BRO - NYSE

Good morning, and welcome to Brown & Brown, Incorporated's Third Quarter Earnings Conference Call. Today's call is being recorded. Please note that certain information discussed during this 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 third quarter and are intended to fall within the safe harbor provisions of the securities laws. Actual results or events in the future are subject to a number of risks and uncertainties and may differ materially from those currently anticipated or desired or referenced in any forward-looking statements made as a result of a number of factors. Such factors include the company's determination as it finalizes its financial results for the third quarter that its financial results differ from the current preliminary unaudited numbers set forth in the press release issued yesterday. Other factors that the company may not have currently identified or quantified are those risks and uncertainties identified from time-to-time in the company's reports filed with the Securities and Exchange Commission. Additional discussion of these and other factors affecting the company's business and prospects as well as additional information regarding forward-looking statements is contained in the slide presentation posted in connection with this call and the company's filings with the Securities and Exchange Commission. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, there are certain non-GAAP financial measures used in this conference call. A reconciliation of non-GAAP financial measures to the most comparable GAAP financial measure can be found in the company's earnings press release or in the company's investor presentation for the call on the company's website at www.bbinsurance.com by clicking on Investor Relations and then Calendar of Events. With that said, I would now turn the call over to Powell Brown, President and Chief Executive Officer. You may begin.

Thank you very much. Good morning, everyone, and welcome to our Q3 2023 earnings call. We delivered an outstanding performance in the third quarter. Organic growth was just shy of 10%. We expanded our EBITDAC margins by 350 basis points and grew adjusted net income per share by 42%. In addition, we closed the acquisition of Kentro earlier this month. As a reminder, the company operates MGUs in the U.K., U.S., Europe and other locations and has a retail broker operation in both the U.K. and Europe. Kentro has great capabilities with a significant focus on financial lines, aviation, and trade credit in addition to a number of other lines of coverage. We'd like to welcome Colin Thompson and their team to Brown & Brown, and look forward to seeing the business continue to grow over the coming quarters and years. Now let's get into our results for the quarter. I'm on Slide 4. Our revenues exceeded $1 billion, growing 15.1% in total and 9.6% organically as compared to the third quarter of 2022. Our adjusted EBITDAC margin expanded 350 basis points to 34.7%, and our adjusted earnings per share grew 42% to $0.72. On the M&A front, we completed seven acquisitions with estimated annual revenues of $14 million. Also, I'd like to highlight that last week, our Board of Directors approved a 13% increase in our dividend. We're extremely proud as this is the 30th consecutive year of dividend increases. We were able to deliver these outstanding results through the relentless dedication of our 16,000-plus teammates that create and deliver innovative solutions for our customers. I'm now on Slide 5. From an economic standpoint, it was similar to the second quarter and consumers are continuing to spend and drive demand. As a result, the economy remained rather resilient even with materially higher interest rates, while growth and inflation continue to moderate and return to more normal levels. Many business leaders continue to hire, but remain cautious regarding large investments in their business. While the revenue side of the P&L is generally healthy for many companies, inflation remains the main challenge as certain costs are still outpacing revenue growth. Specifically, as it relates to the purchasing of insurance, a lot of buyers are exhausted due to the level of rate increases mainly for property that have occurred for multiple years. Shifting to the insurance marketplace. It remained very challenging for customers with their focus on overall spend. Many customers have already increased their deductibles and reduced their limits. We're also seeing lenders being more flexible in certain cat-prone areas regarding total purchased limits. Across most lines of coverage, rate increases were fairly consistent with the first half of the year with admitted markets up 5% to 10% and excess and surplus lines markets, up 10% to 25%. Like previous quarters, there were exceptions outside of these ranges. Two lines of coverage that continue to decline are workers' compensation and professional liability for larger customers. Workers' comp rates declined less than we've seen in previous quarters and were in the range of flat to down 5%. Professional liability rates, including public company D&O and cyber were flat to down 15% or in some instances, down even further. Regarding cat-exposed property, it remained the most challenging line of business as carriers are generally not increasing their capacity. We're also seeing underwriters continue to push for higher insured values due to inflation and increased replacement costs. During the quarter, the placements for personal lines in California, Florida, and Texas remain very difficult, with policies continuing to move into state-sponsored plans or the E&S space. We are well positioned to help our customers due to the breadth of our carrier relationships and the multiple solutions we're able to deliver. This doesn't mean we can solve all issues, but it has helped to drive additional growth for our personal lines businesses. Regarding the M&A market for the quarter, the level of deals primarily from financial backers continue to slow, and we generally saw fewer bidders for businesses. From a valuation standpoint, they have come down slightly. However, good businesses still trade at premium multiples. We remained active and acquired seven great companies for the quarter, which brings us to the total of 20 year-to-date. Overall, we're extremely pleased with the success of our M&A efforts in North America and Europe. We're in a strong position to identify and acquire high-quality companies that fit culturally and make sense financially. I'm now on Slide 6. Our retail segment had another great quarter and delivered organic growth of 8%. This growth, both domestically and internationally, was driven by strong new business, good retention and continued rate increases. We're winning a lot of new business by leveraging our collective capabilities and creating innovative solutions for our customers that are searching for ways to manage their cost of insurance. Our program segment delivered another outstanding quarter with organic growth of 12%, driven by strong new business, good retention, and continued rate increases, especially cat property. Almost all of the programs grew nicely again this quarter. Wholesale brokerage delivered a great quarter with organic growth over 13%, driven by domestic and international strong new business, good retention as well as rate increases for most lines. Our brokerage, delegated authority, and personal lines businesses all performed well during the quarter, while professional liability continued to be under pressure due to the decline in rates mentioned earlier. Organic revenue in our services segment was approximately 3% for -- with the growth driven by an increase in claims processing revenue for certain businesses. Now with that, I'll turn it back over to Andy for more details regarding our financial results.

