8-K
CRAWFORD & CO (CRD-A)
2,421
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 3, 2023
CRAWFORD & COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Georgia
(State or Other Jurisdiction of Incorporation)
| 1-10356 | 58-0506554 |
|---|---|
| (Commission File Number) | (IRS Employer Identification No.) |
| 5335 Triangle Parkway, Peachtree Corners, Georgia | 30092 |
| (Address of Principal Executive Offices) | (Zip Code) |
(404) 300-1000
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Act of 1934.
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Class A Common Stock — $1.00 Par Value | CRD-A | New York Stock Exchange, Inc. |
| Class B Common Stock — $1.00 Par Value | CRD-B | New York Stock Exchange, Inc. |
Item 2.02. Results of Operations and Financial Condition
On May 3, 2023, Crawford & Company (the "Company") issued a press release containing information about the Company's financial results for the first quarter 2023. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by this reference.
Item 7.01. Regulation FD Disclosure
The Company has made available on the Company's website at https://ir.crawco.com a presentation designed to enhance the information presented at its quarterly earnings conference call on Thursday, May 4, 2023 at 8:30 a.m. Eastern Time. A copy of the presentation is attached hereto as Exhibit 99.2 and is incorporated herein by this reference.
Item 9.01. Financial Statements and Exhibits
(d) The following exhibits are being filed herewith:
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated May 3, 2023 |
| 99.2 | Slide Presentation |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
The information contained in this current report on Form 8-K and in the accompanying exhibits shall not be incorporated by reference into any filing of the Company with the SEC, whether made before or after the date hereof, regardless of any general incorporation by reference language in such filing, unless expressly incorporated by specific reference to such filing. The information, including the exhibits hereto, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CRAWFORD & COMPANY | ||
|---|---|---|
| (Registrant) | ||
| By: | /s/ W. BRUCE SWAIN | |
| W. Bruce Swain | ||
| Executive Vice President - | ||
| Chief Financial Officer | ||
| Dated: May 3, 2023 |
EX-99
Exhibit 99.1
Crawford & Company®
5335 Triangle Parkway
Peachtree Corners, GA 30092
FOR IMMEDIATE RELEASE
CRAWFORD & COMPANY REPORTS 2023 FIRST QUARTER RESULTS
BROAD-BASED REVENUE GROWTH LEADS TO A DOUBLING OF NET INCOME
ATLANTA, (May 3, 2023) -- Crawford & Company® (NYSE: CRD-A and CRD-B), is pleased to announce its financial results for the first quarter ended March 31, 2023.
Based in Atlanta, Crawford & Company (NYSE: CRD‐A and CRD‐B) is a leading global provider of claims management and outsourcing solutions to insurance companies and self‐insured entities with an expansive network serving clients in more than 70 countries. The Company’s two classes of stock are substantially identical, except with respect to voting rights for the Class B Common Stock (CRD-B) and protections for the non-voting Class A Common Stock (CRD-A). More information is available on the Company's website.
GAAP Consolidated Results
First Quarter 2023
• Revenues before reimbursements of $313.0 million, up 12% over $279.0 million for the 2022 first quarter
• Net income attributable to shareholders of $10.7 million, more than doubling the $5.1 million in the same period last year
• Diluted earnings per share of $0.22 for both CRD-A and CRD-B, compared with diluted earnings per share of $0.10 for both CRD-A and CRD-B in the prior year first quarter
Non-GAAP Consolidated Results
First Quarter 2023
Non-GAAP consolidated results for 2023 exclude the non-cash, after-tax adjustments for amortization of intangible assets of $1.4 million, non-service related pension costs of $1.6 million, and contingent earnout adjustment of $0.2 million. Non-GAAP consolidated results for 2022 exclude a similar adjustment for amortization of intangible assets of $1.3 million, non-service related pension credits of $(0.4) million, and contingent earnout adjustment of $1.5 million.
• Foreign currency exchange rates decreased revenues before reimbursements by $9.4 million or (3)%. Presented on a constant dollar basis to the prior year, revenues before reimbursements totaled $322.4 million, increasing 16% over the 2022 first quarter
• Net income attributable to shareholders, on a non-GAAP basis, totaled $13.9 million in the 2023 first quarter, compared with $7.5 million in the same period last year
• Diluted earnings per share, on a non-GAAP basis, totaled $0.28 for both CRD-A and CRD-B in the 2023 first quarter, compared with $0.14 for both CRD-A and CRD-B in the prior year first quarter
• Consolidated adjusted operating earnings, on a non-GAAP basis, were $24.9 million, or 7.9% of revenues before reimbursements in the 2023 first quarter, compared with $12.5 million, or 4.5% of revenues, in the 2022 first quarter
• Consolidated adjusted EBITDA, a non-GAAP financial measure, was $32.8 million, or 10.5% of revenues before reimbursements in the 2023 first quarter, compared with $21.3 million, or 7.6% of revenues, in the 2022 first quarter
Management Comments
"Crawford delivered exceptional first quarter results, growing revenues 12% and nearly doubling operating earnings on a year-over-year basis. We experienced growth and profit expansion across all segments, signifying the strength of our business and solid execution of our stated strategies. Platform Solutions and North America Loss Adjusting both delivered double-digit revenue growth in the quarter. We also saw continued momentum in Broadspire, including encouraging signs of recovery within Medical Management. Our International business continued its turnaround, achieving revenue growth and margin expansion during the quarter,” commented Mr. Rohit Verma, chief executive officer of Crawford & Company.
“Our disciplined strategy execution along with the hard work of our dedicated team and our clients’ confidence in our products and services has enabled us to deliver these strong results. We feel good about our continued trajectory as we delivered our tenth consecutive quarter of revenue growth. We remain in an enviable financial position and are confident in our ability to deliver long-term value to our shareholders,” concluded Mr. Verma.
Segment Results for the First Quarter
North America Loss Adjusting
North America Loss Adjusting revenues before reimbursements were $77.1 million in the first quarter of 2023, increasing 19.7% from $64.4 million in the first quarter of 2022.
The segment had operating earnings of $8.1 million in the 2023 first quarter, increasing from $4.1 million in the first quarter of 2022. The operating margin was 10.5% in the 2023 quarter and 6.4% in the 2022 quarter.
International Operations
International Operations revenues before reimbursements were $91.9 million in the first quarter of 2023, up 2.9% from $89.3 million in the same period of 2022, including $0.7 million from the Van Dijk acquisition. Absent foreign exchange rate decreases of $7.7 million, revenues would have been $99.6 million for the 2023 first quarter.
Operating earnings were $3.0 million in the 2023 first quarter, compared to a $(3.1) million operating loss in the 2022 period. The segment’s operating margin for the 2023 quarter was 3.3% as compared with (3.4)% in the 2022 quarter.
Broadspire
Broadspire segment revenues before reimbursements were $81.2 million in the 2023 first quarter, increasing 6.2% from $76.5 million in the 2022 first quarter.
Broadspire recorded operating earnings of $7.9 million in the first quarter of 2023, representing an operating margin of 9.8%, increasing from $6.4 million, or 8.4% of revenues, in the 2022 first quarter.
Platform Solutions
Platform Solutions revenues before reimbursements were $62.8 million in the first quarter of 2023, up 28.6% from $48.9 million in the same period of 2022.
