Crawford & Company · NYSE:CRD.A
Crawford & — Q2 2023 Earnings Presentation
36 slides from Crawford &'s earnings presentation, Aug 4, 2023
Slide 1: Second Quarter 2023 Financial Results
® CRD-A & CRD-B (NYSE) Crawford & Company Second Quarter 2023 Financial Results
Slide 2: Forward-Looking Statements & Additional Information
Forward-Looking Statements & Additional Information 2 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 a
Slide 3: Strategic Update
3 STRATEGIC UPDATE Rohit Verma, Chief Executive Officer Q2 2023 FINANCIAL RESULTS
Slide 4: Crawford Today: Stronger than ever; Partnering with the best
Crawford Today: Stronger than ever; Partnering with the best 4 70 $18B+ Countries Claims Managed Annually 10,000 50,000 Employees Field Resources Q2 2023 FINANCIAL RESULTS
Slide 5: Growth Drivers
Growth Drivers 5 Climate change Increased presence in Gaining market share Growing and Industry-leading continues to drive rapidly growing P&C within fragmented U.S. strengthening strategic Insurtech capabilities global demand in insurance markets with independent loss partnerships across strong out
Slide 6: Q2 Highlights
• 66 Q2 Highlights YoY Revenue Growth $321M • 11th consecutive quarter of revenue growth $293M • Revenue growth across ALL business segments 9% • Net income increased by nearly 50% YoY • Operating earnings up 85% YoY 2Q ‘22 2Q ‘23 • Margin expansion and improved profitability • Added $26 million in
Slide 7: Margin Improvement Strategy Driving Results
Margin Improvement Strategy Driving Results 7 1. Align pricing with the value we deliver 2. Aggressively address low productivity pockets 3. Optimize cost structure to current market dynamics 4. Roll out new systems and improved processes for efficiency gains Increased YoY Operating Margins Across B
Slide 8: Our Capital Allocation Strategy
Our Capital Allocation Strategy 8 Committed to Employing a Disciplined Approach to Capital Allocation Investing in long-term growth Debt Repayment Raised quarterly dividend to through Cap Ex and M&A Reduce leverage $0.07 per share (1.80x EBITDA in Q2 2023) for CRD-A and CRD-B Returned over $120 mill
Slide 9: Operational Update
9 OPERATIONAL UPDATE Joseph Blanco, President Q2 2023 FINANCIAL RESULTS
Slide 10: Operating Segments
Operating Segments 10 North America International Broadspire Platform Solutions Loss Adjusting Operations (US-only) (US-only) 24% 30% 26% 20% of YTD revenues of YTD revenues of YTD revenues of YTD revenues Comprised of the Following Comprised of All Reported Third Party Administration for: Service L
Slide 11: North America Loss Adjusting
11 North America Loss Adjusting $75.8M $3.9M Q2 Revenues Q2 Operating Earnings • Q2 revenue growth of 15% over prior year • Expert adjuster additions continued through Q2 • New account nominations with strong growth in forensic accounting and engineering • GTS and Field Ops collaboration driving inc
Slide 12: International Operations
12 International Operations $95.3M $3.7M Q2 Revenues Q2 Operating Earnings • Q2 revenue growth of 1.7% over prior year and 8.3% when measured in constant currency • $4.4 million OE improvement with continued growth in UK TPA business, large loss performance in Latin America, and efficiency improveme
Slide 13: Broadspire
13 Broadspire $83.9M $8.1M Q2 Revenues Q2 Operating Earnings • Q2 revenue growth of 5% YoY, aided by increased Medical Management revenue growth of over 7% from prior year • New sales momentum in alternative markets and data & analytical services • Innovative technology including advanced data analy
Slide 14: Platform Solutions
14 Platform Solutions $65.6M $8.1M Q2 Revenues Q2 Operating Earnings • Q2 revenue growth of 22% over prior year • Next generation software driving repeatable SaaS revenue and enabling Crawford’s goal to touch every claim • Networks revenues grew 18% YoY; Contractor Connection revenues grew 14% • Sub
