Arthur J. Gallagher & Co. Announces First Quarter 2022 Financial Results
Summary of Financial Results - First Quarter |
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Revenues Before |
Diluted Net Earnings |
||||||||||||||
Reimbursements |
Net Earnings (Loss) |
EBITDAC |
(Loss) Per Share |
||||||||||||
Segment |
1st Q 22 |
1st Q 21 |
1st Q 22 |
1st Q 21 |
1st Q 22 |
1st Q 21 |
1st Q 22 |
1st Q 21 |
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(in millions) |
(in millions) |
(in millions) |
|||||||||||||
Brokerage, as reported |
$ 2,122.6 |
|
$ 464.3 |
$ 364.4 |
|
|
$ 2.17 |
$ 1.82 |
|||||||
Net gains on divestitures |
(1.4) |
(4.1) |
(1.1) |
(3.2) |
(1.4) |
(4.1) |
(0.01) |
(0.02) |
|||||||
Acquisition integration |
- |
- |
35.0 |
3.2 |
43.8 |
4.1 |
0.17 |
0.02 |
|||||||
Workforce and lease termination |
- |
- |
5.0 |
5.5 |
6.2 |
5.2 |
0.02 |
0.03 |
|||||||
Acquisition related adjustments |
- |
- |
16.4 |
12.7 |
9.0 |
6.1 |
0.08 |
0.06 |
|||||||
Amortization of intangible assets |
- |
- |
93.7 |
74.2 |
- |
- |
0.44 |
0.37 |
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Levelized foreign currency |
|||||||||||||||
translation |
- |
(14.8) |
- |
(3.0) |
- |
(4.3) |
- |
(0.01) |
|||||||
Brokerage, as adjusted * |
2,121.2 |
1,591.3 |
613.3 |
453.8 |
844.0 |
625.4 |
2.87 |
2.27 |
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Risk Management, as reported |
259.1 |
220.3 |
23.9 |
18.0 |
44.1 |
39.8 |
0.11 |
0.09 |
|||||||
Workforce and lease termination |
- |
- |
0.5 |
0.5 |
0.7 |
0.7 |
- |
- |
|||||||
Acquisition related adjustments |
- |
- |
- |
1.8 |
0.1 |
- |
- |
0.01 |
|||||||
Amortization of intangible assets |
- |
- |
1.2 |
1.2 |
- |
- |
0.01 |
0.01 |
|||||||
Levelized foreign currency |
|||||||||||||||
translation |
- |
(2.3) |
- |
(0.1) |
- |
(0.3) |
- |
- |
|||||||
Risk Management, as adjusted * |
259.1 |
218.0 |
25.6 |
21.4 |
44.9 |
40.2 |
0.12 |
0.11 |
|||||||
Corporate, as reported |
22.8 |
302.1 |
(49.1) |
11.3 |
(48.2) |
(43.4) |
(0.23) |
0.01 |
|||||||
Transaction-related costs |
- |
- |
14.6 |
- |
15.8 |
- |
0.07 |
- |
|||||||
Income tax related |
- |
- |
(5.0) |
- |
- |
- |
(0.02) |
- |
|||||||
Corporate, as adjusted * |
22.8 |
302.1 |
(39.5) |
11.3 |
(32.4) |
(43.4) |
(0.18) |
0.01 |
|||||||
|
$ 2,404.5 |
|
$ 439.1 |
$ 393.7 |
|
|
$ 2.05 |
$ 1.92 |
|||||||
|
$ 2,403.1 |
|
$ 599.4 |
$ 486.5 |
|
|
$ 2.81 |
$ 2.39 |
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Total Brokerage & Risk |
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Management, as reported |
$ 2,381.7 |
|
$ 488.2 |
$ 382.4 |
|
|
$ 2.28 |
$ 1.91 |
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Total Brokerage & Risk |
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Management, as adjusted * |
$ 2,380.3 |
|
$ 638.9 |
$ 475.2 |
|
|
$ 2.99 |
$ 2.38 |
* |
For first quarter 2022, the pretax impact of the Brokerage segment adjustments totals |
(1 of 14)
"We had a fantastic start to 2022!" said
"During the quarter, we completed 5 new tuck-in mergers with approximately $32 million of annualized revenue, and we were recognized by the
"Overall, first quarter rate and exposure increases were broad-based, driven by firm global P/C rates across nearly all geographies and lines of business, and our clients' continued growth. First quarter 2022 global P/C renewal premium increases of 8% were consistent with fourth quarter levels adjusting for line of coverage seasonality. Additionally, the extremely tight labor market is favorably impacting our benefits and HR consulting business, resulting in more project work and higher covered lives as well as contributing to increased new arising claims for our risk management business.
"Looking ahead, we see robust demand for our services continuing as clients look to manage their risk and human capital challenges. Our team has the expertise, the service capabilities, and the desire to help clients and prospects navigate the current environment!"
