower income and by by declined XXX our EBITDAC charges. For revenues by by increased points. XX.X% lowering driven This intercompany taxes and our XXX a was before payables. declined X.X% IT

to Over regarding We to want some liquidity. capital XX. and comments make Slide

Our in in allocating and conservative ladder our of for strength low the capital returns goal of to maintaining be economic uncertainty. our continue balanced to a and provide We've leverage goal debt approach maturity has during position. times with been of disciplined the having our importance to mentioned a the and in past optimizing leverage will order shareholders

continue public We balance provides through liquidity to and or allow strong the leverage of flexibility. a strong believe uncertainties this but position sheet will us the with pandemic major lowest very and having insurance security invest. allows the of also the financial PE-backed us Having us manage to to brokers

of anticipate are million cash expected and and with equivalents of March a of under We approximately on available of revolving credit At A cash $XXX May before to the capacity $XXX portion revolver. million used had be $XXX these the over payment of of that borrowing in order borrowing we line million early our our in customers from proceeds we end X. be in acquisition to will May. of mitigate this to potential position the result our will close insurance that carriers. of previously remainder delays further protector strengthen payments from services or used announced the pandemic COVID-XX for loan effects anticipate The financial may in connection

Moving over XX. Slide to

our metrics are free working convert revenues the consistently convert available and to is to cash into of revenues ability flow. of we proud into our We to our of One capital. capital rigorous strong XX% margins XX% of due management

the cash we of brokers. That a public than XXX% cash the same conversion we now. ratio a lot business. to generate of excess company free upon capital M&A committed capital twice significant CapEx service. size. flow have the as of is of about a invest position our industry-leading We dividends, our Our about other higher compared average right the we're that really That debt include activity a our and to generate Depending believe in means expenditures amount in in level means of strong we

cash to employee with ASC throughout associated collected has a related cash policies a ratio due primarily we year. accrue revenue As to normally reminder QX conversion XXX lower benefits flow free as the

prior the in quarter. our bonuses annual first pay of the the also earned in performance year majority We

was cash about XXXX. with free quarter X.X% of a compared first for quarter ratio Our conversion the the X.X% for flow of negative first XXXX

on may is our One delay be anticipate free affect an this this either receipts carriers mandated drawing this thing cash by our delaying additional conversion states. capital by customers flow that payments why and would later or We offered scenario month. believe we cash would revolver

over With me to turn Powell comments. that back let it for closing

Powell Brown

report. Great Andy. Thanks

coming thinking Let's about we're the talk for outlook how about the quarters.

reports and are economists slightly next the projecting This banking a economy quarter. quarter. two then based unemployment from the rate assumption on within partners the are into potentially XX% is to to our for many the second at in decline that expect XX% employment going least increase We and quarters fourth

workers generally of mind in self-employed sponsored per that or to more for compensation workers are unemployment. benefits not be These Act the Keep CARES covered impacting likely file gig now eligible by They lines will plans. and not employee are than business. our individuals

figures are examples when unemployment filing eligible. years are complexities prior and still being Also These to the for mind of good current keep but there are potential benefit unemployment on in many in our business. the impact comparing that furloughed are estimating employees

are projecting to XX% anticipate but starting This expecting XX% before a with is to its biggest and on in that GDP same largest to lines as compensation quarter impact be will in employee will believe rebound mid they're the by but until are on XXXX. performance financial XX of be the our the These workers not decline assumptions, about growth coverage Based our fact driven to in our quarter in third the employment these they organic quarter. second economists higher second to third quarter the recovery we the negative see believe impact days late to will numbers. impact growth unemployment and the our we due payrolls. take We benefits could primarily be

to In PMC addition, overall when exposure impacted we reduce companies expect units. their our be business

deep slow Another that the the our the to the unknown We how take now is new expecting we're The is and for COVID-XX for effect increase. will QX. last. how act other. the long business and know but each that in by will to to CARES start not mandate offset will months of action these coming the do hope right We Fed if of retention work-from-home dynamic impact

unknown as organic estimate on our This data. is actual to single we've the of limited full-year known of Regarding rates what we rates growth based the half all about mid that made could the range assumptions second really unknown until is year positive slightly most these COVID-XX. quarter to low but it's or slightly rates the down the impact in will will be happen factors into more consideration digits. is increased think best Taking in second

as coming better depth and the over view quarter to the We will duration. have

Here's management a Therefore and ways know. what provider. we we'll creative of risk stay continue prospects and developing and on solutions providing business for do solutions new to We're remotely. new customers our focused generating

to talk quarter. with second candidates continue and the few close We in a acquisition deals may

months next at and sellers be mean around to the slowdown For in businesses for uncertainty we a future this will might what of the few activity there expect performance due valuations. M&A least the

deliver solutions during carrier that our Brown teammates, our continuing necessity Out as of our our and I the We of customers, customers benefits many uncertain always creativity. Brown new partners comes times. earlier and serve try we mentioned for to innovate to are these our great as possible & shareholders.