Great. Thank you, Powell. Good morning, everyone. I'll review our consolidated financial results on an adjusted basis, which for the third quarter exclude the change in estimated earn-out payables, onetime acquisition and integration costs associated with GRP, BdB and Orchid. Gains and losses on business divestitures and the impact of foreign currency translation. We believe isolating these above items provides a better reflection of the performance of the business and enhance comparability. The reconciliations of our non-GAAP financial measures, including these adjusted amounts to the most closely comparable GAAP amounts can be found either in the appendix of this presentation or in the press release issued yesterday. We're over on Slide 7. On an adjusted basis, total revenues were nearly $1.1 billion for the quarter, growing 14.2% as compared to the third quarter of the prior year. Income before income taxes increased by 40.7% and EBITDAC grew by 27%. Our EBITDAC margin was 34.7%, increasing 350 basis points as compared to the third quarter of 2022. The margin increase was driven primarily by leveraging our cost base in connection with strong organic growth as well as higher contingent commissions, increased interest income and minimal claims costs for our captives. The higher growth in income before income taxes was driven by depreciation, amortization, and interest expense growing slower than total revenues. The effective tax rate for the quarter was 25.5%, which is in line with our expectations and compares to 26.1% in the third quarter of last year. Our adjusted diluted net income per share increased by 42% from last year to $0.71. Our weighted average share count increased approximately 1% as we are directing more of our capital towards reducing our debt. Lastly, our dividends paid increased nearly 12% as compared to the third quarter of 2022. Overall, the performance by our team for the quarter was outstanding. We're over on Slide 8. The retail segment grew almost 10%, driven primarily by strong organic growth of 8% and acquisitions completed in the last year. Adjusted EBITDAC grew slightly faster than revenues, and our adjusted EBITDAC margin expanded to 28.6%. This expansion was driven by leveraging our expense base along with strong organic revenue growth, but it was partially offset by the impact of higher non-cash stock-based compensation and slightly lower profit-sharing contingent commissions. We're over on Slide 9. National Programs had another outstanding quarter with adjusted total revenues growing 20.1% and organic growth of 12.1%. The incremental growth in excess of organic growth was driven almost entirely by an increase in our contingent commissions that were impacted negatively in the prior year related to Hurricane Ian. Our adjusted EBITDAC margin expanded over 11% due to the level of organic growth and leveraging our expense base, higher profit-sharing contingent commissions and lower claims cost in the current year within our captives due to a quieter storm season as compared to the third quarter of 2022. As it relates to organic growth for the fourth quarter of this year, please keep in mind that in the fourth quarter of 2022, we highlighted a nonrecurring incentive bonus of $7 million and also recorded $8 million of claims processing revenue associated with Hurricane Ian. Moving over to Slide 10. Our wholesale segment delivered another strong quarter with adjusted total revenue growth of 17.7% and organic growth of 13.4%. The incremental growth in excess of organic growth was driven by higher profit-sharing contingent commissions and acquisitions completed in the past 12 months. Our adjusted EBITDAC margin expanded 110 basis points to 37% due to a combination of leveraging our expense base with good organic growth and higher profit-sharing contingent commissions, but was partially offset by the impact of higher non-cash stock-based compensation. On Slide 11, the services segment delivered organic growth of 3.2%, with a slight decline in adjusted EBITDAC margin due to onetime expenses for certain businesses as well as the impact of inflation. Few other comments concerning cash generation, capital allocation, and outlook for the remainder of the year. From a cash perspective, we generated $704 million of cash flow from operations for the first nine months of this year and had another strong third quarter growing our year-to-date cash flow from operations by $104 million or 17%. Our year-to-date ratio of cash flow from operations as a percentage of total revenues remained strong year-over-year at approximately 22%. As we mentioned previously, post the acquisitions of GRP, BdB, and Orchid, we remain committed to de-levering. In the third quarter, we further reduced our outstanding debt by approximately $100 million. At the end of the third quarter, we are already within our stated target gross debt-to-EBITDA ratio of zero to 3x. Based on current interest rates, we would expect our investment income and interest expense in the fourth quarter to be similar to what we recognized in the third quarter. Regarding profitability, we had previously provided guidance that our full-year expectations for adjusted EBITDAC margins would be up slightly compared to 2022. Based on our strong financial performance for the first nine months as well as higher investment income and profit-sharing contingent commissions, we now expect our margins for the full-year will be up at least 100 basis points. In summary, we continue to be in a strong position and generate industry-leading cash conversion ratios, which enable us to invest in our company, de-lever and acquire businesses. With that, let me turn it back over to Powell for closing comments.