Gallagher does not have any offices or direct operations within
We currently estimate these actions will adversely impact full year 2022 brokerage segment annual revenues by up to $10 million and full year 2022 net after tax earnings by up to
(2 of 14)
Organic Revenues (Non-GAAP) |
1st Q 2022 |
1st Q 2021 |
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Base Commissions and Fees |
||||||||||
Commissions and fees, as reported |
$ 1,957.2 |
$ 1,459.0 |
||||||||
Less commissions and fees from acquisitions |
(377.2) |
- |
||||||||
Less divested operations |
- |
(1.8) |
||||||||
Levelized foreign currency translation |
- |
(13.1) |
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Organic base commissions and fees |
$ 1,580.0 |
$ 1,444.1 |
||||||||
Organic change in base commissions and fees |
9.4% |
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Supplemental Revenues |
||||||||||
Supplemental revenues, as reported |
$ 74.3 |
$ 66.8 |
||||||||
Less supplemental revenues from acquisitions |
(1.0) |
- |
||||||||
Levelized foreign currency translation |
- |
(0.6) |
||||||||
Organic supplemental revenues |
$ 73.3 |
$ 66.2 |
||||||||
Organic change in supplemental revenues |
10.7% |
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Contingent Revenues |
||||||||||
Contingent revenues, as reported |
$ 71.6 |
$ 63.3 |
||||||||
Less contingent revenues from acquisitions |
(0.8) |
- |
||||||||
Levelized foreign currency translation |
- |
(0.3) |
||||||||
Organic contingent revenues |
$ 70.8 |
$ 63.0 |
||||||||
Organic change in contingent revenues |
12.4% |
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Total reported commissions, fees, supplemental |
||||||||||
revenues and contingent revenues |
$ 2,103.1 |
$ 1,589.1 |
||||||||
Less commissions, fees, supplemental revenues |
||||||||||
and contingent revenues from acquisitions |
(379.0) |
- |
||||||||
Less divested operations and program repricing |
- |
(1.8) |
||||||||
Levelized foreign currency translation |
- |
(14.0) |
||||||||
Total organic commissions, fees, supplemental |
||||||||||
revenues and contingent revenues |
$ 1,724.1 |
$ 1,573.3 |
||||||||
Total organic change |
9.6% |
Acquisition Activity |
1st Q 2022 |
1st Q 2021 |
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Number of acquisitions closed * |
5 |
5 |
||||||||
Estimated annualized revenues acquired (in millions) |
$ 32.2 |
$ 89.7 |
* |
In the first quarter of 2022, Gallagher did not issue any shares of its common stock in connection with acquisitions. |
(3 of 14)
Compensation Expense and Ratios |
1st Q 2022 |
1st Q 2021 |
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Compensation expense, as reported |
$ 1,096.4 |
$ 821.7 |
||||||||
Acquisition integration |
(30.3) |
(3.6) |
||||||||
Workforce and lease termination related charges |
(5.5) |
(4.5) |
||||||||
Acquisition related adjustments |
(9.0) |
(6.1) |
||||||||
Levelized foreign currency translation |
- |
(8.5) |
||||||||
Compensation expense, as adjusted |
$ 1,051.6 |
$ 799.0 |
||||||||
Reported compensation expense ratios using reported |
||||||||||
revenues on page 1 |
* |
51.7% |
51.0% |
|||||||
Adjusted compensation expense ratios using adjusted |
||||||||||
revenues on page 1 |
** |
49.6% |
50.2% |
* |
Reported first quarter 2022 compensation ratio was 0.7 pts higher than first quarter 2021. This ratio was adversely impacted by increased integration costs related to the reinsurance operations acquired in |
** |
Adjusted first quarter 2022 compensation ratio was 0.6 pts lower than first quarter 2021. This ratio was favorably impacted by a lower compensation ratio related to the seasonality of the reinsurance operations acquired in |
Operating Expense and Ratios |
1st Q 2022 |
1st Q 2021 |
||||||||
Operating expense, as reported |
$ 239.8 |
$ 170.1 |
||||||||
Acquisition integration |
(13.5) |
(0.5) |
||||||||
Workforce and lease termination related charges |
(0.7) |
(0.7) |
||||||||
Levelized foreign currency translation |
- |
(2.0) |
||||||||
Operating expense, as adjusted |
$ 225.6 |
$ 166.9 |
||||||||
Reported operating expense ratios using reported |
||||||||||
revenues on page 1 |
* |
11.3% |
10.6% |
|||||||
Adjusted operating expense ratios using adjusted |
||||||||||
revenues on page 1 |
** |
10.6% |
10.5% |
* |
Reported first quarter 2022 operating expense ratio was 0.7 pts higher than first quarter 2021. This ratio was adversely impacted by increased integration costs related to the reinsurance operations acquired in |
** |
Adjusted first quarter 2022 operating expense ratio was 0.1 pts higher than first quarter 2021. This ratio was adversely impacted by the return of advertising, travel, entertainment and other client-related expenses, as well as additional investments in technology, mostly offset by savings from office consolidations and a lower operating expense ratio related to the seasonality of the reinsurance operations acquired in |
(4 of 14)
Net Earnings to Adjusted EBITDAC (Non-GAAP) |
1st Q 2022 |
1st Q 2021 |
||||||||
Net earnings, as reported |
$ 464.3 |
$ 364.4 |
||||||||
Provision for income taxes |
154.1 |
115.9 |
||||||||
Depreciation |
24.2 |
22.1 |
||||||||
Amortization |
123.0 |
103.6 |
||||||||
Change in estimated acquisition earnout payables |
20.8 |
12.4 |
||||||||
EBITDAC |
786.4 |
618.4 |
||||||||
Net gains on divestitures |
(1.4) |
(4.1) |
||||||||
Acquisition integration |
43.8 |
4.1 |
||||||||
Workforce and lease termination related charges |
6.2 |
5.2 |
||||||||
Acquisition related adjustments |
9.0 |
6.1 |
||||||||
Levelized foreign currency translation |
- |
(4.3) |
||||||||
EBITDAC, as adjusted |
$ 844.0 |
$ 625.4 |
||||||||
Net earnings margin, as reported using reported |
||||||||||
revenues on page 1 |
21.9% |
22.6% |
||||||||
EBITDAC margin, as adjusted using adjusted |
||||||||||
revenues on page 1 |
39.8% |
39.3% |
Organic Revenues (Non-GAAP) |
1st Q 2022 |
1st Q 2021 |
||||||||
Fees |
$ 255.3 |
$ 217.3 |
||||||||
International performance bonus fees |
3.7 |
2.9 |
||||||||
Fees as reported |
259.0 |
220.2 |
||||||||
Less fees from acquisitions |
(7.9) |
- |
||||||||
Levelized foreign currency translation |
