Crawford & Company · NYSE:CRD.A
Crawford & — Q4 2023 Earnings Presentation
38 slides from Crawford &'s earnings presentation, Mar 5, 2024
Slide 1: Fourth Quarter & Full Year 2023 Financial Results
® CRD-A & CRD-B (NYSE) Crawford & Company Fourth Quarter & Full Year 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 President & Chief Executive Officer Q4 & FY 2023 FINANCIAL RESULTS
Slide 4: Global Reach; Trusted Partner
Global Reach; Trusted Partner 4 70 $18B+ Countries Claims Managed Annually 10,000 50,000 Employees Field Resources Q4 & FY 2023 FINANCIAL RESULTS
Slide 5: Multiple Growth Drivers Benefitting Crawford
Multiple Growth Drivers Benefitting Crawford 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 insurance markets with Insurtech capabilities global demand in independent loss
Slide 6: Full Year 2023 Highlights
Full Year 2023 Highlights • 66 YoY Revenue Growth • Record FY revenue; third consecutive year of both $1.27B $1.19B revenue growth and the addition of more than $100 million in new and enhanced business 7% • Operating earnings up 38% • Margin expansion and improved profitability in three of FY ‘22 F
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 Full Year 2023 Operating Margin Improved
Slide 8: Our Capital Allocation Strategy
Our Capital Allocation Strategy 8 Committed to Industry Leading Financial Strength and Employing a Disciplined Approach to Capital Allocation Investing in long-term growth Net debt reduced by $42M in 2023 Raised quarterly dividend to through Cap Ex and M&A Significantly reducing leverage to $0.07 pe
Slide 9: Full Year 2023 Revenue Contribution
Full Year 2023 Revenue Contribution 9 North America International Broadspire Platform Solutions Loss Adjusting Operations (US-only) (US-only) 24% 30% 28% 18% Comprised of the Following Comprised of All Reported Third Party Administration for: Service Lines Include: North American Service Lines: Serv
Slide 10: North America Loss Adjusting Full Year 2023 Results
10 10 North America Loss Adjusting Full Year 2023 Results $303.6M $23.2M Revenues Operating Earnings • Revenue growth of 11% driven by improved utilization and expert additions in GTS and new account wins in Field Operations • Operating margin expanded 68 bps • Continue to be an attractive employer
Slide 11: International Operations Full Year 2023 Results
11 11 International Operations Full Year 2023 Results $382.4M $11.2M Revenues Operating Earnings • Revenue growth of 7% and 10% when measured in constant currency • Operating earnings increased 186% resulting in operating margin expansion of 655bps • Strength across all geographies with the exceptio
Slide 12: Broadspire Full Year 2023 Results
12 12 Broadspire Full Year 2023 Results $355.7M $41.9M Revenues Operating Earnings • Record year for Broadspire: o Revenues increased 13% o Operating earnings increased 55% o Operating margin expanded 316 bps • Results driven by client wins and pricing improvements • Medical Management revenue grew
Slide 13: Platform Solutions Full Year 2023 Results
13 13 Platform Solutions Full Year 2023 Results $225.5M $28.5M Revenues Operating Earnings • Revenue decreased by 7.5% o 2022 results included revenue from Hurricane Ian and severe convective storm activity • Networks decrease driven by reduced deployment in CAT • Contractor Connection revenues incr
Slide 14: Financial Update
14 14 FINANCIAL UPDATE Bruce Swain, Chief Financial Officer Q4 & FY 2023 FINANCIAL RESULTS
Slide 15: Q4 2023 Financial Summary
Q4 2023 Financial Summary 15 Quarter Ended ($ in millions, except per share amounts) December 31, 2023 December 31, 2022 % Change Revenues $296.1 $322.2 (8)% Non-GAAP Revenues excluding foreign exchange fluctuations(1) $292.7 $322.2 (9)% Net Loss Attributable to Shareholders of Crawford & Company $(
Slide 16: North America Loss Adjusting