started I I families about as our focus. with Lastly, and with the same their comments teammates to want close

We are and a focused of our dedicated company hardworking on teammates serving customers.

goal focus our it’s we they to management on that always When healthy. them great do and ensure and parents helps be risk innovative this, teammates it solutions. to are safe delivering spouses, Therefore,

With it Lisa to over the Q&A. me that turn let for back

Operator

Greg you. Peters will Please It's ahead. Thank Raymond now [Operator Instructions] the from question. from take James. first We go

Your line is open.

Greg Peters

Good morning.

some to base for by know negative about year. industry, you anticipate the if for and exposures like your thank energy if intend on commenting restaurant of of you the the that layoff that growth; We I outlook you I manage So the peers curious how crisis? your the regarding I'm etc. secondly this appreciate industry, expense you build wondering then pledges organic and could have revenue to just and upon during made guidance the comments the industries was no possibility

Powell Brown

Okay.

A couple things. So Greg. good morning

that have a pretty you but a know we lot just a United across have does lot not don't a States. as all, of of spectrum the First of That of things book mean diversified it's broad we business.

you the gaming, things know restaurants, each theaters, construction, oil it's honestly said and and are quite you So I those right gyms, theme-park, like of to anything industries that as gas; you certain in the would on events, very movie there affected; transportation hospitality, difficult impact dramatically determine now sporting are tell industries.

and assumptions that our would make the can best at estimate time. be We present

could ask lot a RV. – dealerships, business We And we So and business, lot new, both involve of the space. you do automobile do for might we example, of in F&I automobile a things. do

So been the has you impacted widely. where are that depending in on country business

mountain has it unique really it Northeast but we governmental Like the lots it's early call industry read states it have industry harder an than we is that much in about said, we need hit one construction entities an lot to no it's it so you enormous the too and is but used example, there for and standpoint have. nonprofits to of in and and one have lots to lots a have I exposure have as I example Greg such we industry think that an just out. of I because and a the say we So of we from auto

So that's the first thing.

run big we about at everybody one second we that a employees teammates. to on at which group just to and invest relative daily, leadership have The each athletic and thing of local is expected part in monthly, Brown call would it a and the moment. talk We that about Number let's team we are for $XX,XXX team & question, by is ask business the a don't how quarterly, high-performing, yearly one, level have evaluates Brown basis. which

So organization customers, we an and our defined our as our by locally capabilities and relationships. carrier are

local that have it the we in. period be thing that when to best team above. time. say a serve would those during a That last this I dictating I off happen level our to broad dictate, intent you interested not this decision will our be would level very So local teammates from get is would would at on It not how the would if of not we that tell would be assessments customers. occur a be

and whatever other So a we out coming and stronger good around we now as are guess will this as is ours we your we means always sensitive topic as that got because is are believe great right side. of because as very a we the that organization bunch changes teammates that be

Greg Peters

and from comments release that that long customers for the can you delayed you it. about Appreciate the in press be the Thank spoke mean about, Yes, receipts in cash answer. might you risk I and use and and of that any acquisition around speak perhaps the to, in this investing today a evidence build going forward? comments seen how are upon point at that business you've then you if

Powell Brown

Okay.

are remember one, because it's absolutely are number that So Greg. states it mandating there happening

So two, smaller there they're That's XX-day to not particularly on we certain customers but that. something requesting exclusively, one. of rate know they have as holiday customers mandating are relief premium going a exposure number basis where down. are states, you a or Number because units limited

some business. carriers In allowing impact to down anticipation exposure of and overall midterm on some us adjust their instances are the unit in

you the how Now we and question acquisitions asked about think about our business.

