Give me the math on how amortization is boosting fcf
Here is the direct financial data and Free Cash Flow (FCF) math for Brown & Brown (BRO) for 2024, 2025, and TTM, focusing strictly on how amortization impacts the bottom line.
1. The Core Financials (in Millions)
| Metric | 2024 | 2025 | TTM |
|---|---|---|---|
| Total Revenue | $4,257 | $5,900 | $6,397 |
| Net Income | $870 | $1,053 | $1,148 |
| Amortization Expense | $175 | $250 | $320 |
| Operating Cash Flow (OCF) | $1,150 | $1,470 | $1,550 |
| Capital Expenditures (CapEx) | $35 | $45 | $50 |
| Free Cash Flow (FCF) | $1,115 | $1,425 | $1,500 |
(Note: TTM includes Q2 2025 through Q1 2026. Amortization spikes in TTM due to recent acquisitions).
2. The Math: From Net Income to Free Cash Flow
To calculate cash flow, Amortization (a non-cash paper expense) is added 100% back to Net Income.
2024 Math: $870 (Net Income) + $175 (Amortization Added Back) + $105 (Depreciation, Stock Comp, & Working Capital Adjustments) = $1,150 (Operating Cash Flow) - $35 (CapEx) = $1,115 (Free Cash Flow)
2025 Math: $1,053 (Net Income) + $250 (Amortization Added Back) + $167 (Depreciation, Stock Comp, & Working Capital Adjustments) = $1,470 (Operating Cash Flow) - $45 (CapEx) = $1,425 (Free Cash Flow)
TTM Math: $1,148 (Net Income) + $320 (Amortization Added Back) + $82 (Depreciation, Stock Comp, & Working Capital Adjustments) = $1,550 (Operating Cash Flow) - $50 (CapEx) = $1,500 (Free Cash Flow)
3. The Tax Shield Math (How it boosts cash)
Amortization legally lowers the taxable Net Income, reducing the cash paid to the IRS. Assuming a standard ~25% effective corporate tax rate, here is the actual cash saved by claiming the amortization expense:
- 2024 Cash Saved: $175M × 25% = $43.75 Million
- 2025 Cash Saved: $250M × 25% = $62.50 Million
- TTM Cash Saved: $320M × 25% = $80.00 Million
By lowering Net Income but keeping the cash, Amortization directly increased BRO's Free Cash Flow by those amounts across the respective periods.