Slide 15: Financial Update
15 FINANCIAL UPDATE Bruce Swain, Chief Financial Officer Q2 2023 FINANCIAL RESULTS
Slide 16: Q2 2023 Financial Summary
Q2 2023 Financial Summary 16 Quarter Ended ($ in millions, except per share amounts) June 30, 2023 June 30, 2022 % Change Revenues $320.7 $293.3 9% Non-GAAP Revenues excluding foreign exchange fluctuations(1) $328.1 $293.3 12% Net Income Attributable to Shareholders of Crawford & Company $8.4 $5.8 4
Slide 17: North America Loss Adjusting
North America Loss Adjusting 17 Three months ended (in thousands, except percentages) June 30, 2023 June 30, 2022 Variance Revenues $75,827 $65,775 15.3% Direct expenses 62,469 54,507 14.6% Gross profit 13,358 11,268 18.5% Indirect expenses 9,458 8,619 9.7% Operating earnings $3,900 $2,649 47.2% Gro
Slide 18: International Operations
International Operations 18 Three months ended (in thousands, except percentages) June 30, 2023 June 30, 2022 Variance Revenues $95,312 $93,710 1.7% Direct expenses 78,281 80,297 (2.5)% Gross profit 17,031 13,413 27.0% Indirect expenses 13,289 14,074 (5.6)% Operating earnings (loss) $3,742 $(661) nm
Slide 19: Broadspire
Broadspire 19 Three months ended (in thousands, except percentages) June 30, 2023 June 30, 2022 Variance Revenues $83,888 $80,114 4.7% Direct expenses 64,128 62,383 2.8% Gross profit 19,760 17,731 11.4% Indirect expenses 11,612 10,064 15.4% Operating earnings $8,148 $7,667 6.3% Gross profit margin 2
Slide 20: Platform Solutions
Platform Solutions 20 Three months ended (in thousands, except percentages) June 30, 2023 June 30, 2022 Variance Revenues $65,638 $53,746 22.1% Direct expenses 51,726 43,895 17.8% Gross profit 13,912 9,851 41.2% Indirect expenses 5,806 5,255 10.5% Operating earnings $8,106 $4,596 76.4% Gross profit
Slide 21: Additional Financial Matters
Additional Financial Matters 21 Unallocated • Unallocated corporate costs of $1.1 million in Q2 ‘23 compared to costs of Corporate and $1.9 million in the prior year Shared Costs and • Variance was primarily due to an offset to certain internal allocations and other cost reductions Credits Non-servi
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights 22 Unaudited ($ in thousands) June 30, 2023 Dec 31, 2022 Change Cash and cash equivalents $ 47,479 $ 46,007 $ 1,472 Accounts receivable, net 160,333 141,106 19,227 Unbilled revenues, net 129,121 126,274 2,847 Total receivables 289,454 267,380 22,074 Goodwill 76,720 76,622 98
Slide 23: Net Debt and Pension Liability
Net Debt and Pension Liability 23 Net Debt Pension Liability 250,000 100,000 $87.0M $195.3M 90,000 200,000 $171.7M 80,000 70,000 150,000 60,000 50,000 100,000 40,000 $25.3M 30,000 50,000 20,000 10,000 - - 2017 2018 2019 2020 2021 2022 Q2 2023 2017 2018 2019 2020 2021 2022 Q2 2023 Net debt at $195.3
Slide 24: Operating and Free Cash Flow
Operating and Free Cash Flow 24 Unaudited ($ in thousands) 2023 2022 Change Net Income Attributable to Shareholders of Crawford & Company $ 19,108 $ 10,926 $ 8,182 Depreciation and Other Non-Cash Operating Items 20,817 21,932 (1,115) Loss (Gain) on Disposals of Property and Equipment, net 116 (1,544
Slide 25: Summary
Summary 25 Leveraging established relationships with carriers to create “sticky” revenue Leading the industry with next generation Insurtech capabilities Positioned to capitalize on the changing landscape due to climate change and demographic shifts Financial strength and liquidity provide flexibili
Slide 26: Appendix: Non-GAAP Financial Information
26 26 Appendix: Non-GAAP Financial Information Q2 2023 FINANCIAL RESULTS
Slide 27: Non-GAAP Financial Information
Non-GAAP Financial Information 27 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
Slide 28: Non-GAAP Financial Information (cont.)
