Brown & Brown Announces Adjustments to Non-GAAP Financial Measures

authorIntellectia.AI2024-10-29
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Illustration by Intellectia.AI

Overview of Non-GAAP Financial Measures Adjustments

Brown & Brown, Inc. has announced changes in its financial reporting, effective January 1, 2024. The company will no longer exclude Foreign Currency Translation from the calculation of EBITDAC - Adjusted, EBITDAC Margin - Adjusted, and Diluted Net Income Per Share - Adjusted. This change is made because fluctuations in Foreign Currency Translation affect both revenues and expenses, largely offsetting each other, thus providing no meaningful incremental value in evaluating financial performance.

Additionally, the amortization of intangible assets will be excluded from the calculation of Diluted Net Income Per Share - Adjusted. This adjustment is due to the non-cash nature of amortization, which does not reflect the company's business performance.

Non-GAAP Revenue and Earnings Measures

  • Organic Revenue: Calculated as core commissions and fees minus the first 12 months of newly acquired operations, divested business, and Foreign Currency Translation. Core commissions and fees exclude profit-sharing contingent commissions.

  • EBITDAC: Defined as income before interest, income taxes, depreciation, amortization, and changes in estimated acquisition earn-out payables.

  • EBITDAC Margin: EBITDAC divided by total revenues.

  • EBITDAC - Adjusted: EBITDAC excluding gains/losses on disposal, Acquisition/Integration Costs for 2022 and 2023, and the 1Q23 Nonrecurring Cost.

  • EBITDAC Margin - Adjusted: EBITDAC - Adjusted divided by total revenues.

  • Diluted Net Income Per Share - Adjusted: Diluted net income per share, excluding after-tax impacts of changes in estimated acquisition earn-out payables, gains/losses on disposal, Acquisition/Integration Costs, the 1Q23 Nonrecurring Cost, and amortization.

Definitions of Non-GAAP Components

  • Acquisition/Integration Costs: Costs from acquisitions of GRP (Jersey) Holdco Limited and its business, Orchid Underwriters Agency, CrossCover Insurance Services, and BdB Limited companies.

  • Foreign Currency Translation: Impact calculated by applying current-year foreign exchange rates to functional currencies in the business to the US dollar reporting currency.

  • 1Q23 Nonrecurring Cost: A $11.0 million expense in the first quarter of 2023 to resolve a business matter.

  • (Gain)/loss on disposal: Reflects net proceeds compared to net book value from sales of books of business and divestiture transactions.

These adjustments align Brown & Brown, Inc.'s financial reporting with industry standards, ensuring comparability and transparency in evaluating the company's performance.

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