Thanks, Andy. Great report. The impact of inflation, increases in interest rates on our customers and the consumer are the key areas we're monitoring as these will drive the rate of economic expansion and investment. Like previous quarters, we expect business leaders to remain cautious regarding how much they will invest over the coming quarters. As we noted earlier, the consumer is still spending, and most of our customers are growing their businesses. From an insurance standpoint, we believe rate increases will remain relatively consistent through the end of the year. That means customers are going to remain highly focused on managing their insurance spend by either decreasing limits, increasing deductibles and in certain cases, opting for loss limits. Many of our customers have already done one or more of these items. Regarding our carrier partners, they continue to be focused on diversifying their portfolios and reducing volatility in their earnings. This is evident through cat capacity management and disciplined underwriting. As a highly diversified global insurance platform, we have delivered very good underwriting results by continuing to provide our carrier partners with access to distinct customer segments, we believe we're well positioned to maintain and possibly grow our capacity with these important partners. We feel great about our business as our team is executing and delivering at a very high level. We're making the right investments for the long term and remain focused on hiring and retaining the best teammates. As we continue to do this, we are able to leverage our collective capabilities to retain our existing customers and win more new business. In summary, we're very pleased with our results through the first nine months of the year, delivering organic growth of 11%, adjusted EBITDAC margin expansion of 170 basis points and adjusted earnings per share growth of 25%. We are well positioned and have great momentum as we head into the final quarter of the year. With that, we'll turn it back over and open the lines for Q&A.