Operating earnings were $10.0 million in the 2023 first quarter, increasing over the $8.0 million in the 2022 period. The segment’s operating margin for the 2023 quarter was 15.9% as compared with 16.5% in the 2022 quarter.
Unallocated Corporate and Shared Costs and Credits, Net
Unallocated corporate costs were $4.1 million in the first quarter of 2023, compared with $3.0 million in the same period of 2022. The increase in the 2023 first quarter was primarily due to a $1.8 million gain on sale of our Canadian head office building in the 2022 first quarter and an increase in self-insurance costs in 2023, partially offset by other cost reductions.
Other Matters
The Company recognized pretax contingent earnout expenses totaling $0.2 million and $2.1 million in the 2023 first quarter and comparable 2022 period, respectively, related to the fair value adjustment of earnout liabilities arising from recent acquisitions. This adjustment, which is not a component of operating earnings, is based on favorable changes to projections of acquired entities over the respective earnout periods, which span multiple years.
The Company recognized non-service pension costs of $2.2 million in the 2023 first quarter compared with credits of $(0.5) million in the comparable 2022 period. Non-service pension costs represent the U.S. and U.K. non-service defined benefit pension costs, which are non-operating in nature as the U.S. plan is frozen and the U.K. plans are closed to new participants.
Balance Sheet and Cash Flow
The Company’s consolidated cash and cash equivalents position as of March 31, 2023, totaled $43.3 million, compared with $46.0 million at December 31, 2022. The Company’s total debt outstanding as of March 31, 2023, totaled $249.4 million, compared with $238.9 million at December 31, 2022.
The Company’s operations used $0.4 million of cash during the first three months of 2023, compared with $15.3 million used in 2022. The decrease in cash used was primarily driven by an increase in net income, $7.7 million reduction in incentive compensation payments, and increases in accrued income taxes and deferred revenues, partially offset by reductions in other accruals.
The Company made no contributions to its U.S. defined benefit pension plan and $0.5 million in contributions to its U.K. plans for the first quarter of 2023, compared with no contributions to the U.S. plan and $0.2 million to the U.K. plans in 2022.
There were no shares repurchased during the 2023 first quarter. During the 2022 first quarter, the Company repurchased 1,498,084 shares of CRD-A and 719,874 shares of CRD-B at an average per share cost of $7.23 and $7.31, respectively. The total cost of share repurchases in the 2022 quarter was $16.1 million.
Conference Call
As previously announced, Crawford & Company will host a conference call on May 4, 2023, at 8:30 a.m. Eastern Time to discuss its first quarter 2023 results. The conference call can be accessed live by dialing 1-888-396-8049 and using Conference ID 84184847. A presentation for tomorrow’s call can also be found on the investor relations portion of the Company’s website, https://ir.crawco.com. The call will be recorded and available for replay through June 4, 2023. You may dial 1-877-674-7070 and use passcode 184847# to listen to the replay.
Non-GAAP Presentation
In the normal course of business, our operating segments incur certain out-of-pocket expenses that are thereafter reimbursed by our clients. Under U.S. generally accepted accounting principles (“GAAP”), these out-of-pocket expenses and associated reimbursements are required to be included when reporting expenses and revenues, respectively, in our consolidated results of operations. In the foregoing discussion and analysis of segment results of operations, we do not include a gross up of segment expenses and revenues for these pass-through reimbursed expenses. The amounts of reimbursed expenses and related revenues offset each other in our results of operations with no impact to our net income or operating earnings. A reconciliation of revenues before reimbursements to consolidated revenues determined in accordance with GAAP is self-evident from the face of the accompanying unaudited condensed consolidated statements of operations.
Operating earnings is the primary financial performance measure used by our senior management and chief operating decision maker (“CODM”) to evaluate the financial performance of our Company and operating segments, and make resource allocation and certain compensation decisions. Unlike net income, segment operating earnings is not a standard performance measure found in GAAP. We believe this measure is useful to others in that it allows them to evaluate segment and consolidated operating performance using the same criteria used by our senior management and CODM. Consolidated operating earnings represent segment earnings including certain unallocated corporate and shared costs, but before net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, contingent earnout adjustments, non-service pension costs and credits, income taxes and net income or loss attributable to noncontrolling interests.
Adjusted EBITDA is not a term defined by GAAP and as a result our measure of adjusted EBITDA might not be comparable to similarly titled measures used by other companies. However, adjusted EBITDA is used by management to evaluate, assess and benchmark our operational results. The Company believes that adjusted EBITDA is relevant and useful information widely used by analysts, investors and other interested parties. Adjusted EBITDA is defined as net income attributable to shareholders of the Company with adjustments for depreciation and amortization, net corporate interest expense, contingent earnout adjustments, non-service pension costs and credits, income taxes and stock-based compensation expense.
Unallocated corporate and shared costs and credits include expenses and credits related to our chief executive officer and Board of Directors, certain provisions for bad debt allowances or subsequent recoveries such as those related to bankrupt clients, certain unallocated professional fees and certain self-insurance costs and recoveries that are not allocated to our individual operating segments.
Income taxes, net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, contingent earnout adjustments, and non-service pension costs and credits are recurring components of our net income, but they are not considered part of our segment operating earnings because they are managed on a corporate-wide basis. Income taxes are calculated for the Company on a consolidated basis based on statutory rates in effect in the various jurisdictions in which we provide services and vary significantly by jurisdiction. Net corporate interest expense results from capital structure decisions made by senior management and the Board of Directors, affecting the Company as a whole. Stock option expense represents the non-cash costs generally related to stock options and employee stock purchase plan expenses which are not allocated to our operating segments. Amortization expense is a non-cash expense for finite-lived customer-relationship and trade name intangible assets acquired in business combinations. Contingent earnout adjustments relate to changes in the fair value of earnouts associated with our recent acquisitions. Non-service pension costs and credits represent the U.S. and U.K. non-service defined benefit pension costs, which are non-operating in nature as the U.S. plan was frozen in 2002 and the U.K. plans are closed to new participants. None of these costs relate directly to the performance of our services or operating activities and, therefore, are excluded from segment operating earnings to better assess the results of each segment's operating activities on a consistent basis.
A significant portion of our operations are international. These international operations subject us to foreign exchange fluctuations. The following table illustrates revenue as a percentage of total revenue for the major currencies of the geographic areas that Crawford does business:
| (in thousands) | March 31,2022 | |||||||
| Geographic Area | Currency | % of total | equivalent | % of total | ||||
| U.S. | 62.9 | % | 59.3 | % | ||||
| U.K. | 10.6 | % | 12.2 | % | ||||
| Canada | CAD | 7.8 | % | 8.7 | % | |||
| Australia | AUD | 7.3 | % | 6.7 | % | |||
| Europe | 4.5 | % | 5.2 | % | ||||
| Rest of World | Various | 6.9 | % | 7.9 | % | |||
| Total Revenues, before reimbursements | 100.0 | % | 100.0 | % |
All values are in British Pounds.
