Crawford & Company · NYSE:CRD.A
Crawford & — Q2 2019 Earnings Presentation
29 slides from Crawford &'s earnings presentation, Aug 5, 2019
Slide 1: Crawford & Company Second Quarter 2019 Earnings Conference Call
Slide 2: Forward-Looking Statements and Additional Information
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 a
Slide 3: Crawford & Company
Crawford & Company The world’s largest publicly listed $14 Billion independent provider of global claims il management and outsourcing Claims payments annually (cad 1.7 Million solutions Sas Claims handled worldwide Organized across global service lines: 2 9,000 * Crawford Claims Solutions (P&C adju
Slide 4: () See appendix for non-GAAP explanation and reconciliation of non-GAAP measures. 4
() See appendix for non-GAAP explanation and reconciliation of non-GAAP measures. 4
Slide 5: 2019 New Client Momentum
2019 New Client Momentum • Strategic investments in our global sales team are driving real momentum in our business • Delivering on our growth commitment through the recruitment of experienced, solution based sales people to improve our capabilities • Through the second quarter, have signed $47 mill
Slide 6: Investing in Innovation
Investing in Innovation • Crawford remains the preeminent independent provider of outsourced claims management solutions with globally recognized, market leading brands • Transitioning our business model towards more predictable, recurring revenue, while maintaining our competitive position in weath
Slide 7: Focus on Execution
Focus on Execution • An essential element of our strategy is putting innovation into action with our clients • Won an outsourcing contract with a top 15 insurer in the U.S. to administer its Small Business Program, with claims exceeding 10,000 in the first full year • Started a pilot with a Small an
Slide 8: Disciplined Capital Allocation
Disciplined Capital Allocation • Focused on improving cash generation and delivering value to our shareholders through disciplined capital allocation • Free cash flows improved by $37.1 million over the prior six month period • Repurchased nearly 2.2 million shares of CRD-A and CRD-B during the six
Slide 9: Second Quarter 2019 Financial Review
Second Quarter 2019 Financial Review Crawford
Slide 10: Second Quarter 2019 Financial Summary
SECOND QUARTER 2019 FINANCIAL SUMMARY Quarter Ended June 30, June 30, ($ 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 $265.1 — % Net Income Attributable to Shareholders of Crawfor
Slide 11: Reconciliation of Non-GAAP Results
RECONCILIATION OF NON-GAAP RESULTS Three Months Ended June 30, 2019 Net Income Non-GAAP Attributable Diluted Diluted Operating Pretax to Crawford & Earnings per Earnings per Unaudited ($ in thousands) Revenues Earnings Earnings Company CRD-A Share CRD-B Share GAAP $ 256,881 $ 22,518 $ 5,483 $ 2,642
Slide 12: Crawford Claims Solutions Segment Highlights
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 margin o
Slide 13: Crawford TPA Solutions: Broadspire Segment Highlights
CRAWFORD TPA SOLUTIONS: BROADSPIRE SEGMENT HIGHLIGHTS Three months ended Operating Results (2Q 2019 v. 2Q 2018) (in thousands, except June 30, June 30, • Revenues of $99.5 million versus $102.6 million percentages) 2019 2018 Variance • Gross profit of $23.7 million versus $26.5 million Revenues $99,
Slide 14: Crawford Specialty Solutions Segment Highlights
CRAWFORD SPECIALTY SOLUTIONS SEGMENT HIGHLIGHTS Three months ended (in thousands, except June 30, June 30, Operating Results (2Q 2019 v. 2Q 2018) 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 versus $
Slide 15: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS June 30, December Unaudited ($ in thousands) 2019 31, 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 96,8
Slide 16: Operating and Free Cash Flow
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 11,3
Slide 17: Share Repurchases
SHARE REPURCHASES • During the three months ended June 30, 2019, the Company repurchased approximately 280 thousand shares of CRD-A and 72 thousand shares of CRD-B at a weighted average cost of $9.02 • During the six months ended June 30, 2019, the Company repurchased approximately 700 thousand shar
Slide 18: 2019 Guidance
2019 GUIDANCE Crawford & Company is updating its guidance for 2019 for the effect of foreign exchange on revenues and the GCG arbitration settlement as follows: YEAR ENDING DECEMBER 31, 2019 Low End High End Consolidated revenues before reimbursements $1.02 $1.07 billion Net income attributable to s
Slide 19: Conclusion: Looking Forward
CONCLUSION Looking forward Crawford has four primary objectives for 2019: • Growth: Increasing the velocity of revenue growth through continuous innovation as we work to deliver our goal of achieving 5% revenue growth and 15% earnings growth annually • System Readiness: Prioritizing IT investments a
Slide 20: Crawford—Attractive Business Model
Crawford—Attractive Business Model > Experienced Management Team > Technology Enabled BPO Aligned with Shareholders Platform > Global Product and Geographic > Blue Chip Global Client Base Diversification with Long-Term Relationships > Recurring Fee For Service > Solid Balance Sheet and Low Revenue M
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Slide 22: Appendix: Non-GAAP Financial Information
APPENDIX: NON-GAAP FINANCIAL INFORMATION Measurements of financial performance not calculated in accordance with GAAP should be considered as supplements to, and not substitutes for, performance measurements calculated or derived in accordance with GAAP. Any such measures are not necessarily compara
Slide 23: Appendix: Non-GAAP Financial Information (continued)
APPENDIX: NON-GAAP FINANCIAL INFORMATION (continued) Segment and Consolidated Gross Profit Gross profit is defined as revenues less direct expenses which exclude indirect overhead expenses allocated to the business. Indirect expenses consist of centralized administrative support costs, regional and
Slide 24: Reconciliation of Non-GAAP Items
RECONCILIATION OF NON-GAAP ITEMS Revenues, Costs of Services Provided, and Operating Earnings Quarter Ended Quarter Ended Full Year June 30, June 30, Guidance Unaudited ($ in thousands) 2019 2018 2019 * Revenues Before Reimbursements Total Revenues $ 267,846 $ 293,209 $ 1,100,000 Reimbursements (10,
Slide 25: Reconciliation of Non-GAAP Items: Adjusted EBITDA
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 45,700
Slide 26: Reconciliation of Non-GAAP Items: Net Debt
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 202,8
Slide 27: Reconciliation of Non-GAAP Items: Segment Gross Profit
RECONCILIATION OF NON-GAAP ITEMS (continued) Segment Gross Profit Three months ended June 30, 2019 June 30, 2018 (in thousands) 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 gross
Slide 28: Non-GAAP Results for Specialty Solutions Excluding GCG Business
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 Adjustment
Slide 29: Reconciliation of Non-GAAP Results
RECONCILIATION OF NON-GAAP RESULTS Three Months Ended June 30, 2019 Net Income Non-GAAP Attributable Diluted Diluted Operating Pretax to Crawford & Earnings per Earnings per Unaudited ($ in thousands) Revenues Earnings Earnings Company CRD-A Share CRD-B Share GAAP $ 256,881 $ 22,518 $ 5,483 $ 2,642