Crawford & Company · NYSE:CRD.A
Crawford & — Midwest IDEAS Investor Conference 2019
52 slides from Crawford &'s conference presentation, Aug 28, 2019
Slide 1: Investor Presentation August 2019
Crawford & Company ® Investor Presentation August 2019
Slide 2: Forward-Looking Statements and Additional Information
2 Forward-Looking Statements and Additional Information Forward-Looking Statements This presentation contains forward-looking statements, including statements about the expected future financial condition, results of operations and earnings outlook of Crawford & Company. Statements, both qualitative
Slide 3: Crawford & Company
3 Crawford & Company The world’s largest publicly listed independent provider of global outsourced claims management solutions $14 Billion Claims payments annually Organized across global service lines: 1.7 Million Claims handled worldwide • Crawford Claims Solutions (P&C adjusting solutions) 9,000
Slide 4: Our Mission Our Vision
4 Our Mission Restoring and enhancing lives, businesses and communities. Crawford & Company Our Vision Loss resolution for carriers, To be the leading provider and most trusted source for expert assistance, serving those who insure and self-insure the risks of brokers and corporates businesses and c
Slide 5: Comprehensive, intelligent outsourced solutions
5 We bring together thoughtful experts from Loss Adjusting Third Party Managed around the world to offer Administration Repair comprehensive, intelligent outsourced solutions to our customers Medical On-Demand Catastrophe Management Services Response
Slide 6: Value Proposition and Value Delivery System
6 Crawford & Company Value Proposition and Value Delivery System Value Proposition Customer-focused solutions driven by data and executed by experts globally to mitigate risk for carriers, brokers and corporates Value Delivery System • High-performing, caring and capable employees globally • Flexibl
Slide 7: End-to-End Outsourced Solutions
7 End-to-End Outsourced Solutions Multi-channel Pre & Post Liability, Auto, WC Property Claims CAT, Property & Auto Managed Business Interruption FNOL Loss Inspections & Disability Claims Desk Adjusting Field Adjusting Repair & Forensic Accounting ANALYTICS & REPORTING
Slide 8: Scope and Scale of Operations
8 Scope and Scale of Operations Comprehensive experience across the spectrum of the claims world1 70 Crawford Claims Solutions 1.2 million 50,000 Countries with physical P&C Adjusting Solutions P&C claims managed Field resources location Global Technical Services 400+ 2,500 $5.8 billion Large or Com
Slide 9: Crawford—Attractive Business Model
9 Crawford—Attractive Business Model Experienced Management Team Technology Enabled BPO Aligned with Shareholders Platform Global Product and Geographic Blue Chip Global Client Base Diversification with Long-Term Relationships Recurring Fee For Service Solid Balance Sheet and Low Revenue
Slide 10: Investment Thesis
10 Investment Thesis 1 2 3 4 5 6 Experienced The P&C Industry Is Investing to Drive Deliver 5% Revenue Strong Balance Favorable Capital Management Experiencing Rapid Innovation & and 15% Earnings Sheet & Cash Flow Return Profile Team Change Accelerate Growth Growth, Annually Characteristics Crawford
Slide 11: Experienced Executive Management Team
11 1 Experienced Executive Management Team Name Background Experience • Leadership positions at both public and private companies, including several Harsha V. Agadi Fortune 500 companies • 30+ Years President and Chief Executive Officer • Member of the Crawford Board of Directors since 2010 • 10 yea
Slide 12: Insurance Industry Claims Trends
12 2 Insurance Industry Claims Trends Our businesses stand to benefit from a rising level of carrier outsourcing, increasing claim volume and severity, customer demand for scale, and an infusion of alternative capital Increasing Global Claim Volume and Severity o The severity of P&C claims has con
Slide 13: Targeting National and Regional Players
Targeting National and Regional Players 13 2 1. ~98% of carriers are small to medium sized 2. They have limited financial capacity 15% Carriers with less than $1B have limited capacity and scale to invest in innovation 22% Commission 15% 92% Losses* 65% 3% Premium Taxes 63% 17% Other Expenses 6% 2%