Following is a reconciliation of consolidated operating earnings to net income attributable to shareholders of Crawford & Company on a GAAP basis:
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| (in thousands) | March 31, 2023 | March 31, 2022 | ||||
| Operating earnings: | ||||||
| North America Loss Adjusting | $ | 8,065 | $ | 4,135 | ||
| International Operations | 3,035 | (3,067 | ) | |||
| Broadspire | 7,927 | 6,434 | ||||
| Platform Solutions | 9,966 | 8,038 | ||||
| Unallocated corporate and shared costs, net | (4,119 | ) | (2,995 | ) | ||
| Consolidated operating earnings | 24,874 | 12,545 | ||||
| (Deduct) add: | ||||||
| Net corporate interest expense | (4,399 | ) | (1,519 | ) | ||
| Stock option expense | (156 | ) | (205 | ) | ||
| Amortization of intangible assets | (1,899 | ) | (1,726 | ) | ||
| Non-service pension costs and credits | (2,171 | ) | 543 | |||
| Contingent earnout adjustments | (248 | ) | (2,056 | ) | ||
| Income tax provision | (5,271 | ) | (2,426 | ) | ||
| Net income attributable to noncontrolling interests | (49 | ) | (60 | ) | ||
| Net income attributable to shareholders of Crawford & Company | $ | 10,681 | $ | 5,096 |
Following is a reconciliation of net income attributable to shareholders of Crawford & Company on a GAAP basis to non-GAAP adjusted EBITDA:
| Three Months Ended | |||||
|---|---|---|---|---|---|
| (in thousands) | March 31,<br>2023 | March 31,<br>2022 | |||
| Net income attributable to shareholders of Crawford & Company | $ | 10,681 | $ | 5,096 | |
| Add (Deduct): | |||||
| Depreciation and amortization | 9,050 | 9,099 | |||
| Stock-based compensation | 1,023 | 1,660 | |||
| Net corporate interest expense | 4,399 | 1,519 | |||
| Non-service pension costs and credits | 2,171 | (543 | ) | ||
| Contingent earnout adjustments | 248 | 2,056 | |||
| Income tax provision | 5,271 | 2,426 | |||
| Non-GAAP adjusted EBITDA | $ | 32,843 | $ | 21,313 |
Following is a reconciliation of operating cash flow to free cash flow for the three months ended March 31, 2023 and 2022:
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | March 31, 2023 | March 31, 2022 | Change | ||||||
| Net Cash Used in Operating Activities | $ | (445 | ) | $ | (15,253 | ) | $ | 14,808 | |
| Less: | |||||||||
| Property & Equipment Purchases, net | (1,031 | ) | (1,340 | ) | 309 | ||||
| Capitalized Software (internal and external costs) | (7,610 | ) | (6,275 | ) | (1,335 | ) | |||
| Free Cash Flow | $ | (9,086 | ) | $ | (22,868 | ) | $ | 13,782 |
Following are the reconciliations of GAAP Pretax Earnings, Net Income and Earnings Per Share to related non-GAAP Adjusted figures, which reflect each of 2023 and 2022 before amortization of intangible assets, non-service related pension costs (credits) and contingent earnout adjustments:
| Three Months Ended March 31, 2023 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | Pretax earnings | Net income <br>attributable to Crawford & Company | Diluted earnings per <br>CRD-A <br>share | Diluted earnings per <br>CRD-B <br>share | ||||||||
| GAAP | $ | 16,001 | $ | 10,681 | $ | 0.22 | $ | 0.22 | ||||
| Adjustments: | ||||||||||||
| Amortization of intangible assets | 1,899 | 1,424 | 0.03 | 0.03 | ||||||||
| Non-service related pension costs | 2,171 | 1,613 | 0.03 | 0.03 | ||||||||
| Contingent earnout adjustments | 248 | 184 | — | — | ||||||||
| Non-GAAP Adjusted | $ | 20,319 | $ | 13,902 | $ | 0.28 | $ | 0.28 | ||||
| Three Months Ended March 31, 2022 | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (in thousands) | Pretax earnings | Net income <br>attributable to Crawford & Company | Diluted earnings per <br>CRD-A <br>share | Diluted earnings per <br>CRD-B <br>share | ||||||||
| GAAP | $ | 7,582 | $ | 5,096 | $ | 0.10 | $ | 0.10 | ||||
| Adjustments: | ||||||||||||
| Amortization of intangible assets | 1,726 | 1,295 | 0.02 | 0.02 | ||||||||
| Non-service related pension credits | (543 | ) | (421 | ) | (0.01 | ) | (0.01 | ) | ||||
| Contingent earnout adjustments | 2,056 | 1,522 | 0.03 | 0.03 | ||||||||
| Non-GAAP Adjusted | $ | 10,821 | $ | 7,492 | $ | 0.14 | $ | 0.14 |
Following is information regarding the weighted average shares used in the computation of basic and diluted earnings per share:
| Three Months Ended | ||||
|---|---|---|---|---|
| (in thousands) | March 31, 2023 | March 31, 2022 | ||
| Weighted-Average Shares Used to Compute Basic Earnings Per Share: | ||||
| Class A Common Stock | 28,841 | 30,908 | ||
| Class B Common Stock | 19,848 | 20,780 | ||
| Weighted-Average Shares Used to Compute Diluted Earnings Per Share: | ||||
| Class A Common Stock | 29,141 | 31,168 | ||
| Class B Common Stock | 19,848 | 20,780 |
Further information regarding the Company’s operating results for the three months ended March 31, 2023, financial position as of March 31, 2023, and cash flows for the three months ended March 31, 2023 is shown on the attached unaudited condensed consolidated financial statements.
About Crawford & Company
Based in Atlanta, Crawford & Company (NYSE: CRD-A and CRD-B) is a leading provider of claims management and outsourcing solutions to insurance companies and self-insured entities with an expansive network serving clients in more than 70 countries. The Company's two classes of stock are substantially identical, except with respect to voting rights for the Class B Common Stock (CRD-B) and protections for the non-voting Class A Common Stock (CRD-A). More information is available at www.crawco.com.
TAG: Crawford-Financial, Crawford-Investor-News-and-Events
FOR FURTHER INFORMATION REGARDING THIS PRESS RELEASE, PLEASE CALL BRUCE SWAIN AT (404) 300-1051.