Thank you. [Operator Instructions]. And our first question will come from the line of Michael

Hey, great. Good morning. Thinking about the commentary on the great margins this quarter and year-to-date in terms of the lift to the outlook. I guess, Andy, when we -- when you gave color on the kind of the pluses and minuses, is it fair that the only kind of things that might be unusual on a forward-looking basis could be the low costs for the captives and maybe kind of organic growth has exceeded your expectations? Just trying to level set kind of to make sure we kind of understand if you feel like there was some onetime items you should be thinking about?

Yes. Good morning, Mike. As it relates to the third quarter, no, we didn't have any distinct kind of onetime items that we called out. Pertaining to the fourth quarter, the main items were the ones that we highlighted, which were the incentive bonus and the claims revenue associated with Ian. Still got fourth quarter yet to go. So we're still in storm season right now, so don't know actually how everything will play out. But those will be part of -- two of the bigger ones. And then, again, depending upon how storm season ultimately finalizes itself as well as we still got the back end of the year, remember on our captives that they also take a quarterly share on some of our West Coast earthquake programs. So that's the only kind of -- those are the unknowns that could pop up, but we feel good about kind of where we are heading in the fourth quarter.

Okay. And maybe pivoting to organic growth more broadly. So the outlook is the near term is for rate increases to remain constant. Powell, you talked about kind of carriers still pushing through higher insured values, which I think comes on the exposure side. Can you kind of talk about if you have a forward-looking view of whether there's a decel in exposure at all as kind of nominal inflation looks to be decelling a bit. Or do you -- is there this kind of still higher-than-historical level of exposure kind of running through the system, which is benefiting like your growth?

Well, Mike, as you know, we don't give forward-looking organic growth guidance. And historically speaking, we've said that our business is two-thirds exposure units and one-third rate. In certain areas of the business, particularly in coastal communities, rates might have a slightly higher impact. But as it relates to the question specifically on exposure units, we have not seen anything that would indicate a slowdown in those exposure units in the near term yet, but we remain ever vigilant as we kind of watch. But as Andy and I both said, we do see people being more cautious in terms of their willingness to make large capital investments in the business. I think they're pausing on a lot of those. So from a standpoint of lift in exposure units there, we're not seeing that as much. As it relates to sales of product, or construction revenues or whatever, it seems to be continuing as usual.

Thank you.

Thank you. One moment for our next question, please. Our next question comes from the line of Mark Hughes with Truist Securities. Your line is now open.

Yes, thanks. Good morning. Powell, you mentioned maybe prospects for a little more capacity from carriers for next year. I think you've described that as the restraint in 2023, but your organic has obviously been very good with the reinsurers probably doing pretty well this year. Do you think there's more opportunity for faster growth when we think about some of these coastal programs or these states like Texas and California that have had problems getting capacity?

I would caution you about saying faster growth. I think the way I would look at it is there's capacity, but the capacity is at a price. And so as I said earlier, carriers are very careful about managing their cat capacity. We view it as a positive if we can maintain our capacity that we currently have. And in some instances, if somebody wants to modify their distribution to us, i.e., modify down, we believe that we can fill most of that with other carriers that want to participate in our facilities or Wholesale or in Retail. But I would caution you, Mark, on trying to draw parallel that we've got a whole bunch of new capacity that's going to bring a whole bunch of new growth with that. I don't want you to -- please do not misinterpret our statements that way. I would say that we feel good about the indications that we've been given from our carrier partners about maintaining what we have. And as it relates to stuff that they want to modify their participation on, we feel good about replacing that.