Let's of talk very business life. in protector reality of the loan we we anticipate a we about is The reality announced which for second approval number the and think waiting closing one, that good some were life time quarter. is, DOJ a and we

we as know transactions you QX. closed, other several in And

want so we not it's and at up we're but a to the that. a could that where then to and based that a businesses are run call and it come that transaction of stream on do the you talking stream just fit so And people cultural a people very-very-very earnings hard consummating the time that's if the people. so don't seeing I or video by with revenue And never they met always doesn't have work we organization of an end idea the talented have day can best

lots of on of we've that said calling been time. for long-long periods having people But

reason criticize to years the the talked a XX liquidity Andy think really and darn on slowdown to for and and downturn. So flexibility want. invest the years about that important we is, that trying not mean were bunch means reason want. when is, conservative period Andy we of of position now out for used be about about I our before the lot to and then can we talked and -- that's to we're have get does business a a there It I businesses our I through call continue and some in Andy talked during good a we is those to whenever we people ago in us used worked you think little, That buy conservative way that they XX ago of go the being our time where we we're the invest

Greg Peters

the have conditions the willing the and the guaranteed be over Andy sharing to final of to would year how of in think perspective effect in their question outlook provide uncertain could on would and what revenue? based through for Okay. been and opportunity course you might profit balanced within you those I'm use ripple and you And two this that on happen wondering supplemental if quarters, the lines really an previous some year,

Powell Brown

time. going at it Greg, is this look say for of Again like at Okay. two a that, take if and huh, have guess purely not Number one, the that so you could a I'm things automobiles may whacks one. fewer of to because period and you on you road losses

So them. these you but goes to maybe growth components could say it slightly up in some of as there are

have performance. got and partners carrier their a other of have, one. run looking think large that by slightly stuff. That's I different how might Number that what you you distribution our are to standpoint, grow a and two So help partners number business to at certain flow we mean business the have and be ways many carriers I agency cash some other of a independent smaller our how is their business and runs to from again,

I so And meaning I into potential account the they know. that to just there's heard year. for the negative I carriers looking be they do growth how mitigate anybody the can do decide of waive that don't believe at I'm and of side that extraordinary if circumstances yet. like closely a doing haven't these component, will take that, speculating.

I would it So press me, basically it's say very down hard to think would but tell if I slightly. you be Greg

Andrew Watts

accrue for Andy puts basis now XXX morning it complexity Because we in. with here. Yes. go-forward Greg. level Hey ASC good on these of another a

quarter would the first at not stage. on for contingents as comment spot expectation going form next premium we least side saw again now hopefully additional up two it year. what right the those of contingents. this not need quarter trends to that other or their to qualify it occur getting and anticipate would be we the You carriers, down the but going that from our really probably last we we're profitability closely is our We're lost didn't that impacts picked will the watch based and which forward At that like, on look feedback but its is over just see this of impacts

So the a through. need of to factors of going on we're kind there's to monitor lot way

Greg Peters

of Got up that front, that it. ASC XXX to In profit commission that guaranteed and related your some there? through component referenced of none your supplemental the go sharing you adjustments did revenue of or

Powell Brown

it was basis very, No, No -- very small.

Greg Peters

Thank you.

Operator

you. Thank

now take Zaremski next go Credit the will from Please Suisse. Mike We question ahead. from

Mike Zaremski

morning good Hey gentlemen.

recognition. question First revenue the on

wanted to impacted materially? impact understand whether -- margins Just this the quarter

Andrew Watts

Well, know materially $XX.X you've I normally impact had adjustment move it a than business. made would on as we with we don't normally make what the we higher of seen the adjustments million as it about profit that and and revenue million $X.X past is ASC I XXX around say, margins disclosed in overall the Mike the

it consistent pretty and that's how works. So

Mike Zaremski

it clarify -- margin by million like to $X the Thanks. help that, Andy, million $X it to improve --? did

Andrew Watts

have impacted a a out slowed margin. the basically did it don't XX% margin, XX% No, what We EBITDAC margin. about it negatively basically is it

Mike Zaremski

to it. given persist And that we your Okay. and XQ XQ should potentially commentary? Got expect to

Andrew Watts

No.

of the and to back in million million that X.X XX explain a how to policies Let's the in or do the policies that of to residual in relates that so an to to bound back and or are look adjustment do we try through all had those to bound we current do policies through here worked and because see had about then March first at what quarter enforced $XX.X we if relates effect example can XXXX. look all on is, we this we of

use think Here's how you what want let's compensation. about worker to

payrolls $XX bind estimated policy policy were So a to now we were do policy. is going we we that what if said over this earn XX next for that if bound to months would $XXX we that happen the to think what when at we the decrease $XX a going and and the we’ve that payrolls earn we're going stage to is recognized reverse to are now need that the

this We March. example did we up in and that turn $XX in then in So to backed January. around

and organic it commentary that quarters know represent we don't to we the and had on what policies. just business the know right all piece the of now. piece happens and is the exactly don't that renewal What the coming should for So doesn't that impact account we outstanding over then Mike

