Crawford & Company · NYSE:CRD.A
Crawford & — Q3 2023 Earnings Presentation
36 slides from Crawford &'s earnings presentation, Nov 7, 2023
Slide 1: Third Quarter 2023 Financial Results
® CRD-A & CRD-B (NYSE) Crawford & Company Third 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 Q3 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 Q3 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 Insurtech capabilities global demand in insurance markets with independent loss
Slide 6: Q3 Highlights
Q3 Highlights • 66 YoY Revenue Growth • Achieved record quarterly revenue $326M $295M • Net income increased by 181% YoY 10% • Operating earnings up 119% YoY • Margin expansion and improved profitability in three 3Q ‘22 3Q ‘23 of our segments • Added $24 million in new and enhanced business YoY Non-
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 T
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 Debt Repayment Raised quarterly dividend through Cap Ex and M&A Reduce leverage to $0.07 per share (1.40x EBITDA in Q3 2023) Rep
Slide 9: Operational Update
9 OPERATIONAL UPDATE Joseph Blanco, President Q3 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% 27% 19% 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 $79.4M $10.5M Q3 Revenues Q3 Operating Earnings • Q3 revenue growth of 19% YoY • Expert adjuster additions continued through Q3 • Approximately 60 adjusters added YTD • New account nominations driving growing market share in USLA • GTS and Field Ops driving improved u
Slide 12: International Operations
12 International Operations $98.1M $2.2M Q3 Revenues Q3 Operating Earnings • Q3 revenue growth of 14% YoY and 12% when measured in constant currency • $6.1 million operating earnings improvement YoY with continued growth in UK TPA business, large loss performance in Latin America, and efficiency imp
Slide 13: Broadspire
13 Broadspire $88.3M $13.5M Q3 Operating Earnings Q3 Revenues • Q3 record revenues increasing 13% YoY, expanded revenue base through business development • Increased Medical Management revenue growth of over 16% YoY • Benefitting from pricing improvements • Advanced data analytics and predictive mod
Slide 14: Platform Solutions
14 Platform Solutions $59.8M $8.5M Q3 Revenues Q3 Operating Earnings • Q3 revenue decreased by 6% YoY reflecting benign hurricane season • Subrogation revenues grew by 24% YoY driven by increased productivity and new projects • Contractor Connection revenues grew 9% YoY • Some carriers relying more
Slide 15: Financial Update
15 FINANCIAL UPDATE Bruce Swain, Chief Financial Officer Q3 2023 FINANCIAL RESULTS
Slide 16: Q3 2023 Financial Summary
Q3 2023 Financial Summary 16 Quarter Ended ($ in millions, except per share amounts) September 30, 2023 September 30, 2022 % Change Revenues $325.6 $294.9 10% Non-GAAP Revenues excluding foreign exchange fluctuations(1) $325.0 $294.9 10% Net Income (Loss) Attributable to Shareholders of Crawford & C
Slide 17: North America Loss Adjusting
North America Loss Adjusting 17 Three months ended (in thousands, except percentages) September 30, 2023 September 30, 2022 Variance Revenues $79,390 $66,822 18.8% Direct expenses 59,653 54,428 9.6% Gross profit 19,737 12,394 59.2% Indirect expenses 9,269 8,644 7.2% Operating earnings $10,468 $3,750
Slide 18: International Operations
International Operations 18 Three months ended (in thousands, except percentages) September 30, 2023 September 30, 2022 Variance Revenues $98,066 $86,066 13.9% Direct expenses 83,592 76,677 9.0% Gross profit 14,474 9,389 54.2% Indirect expenses 12,277 13,311 (7.8)% Operating earnings (loss) $2,197 $
Slide 19: Broadspire
Broadspire 19 Three months ended (in thousands, except percentages) September 30, 2023 September 30, 2022 Variance Revenues $88,299 $78,381 12.7% Direct expenses 62,799 60,494 3.8% Gross profit 25,500 17,887 42.6% Indirect expenses 11,968 11,689 2.4% Operating earnings $13,532 $6,198 118.3% Gross pr
Slide 20: Platform Solutions
Platform Solutions 20 Three months ended (in thousands, except percentages) September 30, 2023 September 30, 2022 Variance Revenues $59,839 $63,655 (6.0)% Direct expenses 45,761 48,054 (4.8)% Gross profit 14,078 15,601 (9.8)% Indirect expenses 5,555 5,521 0.6% Operating earnings $8,523 $10,080 (15.4
Slide 21: Additional Financial Matters
Additional Financial Matters 21 Unallocated • Unallocated corporate costs of $4.8 million in Q3 ‘23 compared to costs of Corporate and $2.4 million in the prior year Shared Costs and • Variance was primarily due to an increase in incentive compensation and unallocated payroll tax and benefit costs C
Slide 22: Balance Sheet Highlights