- |
(2.3) |
||||||||
Organic fees |
$ 251.1 |
$ 217.9 |
||||||||
Organic change in fees |
15.2% |
Acquisition Activity |
1st Q 2022 |
1st Q 2021 |
||||||||
Number of acquisitions closed |
- |
1 |
||||||||
Estimated annualized revenues acquired (in millions) |
$ - |
$ 14.0 |
(5 of 14)
Compensation Expense and Ratios |
1st Q 2022 |
1st Q 2021 |
||||||||
Compensation expense, as reported |
$ 158.7 |
$ 134.1 |
||||||||
Workforce and lease termination related charges |
(0.3) |
(0.4) |
||||||||
Acquisition related adjustments |
(0.1) |
- |
||||||||
Levelized foreign currency translation |
- |
(1.6) |
||||||||
Compensation expense, as adjusted |
$ 158.3 |
$ 132.1 |
||||||||
Reported compensation expense ratios using reported |
||||||||||
revenues (before reimbursements) on page 1 |
* |
61.3% |
60.9% |
|||||||
Adjusted compensation expense ratios using adjusted |
||||||||||
revenues (before reimbursements) on page 1 |
* |
61.1% |
60.6% |
* |
Reported first quarter 2022 compensation ratio was 0.4 pts higher than first quarter 2021. Adjusted first quarter 2022 compensation ratio was 0.5 pts higher than first quarter 2021. These ratios were primarily impacted by higher temporary help, increased base compensation relating to the resumption of merit wage increases and higher incentive compensation expense related to stronger organic growth. |
Operating Expense and Ratios |
1st Q 2022 |
1st Q 2021 |
||||||||
Operating expense, as reported |
$ 56.3 |
$ 46.4 |
||||||||
Workforce and lease termination related charges |
(0.4) |
(0.3) |
||||||||
Levelized foreign currency translation |
- |
(0.4) |
||||||||
Operating expense, as adjusted |
$ 55.9 |
$ 45.7 |
||||||||
Reported operating expense ratios using reported |
||||||||||
revenues (before reimbursements) on page 1 |
* |
21.7% |
21.1% |
|||||||
Adjusted operating expense ratios using reported |
||||||||||
revenues (before reimbursements) on page 1 |
* |
21.6% |
21.0% |
* |
Reported first quarter 2022 operating expense ratio was 0.6 pts higher than first quarter 2021. Adjusted first quarter 2022 operating ratio was 0.6 pts higher than first quarter 2021. These ratios were adversely impacted by the return of advertising, travel, entertainment and other client-related expenses, increased professional fees and a litigation settlement, partially offset by savings from office consolidations and reduced technology expense. |
Net Earnings to Adjusted EBITDAC (Non-GAAP) |
1st Q 2022 |
1st Q 2021 |
||||||||
Net earnings, as reported |
$ 23.9 |
$ 18.0 |
||||||||
Provision for income taxes |
8.4 |
6.1 |
||||||||
Depreciation |
10.1 |
11.5 |
||||||||
Amortization |
1.6 |
1.6 |
||||||||
Change in estimated acquisition earnout payables |
0.1 |
2.6 |
||||||||
EBITDAC |
44.1 |
39.8 |
||||||||
Workforce and lease termination related charges |
0.7 |
0.7 |
||||||||
Acquisition related adjustments |
0.1 |
- |
||||||||
Levelized foreign currency translation |
- |
(0.3) |
||||||||
EBITDAC, as adjusted |
$ 44.9 |
$ 40.2 |
||||||||
Net earnings margin, as reported using reported |
||||||||||
revenues (before reimbursements) on page 1 |
9.2% |
8.2% |
||||||||
EBITDAC margin, as adjusted using adjusted |
||||||||||
revenues (before reimbursements) on page 1 |
17.3% |
18.4% |
(6 of 14)
2022 |
2021 |
||||||||||||
Net Earnings |
Net Earnings |
||||||||||||
(Loss) |
(Loss) |
||||||||||||
Income |
Attributable to |
Income |
Attributable to |
||||||||||
Pretax |
Tax |
Controlling |
Pretax |
Tax |
Controlling |
||||||||
1st Quarter |
Loss |
Benefit |
Interests |
Loss |
Benefit |
Interests |
|||||||
Components of Corporate Segment, as reported |
|||||||||||||
Interest and banking costs |
$ (64.5) |
$ 16.8 |
$ (47.7) |
$ (49.2) |
$ 12.3 |
$ (36.9) |
|||||||
Clean energy related (1) |
(2.7) |
0.7 |
(2.0) |
(29.0) |
62.4 |
33.4 |
|||||||
Acquisition costs (2) |
(18.4) |
1.4 |
(17.0) |
(1.5) |
0.1 |
(1.4) |
|||||||
Corporate (3) (4) |
(27.1) |
45.0 |
17.9 |
(26.1) |
32.5 |
6.4 |
|||||||
Reported 1st Quarter |
(112.7) |
63.9 |
(48.8) |
(105.8) |
107.3 |
1.5 |
|||||||
Adjustments |
|||||||||||||
Transaction-related costs (2) |
15.8 |
(1.2) |
14.6 |
- |
- |
- |
|||||||
Income tax related (3) |
- |
(5.0) |
(5.0) |
- |
- |
- |
|||||||
Components of Corporate Segment, as adjusted |
|||||||||||||
Interest and banking costs |
(64.5) |
16.8 |
(47.7) |
(49.2) |
12.3 |
(36.9) |
|||||||
Clean energy related (1) |
(2.7) |
0.7 |
(2.0) |
(29.0) |
62.4 |
33.4 |
|||||||
Acquisition costs |
(2.6) |
0.2 |
(2.4) |
(1.5) |
0.1 |
(1.4) |
|||||||
Corporate (4) |
(27.1) |
40.0 |
12.9 |
(26.1) |
32.5 |
6.4 |
|||||||
Adjusted 1st Quarter |
$ (96.9) |
$ 57.7 |
$ (39.2) |
|
$ 107.3 |
$ 1.5 |
(1) |
Pretax loss for the first quarter is presented net of amounts attributable to noncontrolling interests of $(0.3) million in 2022 and |
(2) |
In first quarter 2022, Gallagher incurred transaction-related costs, which include legal, consulting, employee compensation and other professional fees associated with our acquisition of the Willis Towers Watson treaty reinsurance brokerage operations. |
(3) |
In first quarter 2022, Gallagher increased its state effective income tax rate, which resulted in the overall |
(4) |
Corporate pretax loss includes a net unrealized foreign exchange remeasurement gain of |
Interest and banking costs and debt - At
Clean energy - Consists of the operating results related to our investments in clean coal production plants and royalty income from clean coal licenses related to
Acquisition costs - Consists mostly of external professional fees and other due diligence costs related to acquisitions. On occasion, Gallagher enters into forward currency hedges for the purchase price of committed, but not yet funded, acquisitions with funding requirements in currencies other than the
Corporate - Consists of overhead allocations mostly related to corporate staff compensation, other corporate level activities, and net unrealized foreign exchange remeasurement. In addition, includes the tax expense related to partial taxation of foreign earnings, nondeductible executive compensation and entertainment expenses and the tax benefit from vesting of employee equity awards.