Mike Zaremski

Understood your what and that, seeing out your and of there hear interruption are terms the helpful. but ability potential My chatter to there kind curious you that the last opinion have question out of business an your unless paid be speaking A you is to I clients there, out from regulatory the claims that's something it regarding not carrier's this think on I'd front, lot will claims. excluded? interruption maybe clients you or love them is clients, control; be, some in for or business of from of think our do most to of

Powell Brown

to or of Couple pandemic things, first provision Powell. a like as say typically I'd it's is physical loss. a that then and interruption generally due Mark, know top to excluded business Okay. excluded for damage there of is on that you

the your got mind. that So to you keep back in

X% said that wide business has having I if number tell generally for but a a written than it. that very customers one. you speaking small every customer damage as less at exclusion limits, That's single talking in some in generally percentage necessitates speaking loss. That's would about you're also what's out our said industry policies interruption it single you of of and would which physical very the a range policy number as the represent there, a mean pandemic of are every good industry to guess had I but to small I So have there if sub look I in again but

Mike Zaremski

Thank you much. very

Andrew Watts

your adjustment this we want policies. at that's about outstanding reason If different could those Yes, quarter Hey, we what know stage. clarify that estimate The have second now. right some a be turns We sure come would made upon back out adjustment covered question thing just XX.X one we don't just on what to for payroll based or Mike for I incremental? made third we it we best we Again, than impact. that in our you asked to be again to go-forward estimate everybody on our and unemployment with think may because with another could. the that make the we've it best happen anticipate

Mike Zaremski

Understood. Thank you.

Andrew Watts

Okay. Thank you.

Operator

you. Thank

Greenspan Fargo. the ahead. from Wells take go next now Elyse from Please will question We

Elyse Greenspan

a things then there bigger benefit go was if My have might just didn't through Hi, of first was, about quarter? that the and quarter segment thanks. Good quick what couple coming a I the have in morning. $X.X from And the Is there question, EBITDAC corporate? a on gone the corporate picture question. that through million of

Andrew Watts

Elyse. morning good Hi,

then last those, of versus first grants just we other did corporate some year to cost adjustments The IT that the higher also a upon our portion our divisions that the down this was incremental, make on to that mentioned the so shift it the during SIP are divisions and things, the during a really for based we payout quarter a it on reported was how we the down commentary couple a three outstanding. estimated from

up So corporate made million. in primary $X those the the the drivers were that

to relates make you per down and and the again coming As the and that will based be as on know a monitor it payouts both organic think SIP, the we up what basis earnings share. on we adjustments upon regular over will quarters we

Elyse Greenspan

then called that the lender or growth in Okay that's COVID-XX? you prepared with you what it COVID-XX growth have your is helpful happened would remarks and sticking from some does had client recessionary regardless pressures business, out to on guys place in seen that good growth

Andrew Watts

them picked business. inability we on had that a was continuing but trend. they in XXXX, dynamics most we that Yes. great on that was dynamic That a saw covered foreclose by same properties. of almost through of they last good business now there. we M&A number regarding going to a couple a Elyse, that that lost mandates right you year had and The new ’XX, primarily had up all a They're few through customers space see different new and driven

growth incremental which buoy off right now nice is space those if lot organic a not economy placements take is does thing but the around seeing really a So of it we're the that the that go good. gives we because businesses us down that about like

Elyse Greenspan

run that as kind How helpful. stay-at-home lot of and obviously how but Okay and of understand slightly going through recognize more outlook as it year. these through think GDP like this fluid segments what scenarios this see scenario. of unemployment well very this are us could and is there's for And to turn better I you put programs a you what pretty might the organic of is, could do different pressures even of this the segments orders kind but uncertainty projections the long different economy in then see Can of different down well that's I downward. the still on seems kind terms you level of and perform about as to walk kind perform appreciate positive and some high guys those downward you

Powell Brown

we've answer today better and we We've not Elyse, an we're the be to and present but historically if able to on the answer at you know, say give we're said based So done and Powell this is have our you on a as upon information our given time. guesstimate what better when going to best going guidance we give to that. overall time the it's and we would view have give not guidance you divisions best

Andrew Watts

Yes, the segment activity. just seeing segment on was Services what we because on of were the additional that release only color had underlying this claims we quarter

Elyse Greenspan

past was on of some helpful the growth and now that of That's three-quarters remainder of right an being within kind unit two-thirds apply said to book right, in office with then exposure of off your we've price. that driven Does organic the changes given you assumptions Okay. ballpark also the to seen business?