Non-GAAP Financial Information (cont.) 28 Segment and Consolidated Operating Earnings Operating earnings is the primary financial performance measure used by our senior management and chief operating decision maker to evaluate the financial performance of our Company and operating segments and make
Slide 29: Total Revenue Before Reimbursements by Major Currency
Total Revenue Before Reimbursements by Major Currency 29 The following table illustrates revenue as a percentage of total revenue in the major currencies of the geographic areas in which Crawford does business: Three Months Ended (in thousands) June 30, 2023 June 30, 2022 Geographic Area Currency US
Slide 30: Reconciliation of Non-GAAP Items
Reconciliation of Non-GAAP Items 30 Revenues and Costs of Services Provided Quarter Ended Quarter Ended Unaudited ($ in thousands) June 30, 2023 June 30, 2022 Revenues Before Reimbursements Total Revenues $ 333,738 $ 303,651 Reimbursements (13,073) (10,306) Revenues Before Reimbursements 320,665 293
Slide 31: Reconciliation of Non-GAAP Items (cont.)
Reconciliation of Non-GAAP Items (cont.) 31 Operating Earnings Quarter Ended Quarter Ended June 30, 2023 June 30,2022 Unaudited ($ in thousands) North America Loss Adjusting $ 3,900 $ 2,649 International Operations 3,742 (661) Broadspire 8,148 7,667 Platform Solutions 8,106 4,596 Unallocated corpora
Slide 32: Reconciliation of Non-GAAP items (cont.)
Reconciliation of Non-GAAP items (cont.) 32 Adjusted EBITDA Quarter Ended Quarter Ended June 30, 2023 June 30, 2022 Unaudited ($ in thousands) Net income attributable to shareholders of Crawford & Company $ 8,427 $ 5,830 Add (Deduct): Depreciation and amortization 9,191 9,356 Stock-based compensatio
Slide 33: Non-GAAP Financial Information (cont.)
Non-GAAP Financial Information (cont.) 33 Net Debt June 30, 2023 Dec 31, 2022 Unaudited ($ in thousands) Short-term borrowings $ 30,494 $ 26,990 Current installments of finance leases and other obligations 58 58 Long-term debt and finance leases, less current installments 212,217 211,810 Total debt
Slide 34: Non-GAAP Financial Information (cont.)
Non-GAAP Financial Information (cont.) 34 Segment Gross Profit Three months ended ($ in thousands) June 30, 2023 June 30, 2022 North America Loss Adjusting $ 13,358 $ 11,268 International Operations 17,031 13,413 Broadspire 19,760 17,731 Platform Solutions 13,912 9,851 Segment gross profit 64,061 52
Slide 35: Reconciliation of Second Quarter Non-GAAP Results
Reconciliation of Second Quarter Non-GAAP Results 35 Three Months Ended June 30, 2023 Net Income Attributable to Crawford & Diluted Earnings Diluted Earnings Unaudited ($ in thousands) Pretax Earnings Company per CRD-A Share per CRD-B Share GAAP $ 13,551 $ 8,427 $ 0.17 $ 0.17 Adjustments: Amortizati
Slide 36: Reconciliation of Year to Date Non-GAAP Results
Reconciliation of Year to Date Non-GAAP Results 36 Six Months Ended June 30, 2023 Net Income Attributable to Crawford & Diluted Earnings Diluted Earnings Unaudited ($ in thousands) Pretax Earnings Company per CRD-A Share(1) per CRD-B Share GAAP $ 29,552 $ 19,108 $ 0.39 $ 0.39 Adjustments: Amortizati