(7 of 14)
Gallagher allocates the provision for income taxes to its Brokerage and Risk Management segments using the local country statutory rates. Gallagher's consolidated effective tax rate for the quarters ended
Gallagher will host a webcast conference call on
Cautionary Information
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this press release, the words "anticipates," "believes," "contemplates," "see," "should," "could," "will," "estimates," "expects," "intends," "plans" and variations thereof and similar expressions, are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding changes in our expenses in the next several quarters; the impact of the
Gallagher's actual results may differ materially from those contemplated by the forward-looking statements. Readers are therefore cautioned against relying on any of the forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include changes in worldwide and national economic conditions, including the pace of economic recovery following COVID-19; our actual acquisition opportunities; or other factors like the military conflict between
In particular, the global spread of COVID-19 has created significant volatility and uncertainty and economic disruption that may impact our forward-looking statements. The extent to which the pandemic impacts our business, operations and financial results will depend on numerous evolving factors, many of which are not within our control and that we may not be able to accurately predict, including: its duration and scope; governmental, business and individuals' actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response; the effect on our clients and client demand for our services; the ability of our clients to pay their insurance premiums which could impact our commission and fee revenues for our services; the number of new arising workers compensation and general liability claims; and the long-term impact of employees working from home, including increased technology costs, and employees' holistic wellbeing.
Please refer to Gallagher's filings with the
(8 of 14)
In addition to reporting financial results in accordance with GAAP, this press release provides information regarding EBITDAC, EBITDAC margin, adjusted EBITDAC, adjusted EBITDAC margin, diluted net earnings per share, as adjusted (adjusted EPS), adjusted revenue, adjusted compensation and operating expenses, adjusted compensation expense ratio, adjusted operating expense ratio and organic revenue. These measures are not in accordance with, or an alternative to, the GAAP information provided in this press release. Gallagher's management believes that these presentations provide useful information to management, analysts and investors regarding financial and business trends relating to Gallagher's results of operations and financial condition or because they provide investors with measures that our chief operating decision maker uses when reviewing the company's performance. See further below for definitions and additional reasons each of these measures is useful to investors. Gallagher's industry peers may provide similar supplemental non-GAAP information with respect to one or more of these measures, although they may not use the same or comparable terminology and may not make identical adjustments. The non-GAAP information provided by Gallagher should be used in addition to, but not as a substitute for, the GAAP information provided. As disclosed in its most recent Proxy Statement, Gallagher makes determinations regarding certain elements of executive officer incentive compensation, performance share awards and annual cash incentive awards, partly on the basis of measures related to adjusted EBITDAC.
Adjusted Non-GAAP presentation - Gallagher believes that the adjusted non-GAAP presentations of the current and prior period information presented in this earnings release provide stockholders and other interested persons with useful information regarding certain financial metrics of Gallagher that may assist such persons in analyzing Gallagher's operating results as they develop a future earnings outlook for Gallagher. The after-tax amounts related to the adjustments were computed using the normalized effective tax rate for each respective period. See page 13 and 14 for a reconciliation of the adjustments made to income taxes.
- Adjusted measures - Revenues (for the Brokerage segment), revenues before reimbursements (for the Risk Management segment), net earnings, compensation expense and operating expense, respectively, each adjusted to exclude the following, as applicable:
- Net gains on divestitures, which are primarily net proceeds received related to sales of books of business and other divestiture transactions, such as the disposal of a business through sale or closure.
- Acquisition integration costs, which include costs related to certain large acquisitions, outside the scope of the usual tuck-in strategy, not expected to occur on an ongoing basis in the future once Gallagher fully assimilates the applicable acquisition. These costs are typically associated with redundant workforce, extra lease space, duplicate services and external costs incurred to assimilate the acquisition with our IT related systems.
- Transaction-related costs associated with its acquisition of the Willis Towers Watson treaty reinsurance brokerage operations. These include costs related to regulatory filings, legal, accounting services, insurance and incentive compensation.
- Workforce related charges, which primarily include severance costs (either accrued or paid) related to employee terminations and other costs associated with redundant workforce.
- Lease termination related charges, which primarily include costs related to terminations of real estate leases and abandonment of leased space.
- Acquisition related adjustments, which include change in estimated acquisition earnout payables adjustments, impairment charges and acquisition related compensation charges. For first quarter 2022, this adjustment also includes the impact of an acquisition valuation analysis and corresponding adjustments.
- Amortization of intangible assets reflects the amortization of customer/expiration lists, non-compete agreements, trade names and other intangible assets have been acquired through the company's merger and acquisition strategy.
