Crawford & Company · NYSE:CRD.A
Crawford & — Q3 2019 Earnings Presentation
27 slides from Crawford &'s earnings presentation, Nov 5, 2019
Slide 1: Crawford & Company Third 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 j $14 sillion independent provider of global claims & Claims payments annually management and outsourcin — _ 5 Rad 1.7 Million solutions ( 7 Claims handled worldwide Organized across global service lines: = 9 000 ¢ Crawford Claims Solutions (P&C
Slide 4: () See appendix for non-GAAP explanation and reconciliation of non-GAAP measures.
() See appendix for non-GAAP explanation and reconciliation of non-GAAP measures. 4
Slide 5: 2019 New Client Momentum
2019 New Client Momentum • Strong acceleration in new business development and client acquisition continued through the third quarter • Through the third quarter, have signed $85 million in new annual revenues • Industry vertical solutions for Construction, Hospitality, and Transportation are gainin
Slide 6: Focus on Execution
Focus on Execution • We are executing and positioning Crawford for accelerated growth as we drive toward our medium-term goal of 5% revenue and 15% earnings growth, annually • Global TPA has won 76 new clients this year worth $32 million annually which is in the early stages of coming on line • Our
Slide 7: 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 $38.9 million over the prior nine month period • Cash flow used to strengthen our balance sheet as our leverage ratio is
Slide 8: Third Quarter 2019 Financial Review
Third Quarter 2019 Financial Review Crawford
Slide 9: Third Quarter 2019 Financial Summary
THIRD QUARTER 2019 FINANCIAL SUMMARY Quarter Ended September 30, September 30, ($ in millions, except per share amounts) 2019 2018 % Change Revenues $254.7 $255.0 —% Non-GAAP Revenues excluding foreign exchange fluctuations(1) $262.0 $255.0 3% Net Income Attributable to Shareholders of Crawford & Co
Slide 10: Reconciliation of Non-GAAP Results
RECONCILIATION OF NON-GAAP RESULTS Three Months Ended September 30, 2019 Net Income Non-GAAP Attributable to Diluted Diluted Operating Pretax Crawford & Earnings per Earnings per Unaudited ($ in thousands) Revenues Earnings Earnings Company CRD-A Share CRD-B Share GAAP $ 254,677 $ 23,660 $ 16,019 $
Slide 11: Crawford Claims Solutions Segment Highlights
CRAWFORD CLAIMS SOLUTIONS SEGMENT HIGHLIGHTS Three months ended Operating Results (3Q 2019 v. 3Q 2018) 2019 • Revenues of $86.3 million versus $85.3 million (in thousands, except September September Based on percentages) 30, 2019 30, 2018 Variance 2018 rates Variance • On a constant dollars basis, r
Slide 12: Crawford TPA Solutions Segment Highlights
CRAWFORD TPA SOLUTIONS SEGMENT HIGHLIGHTS Three months ended Operating Results (3Q 2019 v. 3Q 2018) 2019 (in thousands, except September September Based on • Revenues of $99.5 million versus $100.3 million percentages) 30, 2019 30, 2018 Variance 2018 rates Variance • On a constant dollar basis, reve
Slide 13: Crawford Specialty Solutions Segment Highlights
CRAWFORD SPECIALTY SOLUTIONS SEGMENT HIGHLIGHTS Operating Results (3Q 2019 v. 3Q 2018) Three months ended • Revenues of $68.9 million versus $69.4 million 2019 (in thousands, except September September Based on • On a constant dollars basis, revenues of $71.5 million, percentages) 30, 2019 30, 2018
Slide 14: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS September December Unaudited ($ in thousands) 30, 2019 31, 2018 Change Cash and cash equivalents $ 46,101 $ 53,119 $ (7,018) Accounts receivable, net 131,329 131,117 212 Unbilled revenues, net 115,672 108,291 7,381 Total receivables 247,001 239,408 7,593 Goodwill 97,152 96,8
Slide 15: Operating and Free Cash Flow
OPERATING AND FREE CASH FLOW For the nine months ended September 30, Unaudited ($ in thousands) 2019 2018 Variance Net Income Attributable to Shareholders of Crawford & Company $ 19,797 $ 14,040 $ 5,757 Depreciation and Other Non-Cash Operating Items 31,983 37,963 (5,980) Loss on Disposition of Busi
Slide 16: Share Repurchases
SHARE REPURCHASES • During the three months ended September 30, 2019, the Company repurchased approximately 402 thousand shares of CRD-A and 231 thousand shares of CRD-B at a weighted average cost of $9.62 • During the nine months ended September 30, 2019, the Company repurchased approximately 1.1 m
Slide 17: 2019 Guidance
2019 GUIDANCE As a result of benign weather continuing into the fourth quarter and slower than expected revenue contribution from new clients, Crawford & Company is adjusting its guidance for 2019 as follows: YEAR ENDING DECEMBER 31, 2019 Low End High End Consolidated revenues before reimbursements
Slide 18: Conclusion
CONCLUSION Looking forward Crawford has four primary objectives: • 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 across the
Slide 19: 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
Slide 20: Appendix
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Slide 21: 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 22: 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 23: Total Revenues Before Reimbursements by Major Currency
TOTAL REVENUES BEFORE REIMBURSEMENTS BY MAJOR CURRENCY The following table illustrates revenue as a percentage of total revenue in the major currencies of the geographic areas that Crawford does business: Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, (i
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 September 30, September 30, Guidance Unaudited ($ in thousands) 2019 2018 2019 * Revenues Before Reimbursements Total Revenues $ 265,842 $ 264,863 $ 1,070,000 Reimburse
Slide 25: Reconciliation of Non-GAAP Items (continued)
RECONCILIATION OF NON-GAAP ITEMS (continued) Adjusted EBITDA Quarter Ended Full Year September 30, September 30, Guidance Unaudited ($ in thousands) 2019 2018 2019 * Net income attributable to shareholders of Crawford & Company $ 11,046 $ 7,896 $ 33,500 Add: Depreciation and amortization 10,236 10,6
Slide 26: Reconciliation of Non-GAAP Items (continued)
RECONCILIATION OF NON-GAAP ITEMS (continued) Net Debt September 30, December 31, Unaudited ($ in thousands) 2019 2018 Net Debt Short-term borrowings $ 33,606 $ 23,195 Current installments of capital leases 13 89 Long-term debt and capital leases, less current installments 155,761 167,126 Total debt
Slide 27: Reconciliation of Non-GAAP Items (continued)
RECONCILIATION OF NON-GAAP ITEMS (continued) Segment Gross Profit Three months ended September 30, September 30, (in thousands) 2019 2018 Segment gross profit: Crawford TPA Solutions $ 26,710 $ 26,533 Crawford Claims Solutions 19,752 17,697 Crawford Specialty Solutions 24,802 25,923 Segment gross pr