Slide 1: Fourth Quarter and Full Year 2014 Earnings Conference Call
Crawford & Company FOURTH QUARTER AND FULL YEAR 2014 EARNINGS CONFERENCE CALL February 23, 2015
Slide 2: Forward-Looking Statements
• Forward-Looking Statements —This presentation contains forward-looking statements, including statements about the future financial condition, results of operations and earnings outlook of Crawford & Company. Statements, both qualitative and quantitative, that are not statements of historical fact
Slide 3: Earnings Per Share and Subsequent Events
Earnings Per Share —The Company's two classes of stock are substantially identical, except with respect to voting rights and the Company's ability to pay greater cash dividends on the non-voting Class A Common Stock (CRDA) than on the voting Class B Common Stock (CRDB), subject to certain limitation
Slide 4: Global Business Services Leader
4 • The world’s largest independent provider of global claims management solutions • Multiple globally recognized brand names: Crawford, Broadspire, GCG • Clients include multinational insurance carriers, brokers and local insurance firms as well as 200 of the Fortune 500 EMEA-A/P Broadspire Legal S
Slide 5: Today's Agenda
Today’s Agenda Welcome and Opening Comments Fourth Quarter and Full Year 2014 Financial Review Fourth Quarter and Full Year 2014 Review and Outlook Guidance and Strategic Initiatives
Slide 6: Full Year 2014 Business Summary
6 94.9 1,143 1,163 Revenues ($ in millions) Consolidated Operating Earnings ($ in millions) • Revenues of $1.143 billion • Consolidated operating earnings of $73.1 million • Diluted earnings per share of $0.57 for CRDA and $0.52 for CRDB • Improvement in Broadspire and Americas operating results • I
Slide 7: Fourth Quarter and Full Year 2014 Financial Review
Fourth Quarter and Full Year 2014 Financial Review
Slide 8: Fourth Quarter Consolidated Income Statement
Unaudited ($ in thousands, except per share amounts) Three Months Ended December 31, 2014 2013 % Change Revenues Before Reimbursements $285,455 $284,879 — % Costs of Services Before Reimbursements 215,118 208,393 3 % Selling, General, and Administrative Expenses 57,900 58,230 (1 )% Corporate Interes
Slide 9: Americas Fourth Quarter Financials
Pro Forma 2014/2013 2014* 2014** 2013 % Change Revenues $ 88,365 $ 85,646 $ 79,483 7.8 % Total Operating Expenses 86,683 84,095 78,306 7.4 % Operating Earnings $ 1,682 $ 1,551 $ 1,177 31.8 % Operating Margin 1.9 % 1.8 % 1.5 % 85.9 6.5 95.9 85.6 79.5 1.2 9 Revenues ($ in millions) Operating Earnings
Slide 10: U.S. Catastrophe Adjuster Activity
9.1 85.9 6.5 14.1 5.0 5.9 10 Revenues ($ in millions) Catastrophe Cases (In thousands) • CAT revenues in the 2014 period included $11.2 million under an outsourcing arrangement with a major U.S. insurer where the Company supplies adjusters to the client's location without corresponding case referral
Slide 11: EMEA/AP Fourth Quarter Financials
91.0 12.7 Pro Forma 2014/2013 2014* 2014** 2013 % Change Revenues $ 91,246 $ 90,595 $ 90,975 (0.4 )% Total Operating Expenses 81,714 81,310 78,303 3.8 % Operating Earnings $ 9,532 $ 9,285 $ 12,672 (26.7 )% Operating Margin 10.4 % 10.2 % 13.9 % 11 Operating Earnings ($ in millions) Revenues ($ in mil
Slide 12: Broadspire Fourth Quarter Financials
69.2 65.4 6.3 2014 2013 % Change Revenues $ 69,184 $ 65,354 5.9 % Total Operating Expenses 62,855 61,584 2.1 % Operating Earnings $ 6,329 $ 3,770 67.9 % Operating Margin 9.1 % 5.8 % 12 Revenues ($ in millions) Operating Earnings ($ in millions) Unaudited ($ in thousands) For the quarters ended Decem
Slide 13: Legal Settlement Administration Fourth Quarter Financials
40.0 49.1 8.0 2014 2013 % Change Revenues $ 40,030 $ 49,067 (18.4 )% Total Operating Expenses 35,516 41,029 (13.4 )% Operating Earnings $ 4,514 $ 8,038 (43.8 )% Operating Margin 11.3 % 16.4 % 4.5 13 Revenues ($ in millions) Operating Earnings ($ in millions) Unaudited ($ in thousands) For the quarte
Slide 14: Balance Sheet Highlights
14 Unaudited ($ in thousands) December 31, 2014 December 31, 2013 Change Cash and cash equivalents $52,456 $75,953 ($23,497 ) Accounts receivable, net 180,096 160,350 19,746 Unbilled revenues, net 103,163 105,791 (2,628 ) Total receivables 283,259 266,141 17,118 Goodwill 131,885 132,777 (892 ) Defer
Slide 15: Operating and Free Cash Flow
15 2014 2013 Variance Net Income Attributable to Shareholders of Crawford & Company $30,624 $50,978 ($20,354 ) Depreciation and Other Non-Cash Operating Items 39,078 38,096 982 Unbilled and Billed Receivables Change (25,574 ) 18,630 (44,204 ) Working Capital Change (22,672 ) (11,910 ) (10,762 ) U.S.