Andrew Watts

I think that's correct.

for had of consider dynamic. very a In and down to have this time is think a rates I exposure that XXXX telephone thing XXXX, you units on you the were period down. everybody important were going going through where is call. Today Here different

units exposure going down going and have You rates up.

And about. there are is, couple got so things to you think there

dynamic want anybody important We're you do any you this trying and ourselves and know. so telling I or get how for want and to how There cash want is then aware people for sense I through to thing when strapped just for I organizations that forget is customers our in that an to in fight you which another to to, that another if are else one, model you with this are mentality to of to the financially you day, be we help people We event lower in talking and me. I'm we can to not seen and our buy and got bunker big limit haven't limit, out lower umbrella, do are to I'm get it this necessity buy do not do you day don't but because enable to are and of call saying know them. on customers do a doing let's really we talking you a ongoing cover, them less that's That's way just you our you buy buy yet what that. your of a of earthquake do a wind you on that slightly concern.

Powell Brown

this trigger X% companies but loss and example, to the some XX couple experience, lay might some their how into because is play weightings. because or growth of the reason always those deductibles calls the in can't property change our that, of deductibles a actual a we about organic that that then you might on for dynamics XX, up up and a the somebody of revenues that their as are so kind make not be they are mark XX the Elyse, if last of about and of X% rates talked are direct result an correlation thinking again Yes you as X%

Elyse Greenspan

the for That's Okay. helpful. very color. Thanks

Powell Brown

Thanks Elyse.

Operator

you. Thank

We go ahead. will from from Mark SunTrust. Hughes now the question take Please next

Mark Hughes

little kind that midpoint flat to Yes. Thank the Thanks year? the does full taking what for Good a down is bit, of the organic the you. profitability morning. for Andy, if just all detail. do or EBITDAC

Andrew Watts

Mark. Hi, morning

unknowns I the now. think still of that's one right for probably us

in direct back there's had and correlation we've you've two seen past margins. between the had always our when the quarters moves it organic our where not We've of As tandem a forth. growth quarters in them and moved

business because around the it's at manage Is that long-term try came but on top why of and we it the potentially the to in face our us we because to our all if some stay margin in have a don't some margins year our have every everybody we not wouldn't actual a good all try data quickly the honesty. really there's business struggle stage, on revenues how on our surprising relates all quarters basis assumptions to quarter-over-quarter. a what on of is. of the we we this any be through to potential know, that's get but arms view margins, we're for it on just at you for the this full interim a business lead day struggling this to There's as As minimal the there but have impact today downward pressure

Mark Hughes

middle distinction How about difference sized accounts, kind accounts or seeing of much a how behavior? are versus smaller their of the in large you

Powell Brown

our and out home service or that else. lot come number particularly lot whether working small of all model the Powell. there don't alternative of would ingenuity or to it's I an I Mark, of six weeks home it delivery it's as that of go a say, to financial value and restaurant see of the transition so to from of resources small customers, a Well, that, we whatever them it is from you transformation the a has write whether takeout our businesses and something have when are, tell I

of into are to get and summer we a we barring typically lot and that can better this a businesses where are businesses of highly the are the their the instances again, and of getting thing be are leveraged conservatively. I medium trying think middle equipped balance a sheet teeth of of if people but pretty small cranked they summer their or sort to it response financial cash make some position had are more received part of or they but because it, forthcoming, into crank assistance there in common been would those larger have couple just went to they're months when that that first there up back the its too so got for we just or we by, managed in this back they and of get up and so some those many

of it's board. So over all the kind

Mark Hughes

Thank you.