| This press release contains forward-looking statements, including statements about the expected future financial condition, results of operations and earnings outlook of Crawford & Company. Statements, both qualitative and quantitative, that are not historical facts may be “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from historical experience or Crawford & Company’s present expectations. Accordingly, no one should place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Crawford & Company does not undertake to update forward-looking statements to reflect the impact of circumstances or events that may arise or not arise after the date the forward-looking statements are made. For further information regarding Crawford & Company, including factors that could cause our actual financial condition, results or earnings to differ from those described in any forward-looking statements, please read Crawford & Company’s reports filed with the SEC and available at www.sec.gov and in the Investor Relations section of Crawford & Company’s website at www.crawco.com. |
|---|
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands, Except Per Share Amounts and Percentages)
| Three Months Ended March 31, | 2023 | 2022 | % Change | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Revenues: | |||||||||
| Revenues Before Reimbursements | $ | 312,992 | $ | 279,025 | 12 | % | |||
| Reimbursements | 11,604 | 8,764 | 32 | % | |||||
| Total Revenues | 324,596 | 287,789 | 13 | % | |||||
| Costs and Expenses: | |||||||||
| Costs of Services Provided, Before Reimbursements | 227,078 | 205,581 | 10 | % | |||||
| Reimbursements | 11,604 | 8,764 | 32 | % | |||||
| Total Costs of Services | 238,682 | 214,345 | 11 | % | |||||
| Selling, General, and Administrative Expenses | 63,369 | 64,841 | (2 | )% | |||||
| Corporate Interest Expense, Net | 4,399 | 1,519 | 190 | % | |||||
| Total Costs and Expenses | 306,450 | 280,705 | 9 | % | |||||
| Other (Loss) Income, Net | (2,145 | ) | 498 | nm | |||||
| Income Before Income Taxes | 16,001 | 7,582 | 111 | % | |||||
| Provision for Income Taxes | 5,271 | 2,426 | 117 | % | |||||
| Net Income | 10,730 | 5,156 | 108 | % | |||||
| Net Income Attributable to Noncontrolling Interests | (49 | ) | (60 | ) | (18 | )% | |||
| Net Income Attributable to Shareholders of Crawford & Company | $ | 10,681 | $ | 5,096 | 110 | % | |||
| Earnings Per Share - Basic: | |||||||||
| Class A Common Stock | $ | 0.22 | $ | 0.10 | 120 | % | |||
| Class B Common Stock | $ | 0.22 | $ | 0.10 | 120 | % | |||
| Earnings Per Share - Diluted: | |||||||||
| Class A Common Stock | $ | 0.22 | $ | 0.10 | 120 | % | |||
| Class B Common Stock | $ | 0.22 | $ | 0.10 | 120 | % | |||
| Cash Dividends Per Share: | |||||||||
| Class A Common Stock | $ | 0.06 | $ | 0.06 | — | ||||
| Class B Common Stock | $ | 0.06 | $ | 0.06 | — |
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2023 and December 31, 2022
Unaudited
(In Thousands, Except Par Values)
| December 31, | |||||
|---|---|---|---|---|---|
| 2022 | |||||
| ASSETS | |||||
| Current Assets: | |||||
| Cash and Cash Equivalents | 43,304 | $ | 46,007 | ||
| Accounts Receivable, Net | 145,348 | 141,106 | |||
| Unbilled Revenues, at Estimated Billable Amounts | 137,410 | 126,274 | |||
| Income Taxes Receivable | 9,098 | 9,098 | |||
| Prepaid Expenses and Other Current Assets | 33,335 | 28,782 | |||
| Total Current Assets | 368,495 | 351,267 | |||
| Net Property and Equipment | 27,053 | 27,809 | |||
| Other Assets: | |||||
| Operating Lease Right-of-Use Asset, Net | 95,224 | 93,334 | |||
| Goodwill | 76,626 | 76,622 | |||
| Intangible Assets Arising from Business Acquisitions, Net | 88,511 | 88,039 | |||
| Capitalized Software Costs, Net | 86,255 | 82,975 | |||
| Deferred Income Tax Assets | 19,335 | 19,573 | |||
| Other Noncurrent Assets | 54,526 | 51,888 | |||
| Total Other Assets | 420,477 | 412,431 | |||
| Total Assets | 816,025 | $ | 791,507 | ||
| LIABILITIES AND SHAREHOLDERS’ INVESTMENT | |||||
| Current Liabilities: | |||||
| Short-Term Borrowings | 39,053 | $ | 27,048 | ||
| Accounts Payable | 46,776 | 50,847 | |||
| Accrued Compensation and Related Costs | 61,438 | 79,285 | |||
| Self-Insured Risks | 13,703 | 12,614 | |||
| Income Taxes Payable | 4,621 | 1,208 | |||
| Operating Lease Liability | 24,367 | 22,910 | |||
| Other Accrued Liabilities | 63,812 | 56,293 | |||
| Deferred Revenues | 32,517 | 29,282 | |||
| Total Current Liabilities | 286,287 | 279,487 | |||
| Noncurrent Liabilities: | |||||
| Long-Term Debt and Finance Leases, Less Current Installments | 210,342 | 211,810 | |||
| Operating Lease Liability | 84,994 | 84,628 | |||
| Deferred Revenues | 25,029 | 24,737 | |||
| Accrued Pension Liabilities | 25,653 | 25,914 | |||
| Other Noncurrent Liabilities | 41,893 | 41,553 | |||
| Total Noncurrent Liabilities | 387,911 | 388,642 | |||
| Shareholders’ Investment: | |||||
| Class A Common Stock, 1.00 Par Value | 28,925 | 28,764 | |||
| Class B Common Stock, 1.00 Par Value | 19,848 | 19,848 | |||
| Additional Paid-in Capital | 79,094 | 78,158 | |||
| Retained Earnings | 220,850 | 213,094 | |||
| Accumulated Other Comprehensive Loss | (205,503 | ) | (215,321 | ) | |
| Shareholders’ Investment Attributable to Shareholders of Crawford & Company | 143,214 | 124,543 | |||
| Noncontrolling Interests | (1,387 | ) | (1,165 | ) | |
| Total Shareholders’ Investment | 141,827 | 123,378 | |||
| Total Liabilities and Shareholders’ Investment | 816,025 | $ | 791,507 |
All values are in US Dollars.
CRAWFORD & COMPANY
SUMMARY RESULTS BY OPERATING SEGMENT WITH DIRECT COMPENSATION AND OTHER EXPENSES
Unaudited
(In Thousands, Except Percentages)
Three Months Ended March 31,
| North America Loss Adjusting | % | International Operations | % | Broadspire | % | Platform Solutions | % | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | Change | 2023 | 2022 | Change | 2023 | 2022 | Change | 2023 | 2022 | Change | |||||||||||||||||
| Revenues Before Reimbursements | $ | 77,127 | $ | 64,438 | 19.7% | $ | 91,863 | $ | 89,272 | 2.9% | $ | 81,182 | $ | 76,454 | 6.2% | $ | 62,820 | $ | 48,861 | 28.6% | ||||||||
| Direct Compensation, Fringe Benefits & Non-Employee Labor | 54,164 | 46,497 | 16.5% | 61,421 | 63,006 | (2.5)% | 52,641 | 47,949 | 9.8% | 40,911 | 31,851 | 28.4% | ||||||||||||||||
| % of Revenues Before Reimbursements | 70.2 | % | 72.2 | % | 66.9 | % | 70.6 | % | 64.8 | % | 62.7 | % | 65.1 | % | 65.2 | % | ||||||||||||
| Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor | 14,898 | 13,806 | 7.9% | 27,407 | 29,333 | (6.6)% | 20,614 | 22,071 | (6.6)% | 11,943 | 8,972 | 33.1% | ||||||||||||||||
| % of Revenues Before Reimbursements | 19.3 | % | 21.4 | % | 29.8 | % | 32.9 | % | 25.4 | % | 28.9 | % | 19.0 | % | 18.4 | % | ||||||||||||
| Total Operating Expenses | 69,062 | 60,303 | 14.5% | 88,828 | 92,339 | (3.8)% | 73,255 | 70,020 | 4.6% | 52,854 | 40,823 | 29.5% | ||||||||||||||||
| Operating Earnings (Loss) (1) | $ | 8,065 | $ | 4,135 | 95.0% | $ | 3,035 | $ | (3,067 | ) | nm | $ | 7,927 | $ | 6,434 | 23.2% | $ | 9,966 | $ | 8,038 | 24.0% | |||||||
| % of Revenues Before Reimbursements | 10.5 | % | 6.4 | % | 3.3 | % | (3.4 | )% | 9.8 | % | 8.4 | % | 15.9 | % | 16.5 | % |
(1) A non-GAAP financial measurement which represents net income attributable to the applicable reporting segment excluding income taxes, net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, non-service pension costs and credits, contingent earnout adjustments, and certain unallocated corporate and shared costs and credits. See pages 3 and 4 for additional information about segment operating earnings.