Slide 14: Delivering Outsourced Solutions that Address Client and Industry Challenges
14 2 Crawford is Delivering Outsourced Solutions that Address Client and Industry Challenges Focus on Speed & Claims processing is evolving with customer expectations for on-demand, Simplicity simplified products and services Knowledge Data analytics are changing how insurers understand and determin
Slide 15: Outsourced Claims Advantage
15 2 Outsourced Claims Advantage Case Study: A Vineyard impacted by the California wildfires Background o The 2017 California wildfires approached an unprecedented $12 billion of insured losses o A historic number of fires burned over 500,000 acres causing damage to almost 30 wineries in Napa, Sonom
Slide 16: TPA Outsourcing
16 TPA Outsourcing 2 Terminix: A case study in the value of transitioning to an outsourced TPA model Terminix • Terminix is one of the largest pest control companies in the world, operating in 47 states and 22 countries • With an internal third-party liability model, they faced two challenges: o The
Slide 17: 99 Cents Only Stores
17 2 99 Cents Only Stores Background • 99 Cents Only Stores is a deep-discount retailer with more than 350 stores in four states • As a retailer with over 17,000 employees, 99 Cents Only Stores struggled to manage the large number of employee injuries caused by overexertion, repetitive strain, slips
Slide 18: Belmond (UK) Limited
18 2 Belmond (UK) Limited Leveraging Crawford’s integrated solutions Background • Belmond La Samanna and Belmond Cap Juluca were left devastated by the powerful hurricanes of 2017 • Strong winds and sea surges caused significant property damage and interrupted business • As major employers in the lo
Slide 19: Innovating to Accelerate Growth, Improve Client Experience and Reduce Costs
Innovating to Accelerate Growth, Improve Client 19 3 Experience and Reduce Costs TruLook Contractor Connection Industry Solutions Investing in Technology Claims triage process leverages The industry’s largest Focus on developing a complete Technology is driving the self-service app, WeGoLook contrac
Slide 20: TruLook
20 3 TruLook Reduce cost and accelerate time in process with end-to-end handling of self-service, on-demand, and field adjusting needs Client Client receives comprehensive report and documentation Submits claim via email, phone, or existing ordering platform YouGoLook (Low complexity) End user colle
Slide 21: WeGoLook
21 3 WeGoLook Complete coverage across the nation with rapid delivery and infinite scale Drone Operators Lookers WeGoLook combines technology with an on-demand workforce to gather and validate 46K ~4.7 ~42.5 36% 100% Lookers Day Years Selection Quality information anytime, anywhere turnaround of age
Slide 22: Managed Repair
22 3 Managed Repair Reduce time-in-process and support your customers all the way to restoration Faster service Through rigorous performance management and consistent application of expectations, we improve cycle times and increase customer satisfaction. Accurate estimates $3.0B Leveraging technolog
Slide 23: TPA Solutions: Broadspire
23 TPA Solutions: Broadspire 3 Consistent and predictable reductions in clients total cost of risk enhanced by comprehensive service teams Scale to support Service depth to deliver Results that matter • 550+ clients globally • Fully integrated medical • 15% reduction in average paid when management
Slide 24: Tailored Industry Verticals and Solutions
24 Industry Verticals Tailored Industry Verticals and Solutions Construction Hospitality Transportation Focused on developing a complete range of specialized outsourced solutions focusing on industry Energy Retail (2019) Real Estate (2019) verticals for managing risks specific Integrated Solutions t
Slide 25: Investments in Market-Leading Technology
25 3 Investments in Market-Leading Technology At Crawford, we’re not just embracing change, we’re leading it. Some of the significant investments we have made to develop solutions to meet clients’ needs and drive growth: Drone capabilities - WeGoLook has a network of over 2,000 licensed drone oper