Operator

you. Thank

from We from will now Kinar take Sachs. the Goldman next Yaron question

Yaron Kinar

everybody. morning Hi good

stable? question, you margins year headcount costs the to And back and to are of negative what here. where disposal second sense at Can maybe for in looking really have maybe variable? and scenarios other organic actually, keep relatively not the shrink circling talk you're margins growth that about your your turns in portion the it First to measures a you broader

Andrew Watts

Good Yaron. morning

those going and future As we of our that from to with figure do and got inside businesses the of we have because make anything in will and their leaders time right they we're the our at, to in will through leaders we'll cost different teammates. know, past. is to got up right variable of our navigate time on that the They really going rely going confidence you Anything with come calls front. commentary through and commissions an out organization there. We've are we've look upon float customers, how in off again if this carrier be our can fair really that that's said down leading there's a locally down today, to to to uncertainty but the each to the the and to partners amount businesses accordingly to in we at businesses balance all do compensation just, of we order job step they excellent of those needs individual at all on going continue levers that how do the our right pay as the the the on inside

Yaron Kinar

long global recovery financial growth I if look exactly the in organic crisis, then the And the of company’s Okay. time back pressure is at under think period. period for I

the relating you with to that XXXX? greater about can you since a a with or lot recovery? what us in XXXX think sizes on orientation or the account that share could how has crisis Maybe of anything average think Can about maybe talk had changed the businesses. and now you to of commissions that the I average do of smaller a to you impacted both just terms get sense

Powell Brown

caution level, very I about subsequent make moment. just else business, event between historically parallels anybody Hey guess. two try high that's for one, a at that just front. Powell. any just think other our occurred this this it's Yaron, to just because and I has purely or about that you you draw up sure event a if think want Number to to is Number a

lot really We’ve market had We've all been organizations the Carlson, that that into middle span Beecher some has and of and high-quality had We've had kinds Hays. even a upper spectrum Arrowhead, other entire Wright. of size another think as is, then for about of today. if large a account as state just businesses. distinction Having Florida the talking moment it we're upon reliance I revenue important said that is the a percentage retail of

of our that So if of revenue is emanates revenue say misleading that's most about that's of Florida you it's overall X% in the Florida the overall but company, NASH part. program for from of outside because let's in almost XX% a

more you as all portfolio have diversified, a might a companies. of say, of Andy sudden, So

we the way I and we tell nature. by not are that actually would are optimists by economists you

is do of that we a not and of great we're numbers and divisions is want is and the of We for quarter sales this with we reinvest term V pleased L business. are long that is, it writing our understand first light really so don't quarters a I whatever the would that we and had understand I lot know, but everybody or simple but biggest what all our that, the who say to live by we people it know in and what U, or three are whether we sea new

are for customers. going we to our And be there

I because That long similarities say very so there a and very out. parallel to then no think let's it, downward draw months I crawl now cautious actually a to in are would be a was slow over and And XX of between opinion. trying my slide, XX

for elevator down panic an was financial included people. which many This drop

consumable goods and services and of view. institutions the stronger financial have you for much drop demand a had and you point So

customer more unemployment check know. because They So on that and could to what us give GDP XX% then that's I getting we but going I and or I'm they're Yaron and the the you unemployed, of or just we help if then that. does they're is the wish it too impact I if would feel customer different it's how saying, don't good feel know furloughed an demand don't think

Andrew Watts

you just thing, sure you make to mind, other effect -- keep that that time in the probably The went citizens recall period. this we through during whole

exactly. So going you've dynamic XXXX that got on

that got impact. you've So

also that's if look what XX, you've commercial went that at So during commercial this it time were XX, but and down lines all got to rates probably at have period XX and begin down. and back you you lines XX, drove look XX but

those some of So are the the dynamics.

‘XX that different had to taking we some feels that significant You aspects impact. very, in event us to think why maybe I'm this construction of That's feels down of it a and like kind or period kind compacting at least that's how now a about right week, us. three the of to ‘XX that's into four it some feels very mean unknowns I

Yaron Kinar

a difference. appreciate I Okay. to understand trying and that exactly it's

that is I So at. where was

can you for pricing one perspective? April the maybe you final one, pricing in thank maybe a that. So And momentum you about talk from saw

Andrew Watts

up of don't kind said, going up more to same. caught is it in, I too you I get go or so down. I mean, It's to like want

potential and the up lines of exposure where not might etc. claim, talking think BI just think liabilities I'm carriers of lines obviously D&O, are they how put that they certain that I'm coverage other they a coverage I an and might there exposure sensitive about around professional and some have limits about very underwrite that, be talking

Yaron Kinar

Okay. very Thank much. you

Andrew Watts

Thanks.