- The impact of foreign currency translation, as applicable. The amounts excluded with respect to foreign currency translation are calculated by applying current year foreign exchange rates to the same period in the prior year.
- Income tax related, which represents the impact in first quarter 2022 of a one-time income tax benefit related to the revaluation of certain deferred income tax assets as a result of a change in our state effective income tax rate.
- Adjusted ratios - Adjusted compensation expense and adjusted operating expense, respectively, each divided by adjusted revenues.
(9 of 14)
- EBITDAC and EBITDAC margin - EBITDAC is net earnings before interest, income taxes, depreciation, amortization and the change in estimated acquisition earnout payables and EBITDAC margin is EBITDAC divided by total revenues (for the Brokerage segment) and revenues before reimbursements (for the Risk Management segment). These measures for the Brokerage and Risk Management segments provide a meaningful representation of Gallagher's operating performance for the overall business and provide a meaningful way to measure its financial performance on an ongoing basis.
- Adjusted EBITDAC and Adjusted EBITDAC Margin - Adjusted EBITDAC is EBITDAC adjusted to exclude net gains on divestitures, acquisition integration costs, workforce related charges, lease termination related charges, acquisition related adjustments, transaction related costs, legal and income tax related costs and the period-over-period impact of foreign currency translation, as applicable and Adjusted EBITDAC margin is Adjusted EBITDAC divided by total adjusted revenues (defined above). These measures for the Brokerage and Risk Management segments provide a meaningful representation of Gallagher's operating performance, and are also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.
- Adjusted EPS and Adjusted Net Earnings - Adjusted net earnings have been adjusted to exclude the after-tax impact of net gains on divestitures, acquisition integration costs, the impact of foreign currency translation, workforce related charges, lease termination related charges, acquisition related adjustments, transaction related costs, amortization of intangible assets, legal and income tax related costs and effective income tax rate impact, as applicable. Adjusted EPS is Adjusted Net Earnings divided by diluted weighted average shares outstanding. This measure provides a meaningful representation of Gallagher's operating performance (and as such should not be used as a measure of Gallagher's liquidity), and for the overall business is also presented to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability. This is the first quarter we have excluded amortization of intangible assets from adjusted EPS, and we have provided the same adjustment for the prior period for comparability.
Organic Revenues (a non-GAAP measure) - For the Brokerage segment, organic change in base commission and fee revenues, supplemental revenues and contingent revenues exclude the first twelve months of such revenues generated from acquisitions and such revenues related to divested operations in each year presented. These revenues are excluded from organic revenues in order to help interested persons analyze the revenue growth associated with the operations that were a part of Gallagher in both the current and prior period. In addition, organic change in base commission and fee revenues, supplemental revenues and contingent revenues excludes the period-over-period impact of foreign currency translation to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability. For the Risk Management segment, organic change in fee revenues excludes the first twelve months of fee revenues generated from acquisitions in each year presented. In addition, change in organic growth excludes the period-over-period impact of foreign currency translation to improve the comparability of our results between periods by eliminating the impact of the items that have a high degree of variability.
These revenue items are excluded from organic revenues in order to determine a comparable, but non-GAAP, measurement of revenue growth that is associated with the revenue sources that are expected to continue in the current year and beyond. Gallagher has historically viewed organic revenue growth as an important indicator when assessing and evaluating the performance of its Brokerage and Risk Management segments. Gallagher also believes that using this non-GAAP measure allows readers of our financial statements to measure, analyze and compare the growth from its Brokerage and Risk Management segments in a meaningful and consistent manner.