Understood. And then I think you had mentioned construction. Are you seeing anything -- any changes in construction? The next job is always an important, any sign of a slowdown there?

So Mark, I would tell you that inventory seems to be okay, still okay, but that's usually a nine to 12 month outlook. I can't comment beyond that, but there just seems to be a lot of activity. And so that's positive.

Very good. Thank you.

Thank you.

Thank you. One moment for our next question please. Our next question comes from the line of Michael Ward with Citi. Your line is now open. Michael Ward, your line is now open.

Michael, we cannot hear you.

Mr. Ward, are you on mute? I'll go to the next person. One moment, please.

Yes. Norma, just put him back in the queue, we'll come back around.

Our next question comes from the line of C. Gregory Peters with Raymond James. Your line is now open.

Gregory?

Mr. Peters, your line is now open. All right. Mr. Peters? All right. I'll go to the next one. Next question comes from the line of Rob Cox with Goldman Sachs. Your line is now open.

Can you guys hear me?

Yes.

Yes, we can hear you.

Awesome, so maybe my first question on organic growth. I mean, just in the context of Brown doing significantly more property cat in the second quarter and growth typically being slower in the back half of the year, could you talk about what drove the more resilient than expected organic growth in the quarter, maybe specifically for both Retail and then Wholesale?

Sure. We're just writing more net new business. I mean, I'm not trying to be funny, Rob, but we're executing really well. And we are maintaining our existing customer relationships, and we are picking up a lot of new customers. That's both on both sides, Wholesale and Retail.

That's great. Thank you. And then maybe just a high-level follow-up on expenses, not necessarily related to this quarter, in particular. But if we zone in on the retail segment, can you just walk us through the expense line items that are seeing kind of the most inflationary pressure here in this environment and what line items are doing okay?

Hey, good morning, Rob. It's Andy here. I think the areas where we probably continue to be challenged. By the way, we've always been challenged in this space is around just the cost of talent. And that's not been just a COVID issue. If you need good talent, which we do and like everybody else, talent is expensive. We are seeing some moderation in the level of inflation and the increases in comparison to volumes from a year ago, but you still see some of those pressures that are out there, but we work our way through those. And then we've got through most of the T&E headwinds. It doesn't mean that hotels and airlines aren't expensive. They are, you've probably been out flying lately or staying somewhere. It's still pretty expensive. But it feels like we've got through most of those headwinds in comparison to where we were a year ago on that front. And then we mentioned in the commentary about stock compensation that that's a headwind year-over-year for the business, both in Retail as well as Wholesale. That's not a bad thing at all. So keep in mind that the way that those plans are structured is they're driven off of how well we perform on organic and earnings per share. So the costs that we're taking through the current year is also reflective of the strong performance that we've had over the last couple of years. So we think that's a really good indicator.

Thanks. Appreciate the color.

Thank you.

Thank you. One moment for our next question please. Our next question comes from the line of Elyse Greenspan with Wells Fargo. Your line is now open.

Hi, thanks. Good morning. My question was on Retail. I know you guys had called out dealer services, right? That was a headwind last -- second half of last year and the first part of this year. It seems given the strong results you guys saw this quarter that maybe that dissipated, is that correct? Or was there any impact of dealer services in the quarter?

Yes, good morning, Elyse. So as you remember, we indicated that the headwind was kind of going to neutralize in the second half of the year relative to dealer services, and we did see that sort of neutralize in Q3. So we are very pleased with the overall business and even in dealer services. It's just getting inventory for our dealer customers. But I would tell you that, that was a positive for us compared to prior quarters this year, yes.

Thanks. And then on the margin update, right, you guys have seen a good amount of margin improvement, I think 170 basis points so far this year. Is the Q4 contraction, just a function of Andy, the one-off revenue you guys had last year within Programs, the $7 million and the $8 million that you called out for -- I know you don't typically guide on a one-quarter basis, but I'm just trying to understand if there's anything else in the Q4 that you're highlighting.