Operator

Thank you.

ahead. from the Returns. Bobman question We from next Ron Capital will now Please go take

Ron Bobman

Andy Hi hi Powell. Thanks about and a your well-being. care We always lot.

pictures we hope on sure that we ago? couple that saw you So weeks neither beach were of a those

Powell Brown

weren't. We

Ron Bobman

flow seeing I very, curious, have as know this I'm your Thanks. or very what of visible early obviously of but as yet or far no very, business about strong sort business a days change? carriers more business Great. traditional channel of into question activity I activity of a wholesale that pushing you're late quoting of the I'm quarter. curious not sort are it's had which wholesale

Powell Brown

there you again continues Well, quarters similar let's the about prior of I QX is and a but just be it's to lot think to that I talk tell activity. answer the would

environment and to to activity on is So those as transition in wholesale we're QX business as did agent QX I think lot not a that let's a maybe or from of let's with depending say activity we but saying remember to agents there's the say else. been someone home just so able easily of have some work doing the

Ron Bobman

So your you're emphasis still point being despite that quite Is that the active? placing? it's

Powell Brown

Yes. That's it.

Ron Bobman

Okay.

Powell Brown

correct. you That's about it. to That's I how want think

Ron Bobman

well. Okay. right. All lot. gentlemen. Thanks Thanks Bye, a Be bye.

Powell Brown

Thank you Ron.

Operator

Thank you.

next We Please question go will Meyer from the ahead. Shields now take from KBW.

Meyer Shields

or employment and $XX.X in Good or looking million sort that annual contemplated of what's morning then Andy, sort of revenues Thanks. maybe denominator out. am the to was decreases Great. I in terms or of of what sort the of adjustment all. like what I payroll frame employment

Andrew Watts

Meyer. good Hi Yes. morning,

ways outstanding couple a think that maybe again So to policies. is look at about we

entire the and the policies of kind in in policy that part it months any more exposure the underpinning is they've for doesn't inside waiting year of it's already it's an year previous they have upwards XX to applying again why to there. we last got of -- reason first uses would So not that that had all year placed the

commentary least our what of information get banking or mentioned is, could potentially we could like. at lot the leveraged What to all what we project a our is that saying, in are try utilize other to that we there partners and do look economists we unemployment are that

don't variable will we is, do. what the Here's furloughing know

that's benefits So exactly a the to piece ago employee on so that's business. about know we out unknown. don't weeks is there is that Cobra data and from The that do is effect three what going

about on Again going kind many our almost benefits reported previous how our So businesses. that now this employee independent i.e. inflate of gig we'll those have a individuals is or unemployment unknown then workers. that's to contractors for and but or work are it's file of to likely able number impact no claims also comp that question more the

that those juggling to kind come of were estimate. in up we with dynamics around are So order the an

Meyer Shields

Does XXX the pretty show if doesn't ASC helpful. that That's is up your estimate Understood. very historical the Okay. correct then impact modest segment? mean

Andrew Watts

is to which perfectly, out comp case. now it your the that statement by if on, is for yes way right here see worked let's is but benefits perfectly it going to starts work out again relates the us give no going as yes premiums we absolutely return So work If true know to at data is, not and that about The everything indication employee that any there that that to policies out item are evident likelihood place. for we those the we take significant at other it's become be but would would a have that are we in in yes periods, look there. to this don't be need to stage

are again, this this stage. in that specific, so unknowns one to need at man, wish be many more environment watch So we could there we current

Meyer Shields

question Okay. help. Understood can. and I last definitely the appreciate all One if

lot that covered. You're aren't rumblings small space shocked the their to insurers business that particularly claims hearing are of a interruption about hear enterprise about, in

me that Let had & of Brown against take disappointment? claims procedures through people cover you Brown no maybe sort these all that and from

Powell Brown

as mandates loss. a have a generally interruption and I it exclusion pandemic damage speaking remember physical Well, business usually said before in is there

is in talking some obviously we customers clarification, how may to policies filed. have there actually to our on and with so obviously instances our written be in there some be And that needs partners to that and claims their in been relative are talking we carrier it instances

the policy. on so customer much very and the depends it So

Meyer Shields

Okay. Thanks so much.

Operator

you. Thank

We additional queue. have two the questions follow-up in

go Wells The from Elyse from Fargo. Greenspan first Please ahead. one

Elyse Greenspan

Hi. Thanks for follow-up. the taking

you in quick one Have and Just potentially guys transportation travel my ban could the question. had second expenses because be is a how a percent quarter? on much just your and entertainment restrictions the commented additional potentially given as assumption is of in third lower from benefit there expenses cumulative