Reconciliation of Non-GAAP Information Presented to GAAP Measures - This press release includes tabular reconciliations to the most comparable GAAP measures, as follows: for EBITDAC (on pages 11 and 12), for adjusted revenues, adjusted EBITDAC and adjusted diluted net earnings per share (on page 1), for organic revenue measures (on pages 3 and 5, respectively, for the Brokerage and Risk Management segments), for adjusted compensation and operating expenses and adjusted EBITDAC margin (on pages 4, 5 and 6, respectively, for the Brokerage and Risk Management segments).
(10 of 14)
|
|||||||||||||||
Reported Statement of Earnings and EBITDAC - 1st Qtr Ended |
|||||||||||||||
(Unaudited - in millions except per share, percentage and workforce data) |
|||||||||||||||
1st Q Ended |
1st Q Ended |
||||||||||||||
Brokerage Segment |
|
|
|||||||||||||
Commissions |
$ 1,565.3 |
$ 1,125.4 |
|||||||||||||
Fees |
391.9 |
333.6 |
|||||||||||||
Supplemental revenues |
74.3 |
66.8 |
|||||||||||||
Contingent revenues |
71.6 |
63.3 |
|||||||||||||
Investment income and net gains on divestitures |
19.5 |
21.1 |
|||||||||||||
Total revenues |
2,122.6 |
1,610.2 |
|||||||||||||
Compensation |
1,096.4 |
821.7 |
|||||||||||||
Operating |
239.8 |
170.1 |
|||||||||||||
Depreciation |
24.2 |
22.1 |
|||||||||||||
Amortization |
123.0 |
103.6 |
|||||||||||||
Change in estimated acquisition earnout payables |
20.8 |
12.4 |
|||||||||||||
Expenses |
1,504.2 |
1,129.9 |
|||||||||||||
Earnings before income taxes |
618.4 |
480.3 |
|||||||||||||
Provision for income taxes |
154.1 |
115.9 |
|||||||||||||
Net earnings |
464.3 |
364.4 |
|||||||||||||
Net earnings attributable to noncontrolling interests |
0.7 |
1.8 |
|||||||||||||
Net earnings attributable to controlling interests |
$ 463.6 |
$ 362.6 |
|||||||||||||
EBITDAC |
|||||||||||||||
Net earnings |
$ 464.3 |
$ 364.4 |
|||||||||||||
Provision for income taxes |
154.1 |
115.9 |
|||||||||||||
Depreciation |
24.2 |
22.1 |
|||||||||||||
Amortization |
123.0 |
103.6 |
|||||||||||||
Change in estimated acquisition earnout payables |
20.8 |
12.4 |
|||||||||||||
EBITDAC |
$ 786.4 |
$ 618.4 |
1st Q Ended |
1st Q Ended |
||||||||||||||
Risk Management Segment |
|
|
|||||||||||||
Fees |
$ 259.0 |
$ 220.2 |
|||||||||||||
Investment income |
0.1 |
0.1 |
|||||||||||||
Revenues before reimbursements |
259.1 |
220.3 |
|||||||||||||
Reimbursements |
30.8 |
32.4 |
|||||||||||||
Total revenues |
289.9 |
252.7 |
|||||||||||||
Compensation |
158.7 |
134.1 |
|||||||||||||
Operating |
56.3 |
46.4 |
|||||||||||||
Reimbursements |
30.8 |
32.4 |
|||||||||||||
Depreciation |
10.1 |
11.5 |
|||||||||||||
Amortization |
1.6 |
1.6 |
|||||||||||||
Change in estimated acquisition earnout payables |
0.1 |
2.6 |
|||||||||||||
Expenses |
257.6 |
228.6 |
|||||||||||||
Earnings before income taxes |
32.3 |
24.1 |
|||||||||||||
Provision for income taxes |
8.4 |
6.1 |
|||||||||||||
Net earnings |
23.9 |
18.0 |
|||||||||||||
Net earnings attributable to noncontrolling interests |
- |
- |
|||||||||||||
Net earnings attributable to controlling interests |
$ 23.9 |
$ 18.0 |
|||||||||||||
EBITDAC |
|||||||||||||||
Net earnings |
$ 23.9 |
$ 18.0 |
|||||||||||||
Provision for income taxes |
8.4 |
6.1 |
|||||||||||||
Depreciation |
10.1 |
11.5 |
|||||||||||||
Amortization |
1.6 |
1.6 |
|||||||||||||
Change in estimated acquisition earnout payables |
0.1 |
2.6 |
|||||||||||||
EBITDAC |
$ 44.1 |
$ 39.8 |
|||||||||||||
See "Information Regarding Non-GAAP Measures" beginning on page 9 of 14. |
|||||||||||||||
(11 of 14) |
|
|||||||||||||||
Reported Statement of Earnings and EBITDAC - 1st Qtr Ended |
|||||||||||||||
(Unaudited - in millions except share and per share data) |
|||||||||||||||
1st Q Ended |
1st Q Ended |
||||||||||||||
Corporate Segment |
|
|
|||||||||||||
Revenues from consolidated clean coal facilities |
$ 22.3 |
$ 283.1 |
|||||||||||||
Royalty income from clean coal licenses |
0.4 |
17.9 |
|||||||||||||
Loss from unconsolidated clean coal facilities |
- |
(0.4) |
|||||||||||||
Other net revenues |
0.1 |
1.5 |
|||||||||||||
Total revenues |
22.8 |
302.1 |
|||||||||||||
Cost of revenues from consolidated clean coal facilities |
22.9 |
309.1 |
|||||||||||||
Compensation |
26.9 |
19.8 |
|||||||||||||
Operating |
21.2 |
16.6 |
|||||||||||||
Interest |
63.9 |
48.1 |
|||||||||||||
Depreciation |
0.9 |
4.5 |
|||||||||||||
Expenses |
135.8 |
398.1 |
|||||||||||||
Loss before income taxes |
(113.0) |
(96.0) |
|||||||||||||
Benefit for income taxes |
(63.9) |
(107.3) |
|||||||||||||
Net earnings (loss) |
(49.1) |
11.3 |
|||||||||||||
Net earnings (loss) attributable to noncontrolling interests |
(0.3) |
9.8 |
|||||||||||||
Net earnings (loss) attributable to controlling interests |
$ (48.8) |
$ 1.5 |
|||||||||||||
EBITDAC |
|||||||||||||||
Net earnings (loss) |
$ (49.1) |
$ 11.3 |
|||||||||||||
Benefit for income taxes |
(63.9) |
(107.3) |
|||||||||||||
Interest |