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year to Date Period Ended March 31, 2023 and March 31, 2022
Unaudited
(In Thousands)
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| Cash Flows From Operating Activities: | ||||||
| Net income | $ | 10,730 | $ | 5,156 | ||
| Reconciliation of net income to net cash used in operating activities: | ||||||
| Depreciation and amortization | 9,050 | 9,099 | ||||
| Stock-based compensation | 1,023 | 1,660 | ||||
| Loss (gain) on sale of property and equipment | 20 | (1,747 | ) | |||
| Contingent earnout adjustments | 248 | 2,056 | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable, net | (17 | ) | 6,542 | |||
| Unbilled revenues, net | (6,333 | ) | (13,022 | ) | ||
| Accrued or prepaid income taxes | 3,895 | 266 | ||||
| Accounts payable and accrued liabilities | (15,818 | ) | (14,902 | ) | ||
| Deferred revenues | 2,841 | 402 | ||||
| Accrued retirement costs | (2,887 | ) | (4,738 | ) | ||
| Prepaid expenses and other operating activities | (3,197 | ) | (6,025 | ) | ||
| Net cash used in operating activities | (445 | ) | (15,253 | ) | ||
| Cash Flows From Investing Activities: | ||||||
| Acquisitions of property and equipment | (1,031 | ) | (1,340 | ) | ||
| Capitalization of computer software costs | (7,610 | ) | (6,275 | ) | ||
| Payments for business acquisitions, net of cash acquired | — | (21,273 | ) | |||
| Cash proceeds from sale of property and equipment | — | 3,032 | ||||
| Net cash used in investing activities | (8,641 | ) | (25,856 | ) | ||
| Cash Flows From Financing Activities: | ||||||
| Cash dividends paid | (2,925 | ) | (3,114 | ) | ||
| Repurchases of common stock | — | (16,089 | ) | |||
| Increases in short-term and revolving credit facility borrowings | 19,394 | 61,816 | ||||
| Payments on short-term and revolving credit facility borrowings | (10,265 | ) | (3,989 | ) | ||
| Payments of contingent consideration on acquisitions | (848 | ) | (746 | ) | ||
| Other financing activities | (169 | ) | (270 | ) | ||
| Net cash provided by financing activities | 5,187 | 37,608 | ||||
| Effects of exchange rate changes on cash and cash equivalents | 1,195 | (321 | ) | |||
| Decrease in cash, cash equivalents, and restricted cash(1) | (2,704 | ) | (3,822 | ) | ||
| Cash, cash equivalents, and restricted cash at beginning of year(1) | 46,645 | 53,689 | ||||
| Cash, cash equivalents, and restricted cash at end of period(1) | $ | 43,941 | $ | 49,867 |
(1) The 2023 amounts include beginning restricted cash of $638 at December 31, 2022, and ending restricted cash of $637 at March 31, 2023, and the 2022 amounts include beginning restricted cash of $461 at December 31, 2021, and ending restricted cash of $782 at March 31, 2022, which we present as part of "Prepaid expenses and other current assets" on the Balance Sheets.
Crawford & Company First Quarter 2023 Earnings Conference Call CRD-A & CRD-B (NYSE)
2 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 and quantitative, that are not statements of historical fact may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from historical experience or Crawford & Company's present expectations. Accordingly, no one should place undue reliance on forward-looking statements, which speak only as of the date on which they are made. Crawford & Company does not undertake to update forward-looking statements to reflect the impact of circumstances or events that may arise or not arise after the date the forward-looking statements are made. Results for any interim period presented herein are not necessarily indicative of results to be expected for the full year or for any other future period. For further information regarding Crawford & Company, and the risks and uncertainties involved in forward-looking statements, please read Crawford & Company's reports filed with the Securities and Exchange Commission and available at www.sec.gov or in the Investor Relations portion of Crawford & Company's website at https://ir.crawco.com. Crawford's business is dependent, to a significant extent, on case volumes. The Company cannot predict the future trend of case volumes for a number of reasons, including the fact that the frequency and severity of weather-related claims and the occurrence of natural and man-made disasters, which are a significant source of cases and revenue for the Company, are generally not subject to accurate forecasting. Revenues Before Reimbursements ("Revenues") Revenues Before Reimbursements are referred to as "Revenues" in both consolidated and segment charts, bullets and tables throughout this presentation. Segment and Consolidated Operating Earnings Under the Financial Accounting Standards Board's Accounting Standards Codification ("ASC") Topic 280, "Segment Reporting," the Company has defined segment operating earnings as the primary measure used by the Company to evaluate the results of each of its four operating segments. Segment operating earnings represent segment earnings, including the direct and indirect costs of certain administrative functions required to operate our business, but excludes unallocated corporate and shared costs and credits, net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, contingent earnout adjustments, non-service pension costs and credits, income taxes and net income or loss attributable to noncontrolling interests. Earnings Per Share The Company's two classes of stock are substantially identical, except with respect to voting rights for the Class B Common Stock (CRD-B) and protections for the non-voting Class A Common Stock (CRD-A). More information available on the Company’s website. In certain periods, the Company has paid a higher dividend on CRD-A than on CRD-B. This may result in a different earnings per share ("EPS") for each class of stock due to the two-class method of computing EPS as required by ASC Topic 260 - "Earnings Per Share". The two-class method is an earnings allocation method under which EPS is calculated for each class of common stock considering both dividends declared and participation rights in undistributed earnings as if all such earnings had been distributed during the period. Segment Gross Profit Segment gross profit is defined as revenues, less direct costs, which exclude indirect centralized administrative support costs allocated to the business. Indirect expenses consist of centralized administrative support costs, regional and local shared services that are allocated to each segment based on usage. Non-GAAP Financial Information For additional information about certain non-GAAP financial information presented herein, see the Appendix following this presentation.