Andrew Watts

Elyse The there. answer you were breaking is up

that think out be telephone we and teammates exactly The rephrase that when on and encouraging what what I positive states would be lot on then think is believe from there believe reopen I believe the and answer away. conference just travel. there. and for Obviously organization be would, of that to cars to and it to our there do be yes. expense cautious relative potential it'll got I traveling going a yes we jumping be we the QX the reduction of it and driving I have safe right don't question to to of the QX they'll QX. and in was may a is are would millions there see other be if it's So open all But our as teammates a video and to the impact out answer our mean but as on standpoint a benefit our customers slight QX in like do do could out could do your with we slight you T&E clients. be people to opposed talk on planes in the by best trying positive that go I We or

Elyse Greenspan

your is T&E much a as expenses? how said percent you of Have

Andrew Watts

that haven't Elyse past. the disclosed No, we in

Elyse Greenspan

Thank follow-up. That's again. Okay. the Thank you. taking for you

Powell Brown

good day. a Have Sure.

Operator

is Mark next The you. Please from Hughes call ahead. from Thank SunTrust. go

Mark Hughes

might Can new it comment if been based April you selling you the on in you to you. lot we're a compared business. think about Powell, have thank on January/February new Okay, run business of April trends mentioned what rate?

Powell Brown

Yes.

anecdotal So let we this would me, remember remember a purely XX, XXX days XX, you XXX, I forward-looking speculative tell out. that, giving information statement not because is and we're work

that in So the working remember June pipe that April, was things we inventory on. were had May,

when May. distinction, and exposure in is think this business I I new see is to you that base customer our existing important and the So you would start the think an for I potential tell reduction impact on units

zero to and have and that for and versus moment. are and and year, they that July So months. think bigger of full If say the you through has we you'll just their two because million months annual of they I a that say May months have a $X we flow to June three a we month and for changes down or their April gotten a through regular and that's let's why three want believe think then somebody million working are statement XX% will revenues revenues with would exposure downdraft in about them next that adjust potential and let's QX everything potentially $XX were into say

Mark Hughes

final One question.

Andrew Watts

that Hey, it carries well that would they Mark, being to mid-term piece what we'll unit exposure is, adjustments other potentially would just probably audit. catch normally now are on receptive than on one other right is they one dynamic more say the

will So on so this time It indicate carrier and play that's on the depends just that probably out to best but how they and now another dynamic exposure make are the would the rather within during units what depends adjustments -- period. we

Mark Hughes

in not to engaged or activities some other business the much -- process, you've to the how this To due that adjusting think that gotten timely or about point, insurance how thinking you're natural good's information presumably good of your got, information impacts? is owners you in is may are and lag of is think how around not, how have timely lag how lot you the Do there a

Powell Brown

going said, As that about to insurance. owners to thought much sure pretty depend I customer I have the make on every want business it's but

they flow. So number have about that's number and also one thought two, cash

instances it encourage, going audit which would paying good to the around I you comes in you So that's concern some I going about the would the and think the thinking, say client if I the I call to care, don't that around. is be keep know the audit, if when payments I'm because the not it, the at if theory, takes catch is normal carrier we'll position in just

to and have next and I month to quarter So manage next get flow next my cash there. and today week

I much. slight delay not but believe Mark, a there is that So

customers encouraging help are to working will get that that midterm through the time. to to adjustments those them our that carrier do our of to allow we extent this make period us So and partners with

Mark Hughes

Very helpful. Thank you.

Powell Brown

Yes.

Andrew Watts

and can else we're I minutes. probably anybody XX follow-up us an hour we're has a Hey Lisa, going to think other ahead If ring. go they there's because about give

some go the ahead up you call today. Powell wrap and have closing comments? We will got

Powell Brown

you, Thank Andy.

themes. I I that to although of that As again environments. to people call difficult and of delivered what had don't they that proud and everybody everybody want I one. in time quarter make we recent teammates understands couple good some have how in of our time the really We we're a just remind conclude, light key to Number put would really and a customers want for we our may events the sure and side

proud of Number two, our have and and conversion balance peers we plus the in dollars don't traded billion deliver access we and we're it. liquidity. strong We highest take we sheet have among cash to a this a lightly, publicly

carry think tell it we or long-term little be about in we two things got beyond? hands you again. quarter to on solutions thing the their can on customers live work for so this but So they could and sure and trying deliver next our business bumpy and so through to a I'll the our wheel one we're situation navigating bit and to businesses Yes,

I quarter. that you in each to the luck. Good and to with health we good of of and next wish forward again day look talking you So best the

Operator

Thank you This for participation. your concludes call. today's

disconnect. You may now

Brown & Brown (BRO) 28 Apr 202020 Q1 Earnings call transcript