No. Those would be -- those are the big items, Elyse, that are in there.

Okay. And then one last one. You guys pointed to -- it seems like a still competitive M&A environment, but it sounds like financial sponsors, I think you guys said interested in maybe waiting a little bit. What are you guys seeing on the M&A side in terms of the pipeline and multiples on transactions as well?

So Elyse, I would tell you that the way we describe it is in the past, there might have been, let's say, two handfuls of early participants in looking at a business that have financial backing whereas now there might be a handful. That doesn't mean that there are none. It just means it's not as many people that are from that segment of the space, number one. And part of that is obviously due to increased interest rates and their capacity to put their money to work. Having said that, we have not seen an enormous downward pressure on multiples. I would tell you that it's -- roughly there might be 0.25x to 0.5x down. But on good businesses, people are -- they're still very competitive for good businesses. So we are just out there looking all the time. We are very pleased with the acquisitions we've made this year, and we're -- when and why someone sells, it's different for every transaction. But we think that there are lots of opportunities that will present themselves in the next one, two, and three years and beyond, but I think there continues to be good opportunities for us, and we really like our position, and we like -- and to your question specifically, the inventory is good. But remember, it's always good. But we're very pleased because it's still good.

Thank you.

Thank you, Elyse.

Thank you.

One moment for our next question please. Our next question comes from the line of Meyer Shields with KBW. Your line is now open.

Great, thanks. Good morning. Am I coming through?

Yes, you're coming through.

Okay. Fantastic. So two really quick questions. First, in the National Programs slide, this is Slide 9. You mentioned higher profit sharing or let me say it differently, improved loss development on Hurricane Ian. Was there any favorable development on the exposure? Or is this just a much better quarter than last year because of last year's issues?

Hi, good morning, Meyer. Yes, it's a combination of two things. So if you recall in the third quarter of last year, since Ian hit on the 28th of September, right? We had recorded what we thought the development would be at that stage. And if you recall in the fourth quarter, we had made some true-ups because the development was not as extensive as it was originally estimated. We made a few more of those kind of throughout the year. But now we're kind of back to where, at least from everything we're seeing and hearing from our carrier partners that we're in a pretty good place on loss development. They got through most of the claims that are out there that we were on.

Okay. But to the extent that you had a little bit of exposure, there's no change in sort of that, I'll call it, underwriting loss?

No. No. If anything, it's actually improved to the betterment.

Okay. Perfect. Second question, just trying to understand the process. One theme we've seen this year is a lot of catastrophe-close property move from the standard markets to E&S. When you look at that segment of the marketplace or that phenomenon, is that a one-year transition? Or should we expect to see that sort of directional move continue in 2024, maybe beyond?

Sure. So I think that there fundamentally is a continued transition of certain types of business, not specifically and limited to cat properties that are rotating into the E&S market. So I think we're going to continue to see that into '24 and '25. That said, is there a time in the future where some of that business that rotates out might come back into the standard market? And the answer is yes, I believe that to be the case. But we've got to have a couple of years of good loss experience for the carriers because I think sometimes there are certain businesses that are because of location, they may be put into a box, and if you looked at them on a one-off basis, they might not necessarily need to move to E&S or all of it to E&S. So I think there's a continued trend towards it. But I also think that in a couple of years, there could be some slight rotation back.

Okay, that's perfect. Thank you so much.

Thanks.

Thank you. One moment for our next question please. Our next question comes from the line of Mark Hughes with Truist Securities. Your line is now open.

Thanks. Employee benefits, seems like the pricing rates are up pretty substantially. Andy, I know in the past, you've talked about how Q1 organic has benefited from employee benefits momentum. Could there be a little bit more this year because of pricing in that market?

When you say this year, are you talking about in Q4 or?

No, I'm thinking Q1, this coming year.