North America Loss Adjusting 16 Three months ended (in thousands, except percentages) December 31, 2023 December 31, 2022 Variance Revenues $69,684 $77,720 (10.3)% Direct expenses 57,968 60,941 (4.9)% Gross profit 11,716 16,779 (30.2)% Indirect expenses 10,964 8,204 33.6% Operating earnings $752 $8,
Slide 17: International Operations
International Operations 17 Three months ended (in thousands, except percentages) December 31, 2023 December 31, 2022 Variance Revenues $97,152 $88,404 9.9% Direct expenses 83,992 79,769 5.3% Gross profit 13,160 8,635 52.4% Indirect expenses 10,953 13,933 (21.4)% Operating earnings (loss) $2,207 $(5
Slide 18: Broadspire
Broadspire 18 Three months ended (in thousands, except percentages) December 31, 2023 December 31, 2022 Variance Revenues $92,123 $78,615 17.2% Direct expenses 67,998 60,726 12.0% Gross profit 24,125 17,889 34.9% Indirect expenses 11,859 11,167 6.2% Operating earnings $12,266 $6,722 82.5% Gross prof
Slide 19: Platform Solutions
Platform Solutions 19 Three months ended (in thousands, except percentages) December 31, 2023 December 31, 2022 Variance Revenues $37,162 $77,449 (52.0)% Direct expenses 29,101 59,141 (50.8)% Gross profit 8,061 18,308 (56.0)% Indirect expenses 6,115 5,276 15.9% Operating earnings $1,946 $13,032 (85.
Slide 20: Additional Financial Matters
Additional Financial Matters 20 Unallocated • Unallocated corporate costs of $9.4 million in Q4 ‘23 compared to corporate credits of $0.3 million in Q4 ‘22 Corporate and Shared • Variance was primarily due to increases in self-insurance costs, Costs and Credits professional fees, compensation and ot
Slide 21: Presentation Revision of 2023 Quarters
Presentation Revision of 2023 Quarters 21 • Revenues before reimbursements for the 2023 fourth quarter includes income earned which offsets the costs of managing the funds maintained to administer claims for certain Company customers. These amounts were previously presented as reductions to selling,
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights 22 Unaudited ($ in thousands) Dec 31, 2023 Dec 31, 2022 Change Cash and cash equivalents $ 58,363 $ 46,007 $ 12,356 Accounts receivable, net 131,362 141,106 (9,744) Unbilled revenues, net 116,611 126,274 (9,663) Total receivables 247,973 267,380 (19,407) Goodwill 76,724 76,6
Slide 23: Net Debt and Pension Liability
Net Debt and Pension Liability 23 Net Debt Pension Liability 250,000 100,000 $87.0M 90,000 200,000 $171.7M $150.8M 80,000 70,000 150,000 60,000 50,000 100,000 40,000 $22.3M 30,000 50,000 20,000 10,000 - - 2017 2018 2019 2020 2021 2022 Q4 2023 2017 2018 2019 2020 2021 2022 Q4 2023 Net debt at $150.8
Slide 24: Operating and Free Cash Flow
Operating and Free Cash Flow 24 Unaudited ($ in thousands) 2023 2022 Change Net Income (Loss) Attributable to Shareholders of Crawford & Company $ 30,609 $ (18,305) $ 48,914 Depreciation and Other Non-Cash Operating Items 40,996 40,794 202 Goodwill Impairment - 36,808 (36,808) Deferred Income Taxes
Slide 25: Weather-Related Revenue Pressure Continuing Through Q1 24
Weather-Related Revenue Pressure Continuing 25 Through Q1 2024 Expected decrease in profit contribution • Benign weather patterns observed in the back half of 2023 have continued and are expected to impact Q1 ’24 Q1 ‘23 saw carryover from • NALA and Platform Solutions face a tough Winter Storm Ellio
Slide 26: Summary
Summary 26 Leveraging strong relationships to enhance market position Leading the industry with next generation Insurtech capabilities Capitalizing on the changing landscape due to climate change and demographic shifts Financial strength and liquidity provide flexibility to pursue market opportuniti
Slide 27: Appendix: Non-GAAP Financial Information
27 27 Appendix: Non-GAAP Financial Information Q4 & FY 2023 FINANCIAL RESULTS
Slide 28: Non-GAAP Financial Information
Non-GAAP Financial Information 28 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 29: Non-GAAP Financial Information (cont.)