63.9 |
48.1 |
|||||||||||||
Depreciation |
0.9 |
4.5 |
|||||||||||||
EBITDAC |
$ (48.2) |
$ (43.4) |
1st Q Ended |
1st Q Ended |
||||||||||||||
Total Company |
|
|
|||||||||||||
Commissions |
$ 1,565.3 |
$ 1,125.4 |
|||||||||||||
Fees |
650.9 |
553.8 |
|||||||||||||
Supplemental revenues |
74.3 |
66.8 |
|||||||||||||
Contingent revenues |
71.6 |
63.3 |
|||||||||||||
Investment income and net gains on divestitures |
19.6 |
21.2 |
|||||||||||||
Revenues from clean coal activities |
22.7 |
300.6 |
|||||||||||||
Other net revenues - Corporate |
0.1 |
1.5 |
|||||||||||||
Revenues before reimbursements |
2,404.5 |
2,132.6 |
|||||||||||||
Reimbursements |
30.8 |
32.4 |
|||||||||||||
Total revenues |
2,435.3 |
2,165.0 |
|||||||||||||
Compensation |
1,282.0 |
975.6 |
|||||||||||||
Operating |
317.3 |
233.1 |
|||||||||||||
Reimbursements |
30.8 |
32.4 |
|||||||||||||
Cost of revenues from clean coal activities |
22.9 |
309.1 |
|||||||||||||
Interest |
63.9 |
48.1 |
|||||||||||||
Depreciation |
35.2 |
38.1 |
|||||||||||||
Amortization |
124.6 |
105.2 |
|||||||||||||
Change in estimated acquisition earnout payables |
20.9 |
15.0 |
|||||||||||||
Expenses |
1,897.6 |
1,756.6 |
|||||||||||||
Earnings before income taxes |
537.7 |
408.4 |
|||||||||||||
Provision for income taxes |
98.6 |
14.7 |
|||||||||||||
Net earnings |
439.1 |
393.7 |
|||||||||||||
Net earnings attributable to noncontrolling interests |
0.4 |
11.6 |
|||||||||||||
Net earnings attributable to controlling interests |
$ 438.7 |
$ 382.1 |
|||||||||||||
Diluted net earnings per share |
$ 2.05 |
$ 1.92 |
|||||||||||||
Dividends declared per share |
$ 0.51 |
$ 0.48 |
|||||||||||||
EBITDAC |
|||||||||||||||
Net earnings |
$ 439.1 |
$ 393.7 |
|||||||||||||
Provision for income taxes |
98.6 |
14.7 |
|||||||||||||
Interest |
63.9 |
48.1 |
|||||||||||||
Depreciation |
35.2 |
38.1 |
|||||||||||||
Amortization |
124.6 |
105.2 |
|||||||||||||
Change in estimated acquisition earnout payables |
20.9 |
15.0 |
|||||||||||||
EBITDAC |
$ 782.3 |
$ 614.8 |
|||||||||||||
See "Information Regarding Non-GAAP Measures" beginning on page 9 of 14. |
|||||||||||||||
(12 of 14) |
|
|||||||||||||||
Consolidated Balance Sheet |
|||||||||||||||
(Unaudited - in millions except per share data) |
|||||||||||||||
|
|
||||||||||||||
Cash and cash equivalents |
$ 528.6 |
$ 402.6 |
|||||||||||||
Restricted cash |
4,110.1 |
4,063.7 |
|||||||||||||
Premiums and fees receivable |
21,608.1 |
11,753.1 |
|||||||||||||
Other current assets |
1,272.5 |
1,451.0 |
|||||||||||||
Total current assets |
27,519.3 |
17,670.4 |
|||||||||||||
Fixed assets - net |
505.1 |
500.8 |
|||||||||||||
Deferred income taxes (includes tax credit carryforwards of |
1,169.4 |
1,228.5 |
|||||||||||||
Other noncurrent assets |
980.2 |
966.5 |
|||||||||||||
Right-of-use assets |
382.2 |
358.6 |
|||||||||||||
|
8,727.7 |
8,666.2 |
|||||||||||||
Amortizable intangible assets - net |
3,877.6 |
3,954.0 |
|||||||||||||
Total assets |
$ 43,161.5 |
$ 33,345.0 |
|||||||||||||
Premiums payable to underwriting enterprises |
$ 23,175.4 |
$ 13,845.6 |
|||||||||||||
Accrued compensation and other current liabilities |
1,968.2 |
1,895.1 |
|||||||||||||
Deferred revenue - current |
577.8 |
520.9 |
|||||||||||||
Premium financing debt |
173.4 |
228.4 |
|||||||||||||
Corporate related borrowings - current |
250.0 |
245.0 |
|||||||||||||
Total current liabilities |
26,144.8 |
16,735.0 |
|||||||||||||
Corporate related borrowings - noncurrent |
5,760.9 |
5,810.2 |
|||||||||||||
Deferred revenue - noncurrent |
64.5 |
58.7 |
|||||||||||||
Lease liabilities - noncurrent |
333.3 |
309.3 |
|||||||||||||
Other noncurrent liabilities |
1,814.9 |
1,871.7 |
|||||||||||||
Total liabilities |
34,118.4 |
24,784.9 |
|||||||||||||
Stockholders' equity: |
|||||||||||||||
Common stock - issued and outstanding |
210.1 |
208.5 |
|||||||||||||
Capital in excess of par value |
6,232.0 |
6,143.7 |
|||||||||||||
Retained earnings |
3,213.0 |
2,882.3 |
|||||||||||||
Accumulated other comprehensive loss |
(665.7) |
(726.1) |
|||||||||||||
Total controlling interests stockholders' equity |
8,989.4 |
8,508.4 |
|||||||||||||
Noncontrolling interests |
53.7 |
51.7 |
|||||||||||||
Total stockholders' equity |
9,043.1 |
8,560.1 |
|||||||||||||
Total liabilities and stockholders' equity |
$ 43,161.5 |
$ 33,345.0 |
|
|||||||||||||||
Other Information |
|||||||||||||||
(Unaudited - data is rounded where indicated) |
|||||||||||||||
1st Q Ended |
4th Q Ended |
1st Q Ended |
|||||||||||||
OTHER INFORMATION |
|
|
|
||||||||||||
Basic weighted average shares outstanding (000s) |
208,991 |
207,797 |
194,642 |
||||||||||||
Diluted weighted average shares outstanding (000s) |
213,519 |
212,864 |
199,076 |
||||||||||||
Number of common shares outstanding at end of period (000s) |
210,068 |
208,454 |
* |