Balance Sheet Highlights 22 Unaudited ($ in thousands) Sept 30, 2023 Dec 31, 2022 Change Cash and cash equivalents $ 49,208 $ 46,007 $ 3,201 Accounts receivable, net 151,142 141,106 10,036 Unbilled revenues, net 131,251 126,274 4,977 Total receivables 282,393 267,380 15,013 Goodwill 76,637 76,622 15
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 $169.2M 80,000 70,000 150,000 60,000 50,000 100,000 40,000 $25.0M 30,000 50,000 20,000 10,000 - - 2017 2018 2019 2020 2021 2022 Q3 2023 2017 2018 2019 2020 2021 2022 Q3 2023 Net debt at $169.2
Slide 24: Operating and Free Cash Flow
Operating and Free Cash Flow 24 Unaudited ($ in thousands) 2023 2022 Change Net Income Attributable to Shareholders of Crawford & Company $ 31,427 $ (4,218) $ 35,645 Depreciation and Other Non-Cash Operating Items 31,360 31,556 (196) Goodwill Impairment - 36,808 (36,808) Loss (Gain) on Disposals of
Slide 25: Despite Less Weather-Related Activity in Q4, 2023 Expected To Be a Record Revenue Year
Despite Less Weather-Related Activity in Q4, 25 2023 Expected To Be a Record Revenue Year Expected decrease in profit •contribution Q4 ‘22 saw hyperactive storm activity – Hurricane Ian and Winter Storm Elliott • $40M - $50M in Q4 ‘22 weather-related Q4 ‘22 saw major storm activity revenue will like
Slide 26: Summary
Summary 26 Leveraging established relationships with carriers to create “sticky” revenue Leading the industry with next generation Insurtech capabilities Positioned to capitalize on the changing landscape due to climate change and demographic shifts Financial strength and liquidity provide flexibili
Slide 27: Appendix: Non-GAAP Financial Information
27 27 Appendix: Non-GAAP Financial Information Q3 2023 FINANCIAL RESULTS
Slide 28: Non-GAAP Financial Information
Non-GAAP Financial Information 28 Measurements of financial performance not calculated in accordance with GAAP should be considered as supplements to, and not substitutes for, performance measurements calculated or derived in accordance with GAAP. Any such measures are not necessarily comparable to
Slide 29: Non-GAAP Financial Information (cont.)
Non-GAAP Financial Information (cont.) 29 Segment and Consolidated Operating Earnings Operating earnings is the primary financial performance measure used by our senior management and chief operating decision maker to evaluate the financial performance of our Company and operating segments and make
Slide 30: Total Revenue Before Reimbursements by Major Currency
Total Revenue Before Reimbursements by Major Currency 30 The following table illustrates revenue as a percentage of total revenue in the major currencies of the geographic areas in which Crawford does business: Three Months Ended (in thousands) September 30, 2023 September 30, 2022 Geographic Area C
Slide 31: Reconciliation of Non-GAAP Items
Reconciliation of Non-GAAP Items 31 Revenues and Costs of Services Provided Quarter Ended Quarter Ended Unaudited ($ in thousands) September 30, 2023 September 30, 2022 Revenues Before Reimbursements Total Revenues $ 337,660 $ 306,417 Reimbursements (12,066) (11,493) Revenues Before Reimbursements 3
Slide 32: Reconciliation of Non-GAAP Items (cont.)
Reconciliation of Non-GAAP Items (cont.) 32 Operating Earnings Quarter Ended Quarter Ended September 30, 2023 September 30,2022 Unaudited ($ in thousands) North America Loss Adjusting $ 10,468 $ 3,750 International Operations 2,197 (3,922) Broadspire 13,532 6,198 Platform Solutions 8,523 10,080 Unal
Slide 33: Reconciliation of Non-GAAP items (cont.)
Reconciliation of Non-GAAP items (cont.) 33 Adjusted EBITDA Quarter Ended Quarter Ended September 30, 2023 September 30, 2022 Unaudited ($ in thousands) Net income (loss) attributable to shareholders of Crawford & Company $ 12,319 $ (15,144) Add (Deduct): Depreciation and amortization 9,115 8,924 St
Slide 34: Non-GAAP Financial Information (cont.)
Non-GAAP Financial Information (cont.) 34 Net Debt September 30, 2023 Dec 31, 2022 Unaudited ($ in thousands) Short-term borrowings $ 16,902 $ 26,990 Current installments of finance leases and other obligations 53 58 Long-term debt and finance leases, less current installments 201,487 211,810 Total
Slide 35: Non-GAAP Financial Information (cont.)
Non-GAAP Financial Information (cont.) 35 Segment Gross Profit Three months ended ($ in thousands) September 30, 2023 September 30, 2022 North America Loss Adjusting $ 19,737 $ 12,394 International Operations 14,474 9,389 Broadspire 25,500 17,887 Platform Solutions 14,078 15,601 Segment gross profit
Slide 36: Reconciliation of Third Quarter Non-GAAP Results
Reconciliation of Third Quarter Non-GAAP Results 36 Three Months Ended September 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(1) GAAP $ 18,955 $ 12,319 $ 0.25 $ 0.25 Adjustments: Am