Slide 26: Driving Profitable Growth
26 4 Driving Profitable Growth Goal: Deliver 5% revenue growth and 15% earnings growth, annually. Baseline 5% Revenue Growth Pro Forma 5% Revenue $100 Revenue $105 Direct Cost (70) Direct Cost (73.5) Gross Profit 30 Gross Profit 31.5 Indirect Cost (20) Indirect Cost (20) 15% Operating Earnings $10 O
Slide 27: Strong Balance Sheet and Cash Flows
27 5 Strong Balance Sheet and Cash Flows • Strengthened the Company’s balance sheet by paying down $35.3 million in debt and contributing $24.0 million to pension plans in 2018 Balance Sheet • Significant financial flexibility as we ended 2018 with the lowest level of debt in the past three years •
Slide 28: Focused on Consistent Shareholder Returns
28 6 Focused on Consistent Shareholder Returns • Crawford continues to return capital to shareholders in the form of quarterly cash dividends and share repurchases • Paid $13.5 million in dividends in 2018 • Repurchased $10.4 million of common shares through 2018 and an additional $19.6 million thro
Slide 29: 2019 Guidance
29 2019 Guidance Crawford & Company updated guidance for 2019 on August 5th as follows: YEAR ENDING DECEMBER 31, 2019 Low End High End Consolidated revenues before reimbursements $1.02 $1.07 billion Non-GAAP net income attributable to shareholders of Crawford & Company* $46.0 $51.0 million Non-GAAP
Slide 30: Positioned For A Return To Growth
30 Positioned For A Return To Growth Looking forward, Crawford has four primary objectives for 2019: 1 Growth: Increasing the velocity of revenue growth through continuous innovation as we work to deliver our goal of achieving 5% revenue growth and 15% earnings growth annually 2 Systems Readiness: P
Slide 31: Appendix A: Global Service Lines
31 Appendix A: Global Service Lines
Slide 32: Crawford Claims Solutions
32 Crawford Claims Solutions Value Proposition Enhancing the policy holder experience through scalable field adjusting solutions and optimizing claim expense for clients Value Delivery System • Most extensive network of field services in the world • Widest range of innovative, end-to-end outsourced
Slide 33: Third Party Administration Solutions: Broadspire
33 Third Party Administration Solutions: Broadspire Value Proposition Consistent and predictable reductions in clients’ total cost of risk delivered by comprehensive service teams Value Delivery System • Client-centric integrated outsourced solutions powered by innovation and data science • Analytic
Slide 34: Crawford Specialty Solutions
34 Crawford Specialty Solutions Global Technical Services Contractor Connection Value Proposition Value Proposition Financial savings powered by analytics-driven insights delivered by The most prompt, vast, managed repair network driving policy holder world leading experts and consumer satisfaction
Slide 35: Appendix B: Second Quarter 2019 Segment Results
35 Appendix B: Second Quarter 2019 Segment Results
Slide 36: Crawford Claims Solutions Segment Highlights
36 Crawford Claims Solutions Segment Highlights Operating Results (2Q 2019 v. 2Q 2018) Three months ended • Revenues of $86.0 million versus $93.1 million (in thousands, except June 30, June 30, percentages) 2019 2018 Variance • Gross profit of $19.6 million versus $21.5 million • Gross profit margi
Slide 37: Crawford TPA Solutions: Broadspire Segment Highlights
37 Crawford TPA Solutions: Broadspire Segment Highlights Operating Results (2Q 2019 v. 2Q 2018) Three months ended • Revenues of $99.5 million versus $102.6 million (in thousands, except June 30, June 30, • Gross profit of $23.7 million versus $26.5 million percentages) 2019 2018 Variance • Gross pr
Slide 38: Crawford Specialty Solutions Segment Highlights
Crawford Specialty Solutions Segment Highlights 38 Three months ended Operating Results (2Q 2019 v. 2Q 2018) (in thousands, except June 30, June 30, percentages) 2019 2018 Variance • Revenues of $71.4 million versus $83.3 million Revenues $71,360 $83,290 (14.3%) • Gross profit of $25.2 million versu
Slide 39: Appendix C: Second Quarter 2019 Consolidated Financial Results
39 Appendix C: Second Quarter 2019 Consolidated Financial Results