Revenue growth across all businesses, led by North America Loss Adjusting and Platforms Revenues grew by 16% year-over-year in the first quarter excluding FX impacts Nearly doubled operating earnings on a year-over-year basis Significant margin expansion and improved profitability EBITDA margin increased 290 bps to 10.5% Q1 2023 METRICS GAAP Non-GAAP $313.0M $322.4M Revenues $0.22 $0.28 CRD-A & CRD-B EPS $10.7M $24.9M Net Income Operating Earnings Key Highlights First Quarter 2023 Strategy Execution Creating Tangible Results Achieving tenth consecutive quarter of revenue growth, highlighting the effectiveness of our long-term strategy
Align pricing with the value we deliver Aggressively address low productivity pockets Optimize cost structure to current market dynamics Roll out new systems and improved processes for efficiency gains 4 3 1 2 As promised, our margin improvement actions are ensuring our top line success translates into expanded profitability to support our long-term growth strategy Crawford’s Long-Term Strategy Driving Profitability Margin Improvement Actions Our actions are driving profitability across the business in Q1 10.5% Operating Margin $8.1M Operating Earnings NA Loss Adjusting 15.9% Operating Margin $10.0M Operating Earnings Platform Solutions 3.3% Operating Margin $3.0M Operating Earnings International Operations 9.8% Operating Margin $7.9M Operating Earnings Broadspire -60 bps +670 bps +140 bps +410 bps
We are committed to employing a disciplined approach to capital allocation Investing in long-term growth through Cap Ex and M&A Debt Repayment Reduce leverage (2.07x EBITDA in Q1 2023) Our Capital Allocation Strategy Regular quarterly dividend of $0.06 per share for CRD-A and CRD-B Acquire adjacent services to bolster presence in claims ecosystem Enhance technical capabilities by attracting top-tier adjusting talent globally Drive market share within fragmented independent loss adjusting market in the US Increase presence in rapidly growing P&C insurance markets with strong outsourced claims processing tailwinds Our M&A Approach Returned over $120 million of capital to shareholders through share buybacks and dividends over the last four years
Operational Overview
7 Impact Across Our Segments First Quarter 2023 Performance Q1 revenue growth of 19.7% over prior year, driven by adjuster additions, increased utilization, and carryover from Hurricane Ian and winter storms in the U.S. Surpassed our 3-year goal of adding 200 expert adjusters globally one year early Operating margin expanded 410 bps over prior year Q1 revenue growth of 6.2% over prior year, aided by accelerated medical management revenue growth of 11% over prior year New sales momentum in alternative markets and data & analytical services Operating margin expanded 140 bps compared to prior year Q1 Revenues $77.1M “OE” refers to Operating Earnings 25% of total Q1 revenues North America Loss Adjusting Q1 OE¹ $8.1M Broadspire (US-only) 26% of total Q1 revenues Q1 revenue growth of 29% over prior year Networks revenues grew 36% year-over-year, outpacing Contractor Connection’s revenue growth of 26% Strong profit contribution from CAT due to increased market share with 2 top 5 carrier clients and onboarding of a new top 5 carrier client Increased contribution from Contractor Connection from pricing actions and increased client utilization Platform Solutions (US-only) 20% of total Q1 revenues Q1 revenue growth of 2.9% over prior year led by Australia and the UK; constant dollar revenue growth of 11.6% Actions to improve pricing and productivity drove favorable results Operating margin expanded 670 bps over the prior year International Operations 29% of total Q1 revenues Q1 Revenues $91.9M Q1 OE¹ $3.0M Q1 Revenues $81.2M Q1 OE¹ $7.9M Q1 Revenues $62.8M Q1 OE¹ $10.0M
Net Promoter Score NPS remains at a healthy level of 47 Actively looking for opportunities to improve our score Added $36.3 million in new and enhanced business in Q1 2023 New and Renewal Business Activity Retained 97% of our Broadspire business year to date Increasing market share with key carrier clients 8 Customer Excellence 47 NPS 97% a Retained Broadspire business New and enhanced business won $36.3M
Environmental, Social and Governance Diversity, Equity and Inclusion (DEI) and human capital initiatives continue to be our top strategic priority and core to our culture Senior leadership supports diversity and inclusion at Crawford. 82 80 I do not face any bias due to my personal identity. Professional Services Norm Overall Crawford Favorable results from recent Pulse Survey on DEI at Crawford scoring ahead of industry benchmarks Employee Resource Groups Encourage a sense of belonging and enabling change Crawford named to 2022 Insurance Business 5-Star Diversity, Equity & Inclusion list This organization is committed to the fair treatment of all employees. I feel I am heard in this organization. 88 69 81 75 69 68
Financial Overview
(1) See appendix for non-GAAP explanation and reconciliation of non-GAAP measures. 11 First Quarter 2023 Financial Summary Quarter Ended March 31, March 31, ($ in millions, except per share amounts) 2023 2022 % Change Revenues $313.0 $279.0 12% Non-GAAP Revenues excluding foreign exchange fluctuations(1) $322.4 $279.0 16% Net Income Attributable to Shareholders of Crawford & Company $10.7 $5.1 110% Diluted Earnings per Share CRD-A $0.22 $0.10 120% CRD-B $0.22 $0.10 120% Non-GAAP Diluted Earnings per Share (1) CRD-A $0.28 $0.14 100% CRD-B $0.28 $0.14 100% Adjusted Operating Earnings (1) $24.9 $12.5 98% Adjusted Operating Margin (1) 7.9% 4.5% 340 bps Adjusted EBITDA (1) $32.8 $21.3 54% Adjusted EBITDA Margin (1) 10.5% 7.6% 290 bps
North America Loss Adjusting Q1 Highlights Q1 revenue growth of 19.7% over prior year, driven by adjuster additions, increased utilization, and carryover from Hurricane Ian and winter storms in the U.S. Surpassed our 3-year goal of adding 200 expert adjusters globally one year early Operating Results (Q1 2023 v. Q1 2022) Revenues of $77.1 million versus $64.4 million Gross profit of $17.3 million versus $11.1 million Gross profit margin of 22.5% versus 17.2% Operating earnings of $8.1 million versus $4.1 million Operating margin of 10.5% versus 6.4% Three months ended (in thousands, except percentages) March 31, 2023 March 31, 2022 Variance Revenues $77,127 $64,438 19.7% Direct expenses 59,783 53,370 12.0% Gross profit 17,344 11,068 56.7% Indirect expenses 9,279 6,933 33.8% Operating earnings $8,065 $4,135 95.0% Gross profit margin 22.5% 17.2% 5.3% Operating margin 10.5% 6.4% 4.1% Total cases received 73,002 76,993 (5.2)% Full time equivalent employees 2,091 1,952 7.1%
International Operations Q1 Highlights Q1 revenue growth of 2.9% over prior year led by Australia and the UK; constant dollar revenue growth of 11.6% Actions to improve pricing and productivity drove favorable results Operating Results (Q1 2023 v. Q1 2022) Revenues of $91.9 million versus $89.3 million Gross profit of $15.7 million versus $10.0 million Gross profit margin of 17.1% versus 11.2% Operating earnings of $3.0 million versus a loss of $(3.1) million Operating margin of 3.3% versus a loss of (3.4)% Three months ended (in thousands, except percentages) March 31, 2023 March 31, 2022 Variance Revenues $91,863 $89,272 2.9% Direct expenses 76,159 79,308 (4.0)% Gross profit 15,704 9,964 57.6% Indirect expenses 12,669 13,031 (2.8)% Operating earnings (loss) $3,035 $(3,067) n.m. Gross profit margin 17.1% 11.2% 5.9% Operating margin 3.3% (3.4)% 6.7% Total cases received 126,483 137,090 (7.7)% Full time equivalent employees 3,693 3,608 2.3%