195,887 |
|||||||||||
Workforce at end of period (includes acquisitions): |
|||||||||||||||
Brokerage |
30,337 |
29,869 |
25,870 |
||||||||||||
Risk Management |
7,392 |
7,308 |
6,451 |
||||||||||||
Total Company |
39,876 |
39,174 |
** |
34,061 |
|||||||||||
* Gallagher completed a follow-on public offering of 10,350,000 shares of its common stock on |
|||||||||||||||
acquisition of Willis Towers Watson treaty reinsurance brokerage operations that was completed in |
|||||||||||||||
** The acquistion of the Willis Towers Watson's treaty reinsurance brokerage operations added approximately 2,200 employees in |
|||||||||||||||
Reconciliation of Non-GAAP Measures - Pre-tax Earnings and Diluted Net Earnings per Share (Unaudited) |
|||||||||||||||
(Unaudited - in millions except share and per share data) |
|||||||||||||||
Net Earnings |
|||||||||||||||
Earnings |
Provision |
Net Earnings |
(Loss) |
Diluted Net |
|||||||||||
(Loss) |
(Benefit) |
Attributable to |
Attributable to |
Earnings |
|||||||||||
Before Income |
for Income |
Net Earnings |
Noncontrolling |
Controlling |
(Loss) |
||||||||||
Taxes |
Taxes |
(Loss) |
Interests |
Interests |
per Share |
||||||||||
1st Q Ended |
|||||||||||||||
Brokerage, as reported |
$ 618.4 |
$ 154.1 |
$ 464.3 |
$ 0.7 |
$ 463.6 |
$ 2.17 |
|||||||||
Net gains on divestitures |
(1.4) |
(0.3) |
(1.1) |
- |
(1.1) |
(0.01) |
|||||||||
Acquisition integration |
43.8 |
8.8 |
35.0 |
- |
35.0 |
0.17 |
|||||||||
Workforce and lease termination |
6.3 |
1.3 |
5.0 |
- |
5.0 |
0.02 |
|||||||||
Acquisition related adjustments |
20.6 |
4.2 |
16.4 |
- |
16.4 |
0.08 |
|||||||||
Amortization of intangible assets |
123.0 |
29.3 |
93.7 |
- |
93.7 |
0.44 |
|||||||||
Brokerage, as adjusted |
$ 810.7 |
$ 197.4 |
$ 613.3 |
$ 0.7 |
$ 612.6 |
$ 2.87 |
|||||||||
Risk Management, as reported |
$ 32.3 |
$ 8.4 |
$ 23.9 |
$ - |
$ 23.9 |
$ 0.11 |
|||||||||
Workforce and lease termination |
0.8 |
0.3 |
0.5 |
- |
0.5 |
- |
|||||||||
Amortization of intangible assets |
1.6 |
0.4 |
1.2 |
- |
1.2 |
0.01 |
|||||||||
Risk Management, as adjusted |
$ 34.7 |
$ 9.1 |
$ 25.6 |
$ - |
$ 25.6 |
$ 0.12 |
|||||||||
Corporate, as reported |
$ (113.0) |
$ (63.9) |
$ (49.1) |
$ (0.3) |
$ (48.8) |
$ (0.23) |
|||||||||
Transaction-related costs |
15.8 |
1.2 |
14.6 |
- |
14.6 |
0.07 |
|||||||||
Income tax related |
- |
5.0 |
(5.0) |
- |
(5.0) |
(0.02) |
|||||||||
Corporate, as adjusted |
$ (97.2) |
$ (57.7) |
$ (39.5) |
$ (0.3) |
$ (39.2) |
$ (0.18) |
|||||||||
See "Information Regarding Non-GAAP Measures" beginning on page 9 of 14. |
|||||||||||||||
(13 of 14) |
Reconciliation of Non-GAAP Measures - Pre-tax Earnings and Diluted Net Earnings per Share (Unaudited) - Continued |
|||||||||||||||
(Unaudited - in millions except share and per share data) |
|||||||||||||||
Net Earnings |
|||||||||||||||
Earnings |
Provision |
Net Earnings |
(Loss) |
Diluted Net |
|||||||||||
(Loss) |
(Benefit) |
Attributable to |
Attributable to |
Earnings |
|||||||||||
Before Income |
for Income |
Net Earnings |
Noncontrolling |
Controlling |
(Loss) |
||||||||||
Taxes |
Taxes |
(Loss) |
Interests |
Interests |
per Share |
||||||||||
1st Q Ended |
|||||||||||||||
Brokerage, as reported |
$ 480.3 |
$ 115.9 |
$ 364.4 |
$ 1.8 |
$ 362.6 |
$ 1.82 |
|||||||||
Net gain on divestitures |
(4.1) |
(0.9) |
(3.2) |
- |
(3.2) |
(0.02) |
|||||||||
Acquisition integration |
4.1 |
0.9 |
3.2 |
- |
3.2 |
0.02 |
|||||||||
Workforce and lease termination |
7.0 |
1.5 |
5.5 |
- |
5.5 |
0.03 |
|||||||||
Acquisition related adjustments |
16.1 |
3.4 |
12.7 |
- |
12.7 |
0.06 |
|||||||||
Amortization of intangible assets |
97.2 |
23.0 |
74.2 |
- |
74.2 |
0.37 |
|||||||||
Levelized foreign currency translation |
(3.8) |
(0.8) |
(3.0) |
- |
(3.0) |
(0.01) |
|||||||||
Brokerage, as adjusted |
$ 596.8 |
$ 143.0 |
$ 453.8 |
$ 1.8 |
$ 452.0 |
$ 2.27 |
|||||||||
Risk Management, as reported |
$ 24.1 |
$ 6.1 |
$ 18.0 |
$ - |
$ 18.0 |
$ 0.09 |
|||||||||
Workforce and lease termination |
0.7 |
0.2 |
0.5 |
- |
0.5 |
- |
|||||||||
Acquisition related adjustments |
2.4 |
0.6 |
1.8 |
- |
1.8 |
0.01 |
|||||||||
Amortization of intangible assets |
1.6 |
0.4 |
1.2 |
- |
1.2 |
0.01 |
|||||||||
Levelized foreign currency translation |
(0.2) |
(0.1) |
(0.1) |
- |
(0.1) |
- |
|||||||||
Risk Management, as adjusted |
$ 28.6 |
$ 7.2 |
$ 21.4 |
$ - |
$ 21.4 |
$ 0.11 |
|||||||||
See "Information Regarding Non-GAAP Measures" beginning on page 9 of 14. |
|||||||||||||||
(14 of 14)
View original content:https://www.prnewswire.com/news-releases/arthur-j-gallagher--co-announces-first-quarter-2022-financial-results-301535841.html
SOURCE
Kinsale Capital Group, Inc. Reports 2022 First Quarter Results
CINCINNATI FINANCIAL CORP – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations
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