Slide 40: Second Quarter 2019 Financial Summary
Second Quarter 2019 Financial Summary 40 Quarter Ended June 30, June 30, ($ in millions, except per share amounts) 2019 2018 % Change Revenues $256.9 $279.0 (8)% Non-GAAP Revenues excluding GCG business and foreign exchange impacts(1) $264.2 $265.1 —% Net Income Attributable to Shareholders of Crawf
Slide 41: Balance Sheet Highlights
41 Balance Sheet Highlights December 31, Unaudited ($ in thousands) June 30, 2019 2018 Change Cash and cash equivalents $ 39,150 $ 53,119 $ (13,969) Accounts receivable, net 137,175 131,117 6,058 Unbilled revenues, net 120,920 108,291 12,629 Total receivables 258,095 239,408 18,687 Goodwill 97,186 9
Slide 42: Operating And Free Cash Flow
42 Operating And Free Cash Flow For the six months ended June 30, Unaudited ($ in thousands) 2019 2018 Variance Net Income Attributable to Shareholders of Crawford & Company $ 8,751 $ 6,144 $ 2,607 Depreciation and Other Non-Cash Operating Items 20,891 25,853 (4,962) Arbitration Settlement Charges 1
Slide 43: Appendix D: Non-GAAP Financial Information
43 Appendix D: Non-GAAP Financial Information
Slide 44: Appendix: Non-GAAP Financial Information
44 Appendix: Non-GAAP Financial Information Measurements of financial performance not calculated in accordance with GAAP should be considered as supplements to, and not substitutes for, performance measurements calculated or derived in accordance with GAAP. Any such measures are not necessarily comp
Slide 45: Appendix: Non-GAAP Financial Information (continued)
45 Appendix: Non-GAAP Financial Information (continued) Segment and Consolidated Gross Profit Gross profit is defined as revenues less direct expenses which exclude indirect overhead expenses allocated to the business. Indirect expenses consist of centralized administrative support costs, regional a
Slide 46: Reconciliation of Non-GAAP Items
Reconciliation of Non-GAAP Items 46 Revenues, Costs of Services Provided, and Operating Earnings Quarter Ended Quarter Ended Full Year June 30, June 30, Guidance Unaudited ($ in thousands) 2019 2018 2019 * Revenues Before Reimbursements Total Revenues $ 267,846 $ 293,209 $ 1,100,000 Reimbursements (
Slide 47: Reconciliation of Non-GAAP Items (continued)
47 Reconciliation of Non-GAAP Items (continued) Adjusted EBITDA Quarter Ended Full Year June 30, June 30, Guidance Unaudited ($ in thousands) 2019 2018 2019 * Net income attributable to shareholders of Crawford & Company $ 2,642 $ (2,425) $ 40,500 Add: Depreciation and amortization 9,206 12,350 45,7
Slide 48: Reconciliation of Non-GAAP Items (continued)
48 Reconciliation of Non-GAAP Items (continued) Net Debt June 30, December 31, Unaudited ($ in thousands) 2019 2018 Net Debt Short-term borrowings $ 36,629 $ 23,195 Current installments of capital leases 24 89 Long-term debt and capital leases, less current installments 166,155 167,126 Total debt 20
Slide 49: Reconciliation of Non-GAAP Items (continued)
49 Reconciliation of Non-GAAP Items (continued) Segment Gross Profit Three months ended (in thousands) June 30, 2019 June 30, 2018 Segment gross profit: Crawford TPA Solutions: Broadspire $ 23,678 $ 26,532 Crawford Claims Solutions 19,553 21,521 Crawford Specialty Solutions 25,223 26,773 Segment gro
Slide 50: Non-GAAP Results for Crawford Specialty Solutions Segment Excluding GCG Business
50 NON-GAAP RESULTS FOR CRAWFORD SPECIALTY SOLUTIONS SEGMENT EXCLUDING GCG BUSINESS Three Months Ended June 30, 2019 Direct Indirect Operating Unaudited ($ in thousands) Revenues Expenses Gross Profit Expenses Earnings Crawford Specialty Solutions $ 71,360 $ 46,137 $ 25,223 $ 12,611 $ 12,612 Adjustm
Slide 51: Non-GAAP Results Excluding GCG Business in 2018 and Foreign Exchange Impacts in 2019
51 NON-GAAP RESULTS EXCLUDING GCG BUSINESS IN 2018 AND FOREIGN EXCHANGE IMPACTS IN 2019 Three Months Ended June 30, 2019 Net Income Non-GAAP Attributable to Diluted Diluted Operating Pretax Crawford & Earnings per Earnings per Unaudited ($ in thousands) Revenues Earnings Earnings Company CRD-A Share
Slide 52: Crawford & Company
Crawford & Company ®
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