Slide 16: Other Financial Highlights
16 Share Repurchases: • During the 2014 fourth quarter, Crawford repurchased 27,000 shares of CRDA at an average cost of $8.64 per share • From inception of share repurchase programs authorized in May 2012 through December 31, 2014, Crawford has repurchased 1,571,527 shares of CRDA at an average cos
Slide 17: Fourth Quarter and Full Year 2014 Operational Review
Fourth Quarter and Full Year 2014 Operational Review
Slide 18: Business Activities Fourth Quarter Operational Review
18 Revenues ($ in millions) Cases Received (In thousands) • Results in Americas segment led by North American Contractor Connection expansion and Canadian growth • Continuing improvement in Broadspire revenues and operating earnings • EMEA/AP and Legal Settlement Administration results impacted by r
Slide 19: Americas Fourth Quarter Operational Review
19 U.S. Canada Latin America/ Caribbean Revenues by Geographic Region ($ in millions) Americas Cases Received (In thousands) U.S. Canada Latin America/ Caribbean U.S. Property and Casualty Long-term outsourcing project to assist major U.S. insurer partially offset decline in weather-related cases U.
Slide 20: EMEA/AP Fourth Quarter Operational Review
20 U.K. CEMEA U.K. Asia-Pacific Asia-Pacific CEMEA Revenues by Geographic Region ($ in millions) EMEA/AP Cases Received (In thousands) EMEA/AP U.K. U.K. improvement driven by weather-related claims Completed acquisition of GAB Robins CEMEA Claims volume increased in fourth quarter from high frequenc
Slide 21: Broadspire Fourth Quarter Operational Review
21 Revenues by Service Line ($ in millions) Broadspire Cases Received (In thousands) Risk Mgmt Info. Svcs. Other Medical Mgmt. Casualty Workers' Comp. Workers' Comp. Broadspire • Broadspire case volume increased 7% over prior year fourth quarter • Client retention remained strong • Medical managemen
Slide 22: Legal Settlement Administration Fourth Quarter Operational Review
22 Backlog ($ in millions) Legal Settlement Administration • Deepwater Horizon and other significant class action projects continued to wind down • Backlog at $102 million as of December 31, 2014 • Focus on operating margin improvement • Activities to build new business pipeline ongoing Fourth Quart
Slide 23: 2015 Guidance
23 The Company expects to incur pretax special charges in 2015, currently estimated at approximately $7.0 million for the integration of GAB Robins and $9.0 million related to the establishment of a global business services center in Manila, Philippines. Crawford & Company is providing a guidance ra
Slide 24: 2015 Operational Initiatives
24 • Execute on growth strategies • Successful integration of recent acquisitions • Enhance operational effectiveness and efficiency • Worldwide expense reduction program • Global Business Services Center implementation 2015 Operational Initiatives
Slide 25: Fourth Quarter and Full Year 2014 Appendix
Fourth Quarter and Full Year 2014 Appendix
Slide 26: Non-GAAP Measures and Reimbursements
26 Measurements of financial performance not calculated in accordance with GAAP should be considered as supplements to, and not substitutes for, performance measurements calculated or derived in accordance with GAAP. Any such measures are not necessarily comparable to other similarly-titled measurem
Slide 27: Reconciliation of Non-GAAP Items
Reconciliation of Non-GAAP Items Unaudited ($ in thousands) 2013 2014 Operating Earnings (Loss): Americas $ 18,532 $ 23,663 EMEA/AP 32,158 19,720 Broadspire 8,245 15,469 Legal Settlement Administration 46,752 22,849 Unallocated corporate and shared costs and credits (10,82 9 ) (8,582 ) Consolidated
Slide 28: Fourth Quarter Revenues, Costs of Services, and Operating Earnings
Quarter Ended Quarter Ended December 31, December 31, Unaudited ($ in thousands) 2014 2013 Revenues Before Reimbursements Total Revenues $ 305,642 $ 306,720 Reimbursements (20,187 ) (21,841 ) Revenues Before Reimbursements $ 285,455 $ 284,879 Costs of Services Before Reimbursements Total Costs of Se
Slide 29: Reconciliation of Non-GAAP Items (cont.)
Reconciliation of Non-GAAP Items (cont.) 29 Quarterly Revenues and Net Debt Unaudited ($ in millions) 4Q 2014 3Q 2014 2Q 2014 1Q 2014 4Q 2013 Revenues Before Reimbursements Total Revenues $ 306 $ 315 $ 307 $ 289 $ 307 Reimbursements (21 ) (21 ) (19 ) (14 ) (22 ) Revenues Before Reimbursements $ 285