Well, again, we're not giving -- we don't give growth guidance on lines of business, just like we don't give organic growth. But we're very pleased with the way our employee benefits line of business is growing, and we continue to invest in the capabilities and we are writing lots of new business across the platform.

Yes. I mean, Mark, if your question is about rates on the EB space, no, we're not seeing any fundamental changes in the rate increases in the EB business. They continue to be pretty robust as we've been talking about for a number of quarters. It is different if you're on a fully funded versus self-funded plan. The pharmacy is probably the biggest topic that everybody is talking about today because of all the specialty drugs that are out there.

Thank you.

Hey, Norma, can we do -- we had a couple of people that didn't get in earlier. Can we get them back in the queue, please?

Yes, thank you. One moment for our next question. Our next question comes from the line of C. Gregory Peters with Raymond James. Your line is now open. Mr. Peters, your line is now open. Are you muted?

Norma, can you check and see if he's muted by chance on your end?

Not on my end, I'm checking. He's open. Mr. Peters, are you muted?

He's not there.

Okay. I'll go to the next person.

We'll get him back around.

One moment for our next question comes from the line of Scott Heleniak with RBC Capital Markets. Your line is now open.

Yes, good morning. First question I had was just on the services segment. You had better growth there than you had in a while, the 3%. And you mentioned in there, there's a benefit from some claims processing revenue. Was that sort of onetime? Just kind of trying to figure out, is this something where you think you can get sustainable organic growth in this unit? Or was there anything kind of onetime in that -- that you called out, the claims processing revenue for that unit?

Hi, good morning, it's Andy. That was really driven off of, we've expanded some customer relationships there as well as we've won some new relationships in that business, and that's what's driving the new claims. The way that we really think about the Services business is the actual transaction is onetime in nature, but the relationships are recurring in nature for us. And that's really what we try to focus on, and it's that business in general, that segment, you can't forecast by individual quarters, where you quite often have to look at averages just because of the way items kind of flow back and forth. But no, we were real pleased with the performance for the third quarter.

Got it. That makes sense. The other question I had was just on -- you mentioned in the script, you were at your 0x to 3x debt leverage target now. So does that -- should I take that to mean that we shouldn't expect additional debt reduction over the next few quarters? Is that largely over? Or is there more left? Or is that still...

You shouldn't assume that now.

No, Mike if you were to back historically, we will increase our leverage modestly times when we have incrementally higher -- I'm sorry, Scott, sorry about that -- is you'll end up -- we'll have -- we'll take our leverage up a little bit when we have higher levels of larger acquisitions. And if you look at it, we de-lever on the back end at a pretty rapid pace. The organization itself will normally de-lever anywhere from 0.25x to 0.5x sometimes 0.75x during the year, and that's really driven off of just normal maturities that we have and then growth in the business. But if you go back over time, we'll run somewhere in kind of 2.2x to 2.4x on a gross-to-EBITDA ratio. And we're in our range and probably continue to moderate down. That doesn't mean though that we won't take it back up at some point if we find a really good acquisition for the organization. But generally, we're going to have a pretty conservative balance sheet.

Okay, thanks.

Thank you. One moment for our next question please. [Operator Instructions] Our next question comes from the line of Michael Ward. One moment for your line to be open. Michael Ward, your line is now open. Michael, your line is open.

All right. We seem to have two new -- two folks are having some technical difficulties today. Norma, do we have anybody else in queue?

I see no other callers. [Operator Instructions].

Okay. We'll give Mike and Greg if they're in queue just a second. And if not, we'll go ahead and we'll call the call. We can always do a follow-up with them.

Okay. [Operator Instructions] And I'm showing no further questions at this time. I'll go ahead and turn the call back over to you, Mr. Brown for closing remarks.

Thank you all very much. We're very pleased with the quarter and equally excited about going into Q4. Look forward to talking to everybody in January. Have a great day. Thank you.