Broadspire Q1 Highlights Q1 revenue growth of 6.2% over prior year, aided by accelerated medical management revenue growth of 11% over prior year New sales momentum in alternative markets and data & analytical services Operating Results (Q1 2023 v. Q1 2022) Revenues of $81.2 million versus $76.5 million Gross profit of $19.2 million versus $16.4 million Gross profit margin of 23.7% versus 21.5% Operating earnings of $7.9 million versus $6.4 million Operating margin of 9.8% versus 8.4% Three months ended (in thousands, except percentages) March 31, 2023 March 31, 2022 Variance Revenues $81,182 $76,454 6.2% Direct expenses 61,933 60,038 3.2% Gross profit 19,249 16,416 17.3% Indirect expenses 11,322 9,982 13.4% Operating earnings $7,927 $6,434 23.2% Gross profit margin 23.7% 21.5% 2.2% Operating margin 9.8% 8.4% 1.4% Total cases received 128,722 133,722 (3.7)% Full time equivalent employees 2,591 2,421 7.0%
Platform Solutions Q1 Highlights Q1 revenue growth of 29% over prior year led by Networks and Contractor Connection Networks revenues grew 36% year-over-year outpacing Contractor Connection’s revenue growth of 26% Strong profit contribution from CAT due to increased market share with 2 top 5 carrier clients and onboarding of a new top 5 carrier client Increased contribution from Contractor Connection from pricing actions and increased client utilization Operating Results (Q1 2023 v. Q1 2022) Revenues of $62.8 million versus $48.9 million Gross profit of $15.5 million versus $12.5 million Gross profit margin of 24.7% versus 25.6% Operating earnings of $10.0 million versus $8.0 million Operating margin of 15.9% versus 16.5% Three months ended (in thousands, except percentages) March 31, 2023 March 31, 2022 Variance Revenues $62,820 $48,861 28.6% Direct expenses 47,285 36,330 30.2% Gross profit 15,535 12,531 24.0% Indirect expenses 5,569 4,493 23.9% Operating earnings $9,966 $8,038 24.0% Gross profit margin 24.7% 25.6% (0.9)% Operating margin 15.9% 16.5% (0.6)% Total cases received 98,490 109,992 (10.5)% Full time equivalent employees 1,445 1,203 20.1%
Additional Financial Matters Unallocated Corporate and Shared Costs and Credits Unallocated corporate costs of $4.1 million in 2023 compared to costs of $3.0 million in the prior year period Variance was primarily due to a $1.8 million gain on sale of our Canadian head office building in the 2022 first quarter, and an increase in self-insurance costs, partially offset by other cost reductions in the 2023 period Non-service Pension Costs and Credits During the 2023 quarter non-service pension costs were $2.2 million compared to a $(0.5M) credit in the 2022 period These costs are not a component of operating earnings and are added back for non-GAAP earnings and EPS, similar to the amortization of intangible assets and contingent earnout adjustments Contingent Earnout Adjustment Recognized a pretax contingent earnout expense totaling approximately $0.2 million in the 2023 first quarter, compared to $2.1 million in the prior year period Based on changes to projections of certain acquired entities Share Repurchases There were no shares repurchased in the 2023 first quarter Approximately 1.8 million shares are eligible to be repurchased under our 2021 Share Repurchase Authorization
(1) See Appendix for non-GAAP explanation and reconciliation Balance Sheet Highlights Unaudited ($ in thousands) March 31, 2023 December 31, 2019 December 31, 2022 December 31, 2018 Change Change Cash and cash equivalents $ 43,304 $ 46,007 $ (2,703 ) Accounts receivable, net 145,348 141,106 4,242 Unbilled revenues, net 137,410 126,274 11,136 Total receivables 282,758 267,380 15,378 Goodwill 76,626 76,622 4 Intangible assets arising from business acquisitions, net 88,511 88,039 472 Deferred revenues 57,546 54,019 3,527 Pension liabilities 25,653 25,914 (261 ) Short-term borrowings and current portion of finance leases 39,053 27,048 12,005 Long-term debt, less current portion 210,342 211,810 (1,468 ) Total debt 249,395 238,858 10,537 Total stockholders' equity attributable to Crawford & Company 143,214 124,543 18,671 Net debt (1) 206,091 192,851 13,240
18 Net Debt and Pension Liability $206.1 million $25.7 million Net debt at $206.1 million Pension liability at $25.7 million $171.7 million $87.0 million Leverage Ratio of 2.07x EBITDA at end of Q1 2023 Funded Ratio of US pension plan is 91.9% at end of Q1 2023
(1) See Appendix for non-GAAP explanation and reconciliation Operating And Free Cash Flow For the period ended March 31, Unaudited ($ in thousands) 2023 2019 2022 2018 Change Change Net Income Attributable to Shareholders of Crawford & Company $ 10,681 $ 5,096 $ 5,585 Depreciation and Other Non-Cash Operating Items 10,122 10,819 (697 ) Loss (Gain) on Disposals of Property and Equipment, net 20 (1,747) 1,767 Contingent Earnout Adjustments 248 2,056 (1,808 ) Billed Receivables Change (17 ) 6,542 (6,559 ) Unbilled Receivables Change (6,333 ) (13,022 ) 6,689 Change in Accrued Compensation, 401K, and Other Payroll (17,594 ) (19,994 ) 2,400 Change in Accrued and Prepaid Income Taxes 3,895 266 3,629 Other Working Capital Changes (965 ) (5,109 ) 4,144 U.S. and U.K. Pension Contributions (502 ) (160 ) (342 ) Cash Flows from Operating Activities (445 ) (15,253 ) 14,808 Property & Equipment Purchases, net (1,031 ) (1,340 ) 309 Capitalized Software (internal and external costs) (7,610 ) (6,275 ) (1,335 ) Free Cash Flow(1) $ (9,086 ) $ (22,868 ) $ 13,782
20 10,000+ 50,000+ 70 $18B+ employees Field Resources countries claims managed annually Crawford & Company The world’s largest publicly listed independent provider of global claims management and outsourcing solutions. 20
Appendix: Non-GAAP Financial Information 21
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 comparable to other similarly-titled measurements employed by other companies. Reimbursements for Out-of-Pocket Expenses In the normal course of our business, our operating segments incur certain out-of-pocket expenses that are thereafter reimbursed by our clients. Under GAAP, these out-of-pocket expenses and associated reimbursements are required to be included when reporting expenses and revenues, respectively, in our consolidated results of operations. In this presentation, we do not believe it is informative to include in reported revenues the amounts of reimbursed expenses and related revenues, as they offset each other in our consolidated results of operations with no impact to our net income or operating earnings. As a result, unless noted in this presentation, revenue and expense amounts exclude reimbursements for out-of-pocket expenses. Net Debt Net debt is computed as the sum of long-term debt, capital leases and short-term borrowings less cash and cash equivalents. Management believes that net debt is useful because it provides investors with an estimate of what the Company's debt would be if all available cash was used to pay down the debt of the Company. The measure is not meant to imply that management plans to use all available cash to pay down debt. Free Cash Flow Management believes free cash flow is useful to investors as it presents the amount of cash the Company has generated that can be used for other purposes, including additional contributions to the Company's defined benefit pension plans, discretionary prepayments of outstanding borrowings under our credit agreement, and return of capital to shareholders, among other purposes. It does not represent the residual cash flow of the Company available for discretionary expenditures. 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 resource allocation and certain compensation decisions. Management believes operating earnings is useful to others in that it allows them to evaluate segment and consolidated operating performance using the same criteria our management and chief operating decision maker use. Consolidated operating earnings represent segment earnings including certain unallocated corporate and shared costs and credits, but before net corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, contingent earnout adjustments, non-service pension costs and credits, income taxes and net income or loss attributable to noncontrolling interests.