Non-GAAP Financial Information (cont.) 29 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 30: Total Revenue Before Reimbursements by Major Currency
Total Revenue Before Reimbursements by Major Currency 30 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) December 31, 2023 December 31, 2022 Geographic Area Cur
Slide 31: Reconciliation of Non-GAAP Items
Reconciliation of Non-GAAP Items 31 Revenues and Costs of Services Provided Quarter Ended Quarter Ended Unaudited ($ in thousands) December 31, 2023 December 31, 2022 Revenues Before Reimbursements Total Revenues $ 309,165 $ 333,369 Reimbursements (13,044) (11,181) Revenues Before Reimbursements 296
Slide 32: Reconciliation of Non-GAAP Items (cont.)
Reconciliation of Non-GAAP Items (cont.) 32 Operating Earnings Quarter Ended Quarter Ended December 31, 2023 December 31,2022 Unaudited ($ in thousands) North America Loss Adjusting $ 752 $ 8,575 International Operations 2,207 (5,298) Broadspire 12,266 6,722 Platform Solutions 1,946 13,032 Unallocat
Slide 33: Reconciliation of Non-GAAP Items (cont.)
Reconciliation of Non-GAAP Items (cont.) 33 Operating Earnings Year Ended Year Ended December 31, 2023 December 31,2022 Unaudited ($ in thousands) North America Loss Adjusting $ 23,185 $ 19,108 International Operations 11,181 (12,946) Broadspire 41,873 27,021 Platform Solutions 28,541 35,746 Unalloc
Slide 34: Reconciliation of Non-GAAP Items (cont.)
Reconciliation of Non-GAAP items (cont.) 34 Adjusted EBITDA Quarter Ended Quarter Ended December 31, 2023 December 31, 2022 Unaudited ($ in thousands) Net loss attributable to shareholders of Crawford & Company $ (818) $ (14,087) Add (Deduct): Depreciation and amortization 8,386 8,719 Stock-based co
Slide 35: Non-GAAP Financial Information (cont.)
Non-GAAP Financial Information (cont.) 35 Net Debt December 31, 2023 December 31, 2022 Unaudited ($ in thousands) Short-term borrowings $ 14,762 $ 26,966 Current installments of finance leases and other obligations 51 82 Long-term debt and finance leases, less current installments 194,335 211,810 To
Slide 36: Non-GAAP Financial Information (cont.)
Non-GAAP Financial Information (cont.) 36 Segment Gross Profit Three months ended ($ in thousands) December 31, 2023 December 31, 2022 North America Loss Adjusting $ 11,716 $ 16,779 International Operations 13,160 8,635 Broadspire 24,125 17,889 Platform Solutions 8,061 18,308 Segment gross profit 57
Slide 37: Reconciliation of Fourth Quarter Non-GAAP Results
Reconciliation of Fourth Quarter Non-GAAP Results Three Months Ended December 31, 2023 37 Net (Loss) Income Attributable to Diluted (Loss) Diluted (Loss) Pretax (Loss) Crawford & Earnings per CRD-A Earnings per CRD-B Unaudited ($ in thousands) Earnings Company Share Share(1) GAAP $ (1,150) $ (818) $
Slide 38: Reconciliation of Full-Year Non-GAAP Results
Reconciliation of Full-Year Non-GAAP Results Year Ended December 31, 2023 38 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 $ 47,357 $ 30,609 $ 0.61 $ 0.62 Adjustments: Amortization of