Brown & Brown, Inc. Q3 FY2026 earnings call

• Top-line results: Geographic performance with emerging markets and travel retail growth, developed markets challenges. Strategic initiatives like building Jack Daniels family, innovation with Jack Daniels Tennessee Blackberry. Route-to-consumer decisions in Italy, Japan, etc. Workforce restructuring in travel retail. - Financial metrics: Gross margin details, operating expenses changes, capital allocation including free cash flow and share repurchase. - CFO recruitment update: Search for CFO with specific experience considerations, Leanne to transition smoothly.

For the first nine months of fiscal 2026, reported net sales declined 2%, with organic net sales flat after adjusting for certain impacts. Emerging international markets and travel retail channel led organic net sales growth. Mexico and Brazil in emerging markets had strong double-digit growth. Jack Daniels family of brands performed well. Developed markets collectively declined, with Canada having a significant negative impact. Developed Europe markets had challenges but some gained share. US total distilled spirits declined, but organic net sales were ahead of some trends. Gross profit decreased 1% in year-to-date fiscal 2026, with gross margin of 59.9% affected by various factors like A&D, foreign exchange, costs, and price mix.

Reaffirmed full-year fiscal 2026 outlook. Expect continued challenges in spirits sector. Geographically, continued growth in emerging markets and travel retail, expected depletion-based trends in US and developed international except Canada. Used barrel sales expected to be lower than fiscal 2025 level. Anticipate product mix headwinds due to RTD portfolio growth. Forecast organic operating income to decline in low single-digit range, capital expenditures in range of $110 to $120 million, effective tax rate outlook updated to 19% to 21%.

Numerous risks and uncertainties may cause actual results to differ from forward-looking statements. Factors like macro uncertainty, trade disputes, consumer sentiment changes, used barrel demand and pricing, inventory dynamics, and potential impacts from geopolitical events (e.g., Middle East conflict) are risks.

Q: About developed market business and pricing environment.

A: Discussed developed market challenges including Canada, Europe, US. Talked about pricing repositioning and holding ground.

Q: On gross margin commentary and US underlying sales.

A: Explained gross margin trends and talked about US underlying sales tailwinds from distributor terms and BlackBerry depletions.

Q: On gross margins and BlackBerry launch.

A: Discussed gross margin headwinds and BlackBerry launch plans.

Q: On inventory dynamics and Middle East exposure.

A: Talked about inventory dynamics and Middle East market assessment.

Q: On SG&A efficiencies.

A: Spoke about being disciplined in controlling costs.

Q: On aging barrel cost and tax rate.

A: Explained liquidating aging barrels and tax rate changes.

Q: On return of capital and US distributor realignment.

A: Talked about capital allocation and US distributor transition progress.

Q: On U.S. distributor realignment.

A: Gave assessment of distributor transition process.

Q: On Numix and Diageo's actions.

A: Talked about Numix launch and Diageo's impact