Appendix: Non-GAAP Financial Information (cont.) 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 local shared services that are allocated to each segment based on usage. Adjusted EBITDA Adjusted EBITDA is used by management to evaluate, assess and benchmark our operational results and the Company believes that adjusted EBITDA is relevant and useful information widely used by analysts, investors and other interested parties. Adjusted EBITDA is defined as net income attributable to shareholders of the Company with recurring adjustments for depreciation and amortization, net corporate interest expense, contingent earnout adjustments, non-service pension costs and credits, income taxes and stock-based compensation expense. Adjusted EBITDA is not a term defined by GAAP and as a result our measure of adjusted EBITDA might not be comparable to similarly titled measures used by other companies. Adjusted Revenue, Operating Earnings, Pretax Earnings, Net Income, Diluted Earnings per Share and EBITDA Included in non-GAAP adjusted measurements as an add back or subtraction to GAAP measurements, are impacts of amortization of customer-relationship intangible assets and contingent earnout adjustments, which arise from non-core items not directly related to our normal business or operations, or our future performance. Management believes it is useful to exclude these charges when comparing net income and diluted earnings per share across periods, as these charges are not from ordinary operations.
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 in which Crawford does business: Three Months Ended (in thousands) March 31, 2023 March 31, 2022 Geographic Area Currency USD equivalent % of total USD equivalent % of total U.S. USD $ 196,768 62.9% $ 165,493 59.3% U.K. GBP 33,124 10.6% 34,050 12.2% Canada CAD 24,361 7.8% 24,260 8.7% Australia AUD 22,994 7.3% 18,717 6.7% Europe EUR 14,038 4.5% 14,539 5.2% Rest of World Various 21,707 6.9% 21,966 7.9% Total Revenues, before reimbursements $ 312,992 100.0% $ 279,025 100.0%
Reconciliation of Non-GAAP Items Revenues, Costs of Services Provided, and Operating Earnings Quarter Ended Quarter Ended Quarter Ended Quarter Ended March 31, December 31, March 31, December 31, Unaudited ($ in thousands) 2023 2019 2022 2018 Revenues Before Reimbursements Total Revenues $ 324,596 $ 287,789 Reimbursements (11,604 ) (8,764 ) Revenues Before Reimbursements 312,992 279,025 Costs of Services Provided, Before Reimbursements Total Costs of Services 238,682 214,345 Reimbursements (11,604 ) (8,764 ) Costs of Services Provided, Before Reimbursements $ 227,078 $ 205,581 Quarter Ended Quarter Ended Quarter Ended Quarter Ended March 31, December 31, March 31, December 31, Unaudited ($ in thousands) 2023 2019 2022 2018 Operating Earnings: North America Loss Adjusting $ 8,065 $ 4,135 International Operations 3,035 (3,067 ) Broadspire 7,927 6,434 Platform Solutions 9,966 8,038 Unallocated corporate and shared costs and credits, net (4,119 ) (2,995 ) Consolidated Operating Earnings 24,874 12,545 (Deduct) Add: Net corporate interest expense (4,399 ) (1,519 ) Stock option expense (156 ) (205 ) Amortization expense (1,899 ) (1,726 ) Non-service pension costs and credits (2,171 ) 543 Contingent earnout adjustments (248 ) (2,056 ) Income tax provision (5,271 ) (2,426 ) Net income attributable to noncontrolling interests (49 ) (60 ) Net Income Attributable to Shareholders of Crawford & Company $ 10,681 $ 5,096
Reconciliation of Non-GAAP Items (cont.) Adjusted EBITDA ) Quarter Ended Quarter Ended March 31, December 31, March 31, December 31, Unaudited ($ in thousands) 2023 2019 2022 2018 Net income attributable to shareholders of Crawford & Company $ 10,681 $ 5,096 Add (Deduct): Depreciation and amortization 9,050 9,099 Stock-based compensation 1,023 1,660 Net corporate interest expense 4,399 1,519 Non-service pension costs and credits 2,171 (543 ) Contingent earnout adjustments 248 2,056 Income tax provision 5,271 2,426 Adjusted EBITDA $ 32,843 $ 21,313
Reconciliation of Non-GAAP Items (cont.) Net Debt March 31, December 31, December 31, December 31, Unaudited ($ in thousands) 2023 2019 2022 2018 Net Debt Short-term borrowings $ 38,993 $ 26,990 Current installments of finance leases and other obligations 60 58 Long-term debt and finance leases, less current installments 210,342 211,810 Total debt 249,395 238,858 Less: Cash and cash equivalents 43,304 46,007 Net debt $ 206,091 $ 192,851
Reconciliation of Non-GAAP Items (cont.) Segment Gross Profit Three months ended Three months ended ($ in thousands) March 31, 2023 December 31, 2019 March 31, 2022 December 31, 2018 Segment gross profit: North America Loss Adjusting $ 17,344 $ 11,068 International Operations 15,704 9,964 Broadspire 19,249 16,416 Platform Solutions 15,535 12,531 Segment gross profit 67,832 49,979 Segment indirect costs: North America Loss Adjusting (9,279 ) (6,933 ) International Operations (12,669 ) (13,031 ) Broadspire (11,322 ) (9,982 ) Platform Solutions (5,569 ) (4,493 ) Unallocated corporate and shared costs, net (4,119 ) (2,995 ) Consolidated operating earnings 24,874 12,545 Net corporate interest expense (4,399 ) (1,519 ) Stock option expense (156 ) (205 ) Amortization expense (1,899 ) (1,726 ) Non-service pension costs and credits (2,171 ) 543 Contingent earnout adjustments (248 ) (2,056 ) Income tax provision (5,271 ) (2,426 ) Net income attributable to noncontrolling interests (49 ) (60 ) Net income attributable to shareholders of Crawford & Company $ 10,681 $ 5,096
Reconciliation of First Quarter Non-GAAP Results Three Months Ended March 31, 2023 Unaudited ($ in thousands) Pretax Earnings Pretax (Loss) Earnings Net Income Attributable to Crawford & Company Net (Loss) Income Attributable to Crawford & Company Diluted Earnings per CRD-A Share Diluted (Loss) Earnings per CRD-A Share Diluted Earnings per CRD-B Share Diluted (Loss) Earnings per CRD-B Share GAAP $ 16,001 $ 10,681 $ 0.22 $ 0.22 Adjustments: Amortization of intangible assets 1,899 1,424 0.03 0.03 Non-service related pension costs 2,171 1,613 0.03 0.03 Contingent earnout adjustments 248 184 — — Non-GAAP Adjusted $ 20,319 $ 13,902 $ 0.28 $ 0.28 Three Months Ended March 31, 2022 Unaudited ($ in thousands) Pretax Earnings Pretax Earnings Net Income Attributable to Crawford & Company Net Income Attributable to Crawford & Company Diluted Earnings per CRD-A Share Diluted Earnings per CRD-A Share Diluted Earnings per CRD-B Share Diluted Earnings per CRD-B Share GAAP $ 7,582 $ 5,096 $ 0.10 $ 0.10 Adjustments: Amortization of intangible assets 1,726 1,295 0.02 0.02 Non-service related pension credits (543 ) (421 ) (0.01 ) (0.01 ) Contingent earnout adjustments 2,056 1,522 0.03 0.03 Non-GAAP Adjusted $ 10,821 $ 7,492 $ 0.14 $ 0.14