8-K
CRAWFORD & CO (CRD-A)
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): November 8, 2022
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 November 8, 2022, Crawford & Company (the "Company") issued a press release containing information about the Company's financial results for the third quarter 2022. 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 Wednesday, November 9, 2022 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 November 8, 2022 |
| 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: November 8, 2022 |
EX-99.1
Exhibit 99.1
Crawford & Company®
5335 Triangle Parkway
Peachtree Corners, GA 30092
FOR IMMEDIATE RELEASE
CRAWFORD & COMPANY REPORTS 2022 THIRD QUARTER RESULTS
ATLANTA, (November 8, 2022) -- Crawford & Company® (NYSE: CRD-A and CRD-B), the world’s largest publicly listed independent provider of claims management and outsourcing solutions to carriers, brokers and corporations, today announced its financial results for the third quarter ended September 30, 2022.
The Company’s two classes of stock are substantially identical, except with respect to voting rights and the Company’s ability to pay greater cash dividends on the non-voting Class A Common Stock (CRD-A) than on the voting Class B Common Stock (CRD-B), subject to certain limitations. In addition, with respect to mergers or similar transactions, holders of CRD-A must receive the same type and amount of consideration as holders of CRD-B, unless different consideration is approved by the holders of 75% of CRD-A, voting as a class.
GAAP Consolidated Results
Third Quarter 2022
• Revenues before reimbursements of $294.9 million, up 2% over $288.5 million for the 2021 third quarter
• The Company recorded a non-cash goodwill impairment of $36.8 million in the 2022 third quarter
• Net loss attributable to shareholders of $(15.1) million, compared with income of $11.2 million in the same period last year
• Diluted loss per share of $(0.31) for both CRD-A and CRD-B, compared with diluted earnings per share of $0.20 for CRD-A and $0.21 for CRD-B in the prior year third quarter
Non-GAAP Consolidated Results
Third Quarter 2022
Non-GAAP consolidated results for 2022 exclude the non-cash, after-tax adjustments for goodwill impairment of $20.9 million, amortization of intangible assets of $1.5 million and the contingent earnout adjustment of $0.7 million. Non-GAAP consolidated results for 2021 exclude a similar adjustment for amortization of intangible assets of $2.2 million.
• Foreign currency exchange rates decreased revenues before reimbursements by $11.0 million or (4)%. Presented on a constant dollar basis to the prior year, revenues before reimbursements totaled $306.0 million, increasing 6% over $288.5 million for the 2021 third quarter
• Net income attributable to shareholders, on a non-GAAP basis, totaled $7.9 million in the 2022 third quarter, compared with $13.4 million in the same period last year
• Diluted earnings per share, on a non-GAAP basis, totaled $0.16 for both CRD-A and CRD-B in the 2022 third quarter, compared with $0.24 for CRD-A and $0.25 for CRD-B in the prior year third quarter
• Consolidated adjusted operating earnings, on a non-GAAP basis, were $14.2 million, or 4.8% of revenues before reimbursements in the 2022 third quarter, compared with $20.8 million, or 7.2% of revenues, in the 2021 third quarter
• Consolidated adjusted EBITDA, a non-GAAP financial measure, was $21.9 million, or 7.4% of revenues before reimbursements in the 2022 third quarter, compared with $29.5 million, or 10.2% of revenues, in the 2021 third quarter
Management Comments
“Our third quarter results reflect sustained top-line momentum driven by the strategic investments we are making across the business. Revenues increased 6% on a constant currency basis compared to a strong prior year period, which included pronounced weather events in the U.S. Platform Solutions delivered double-digit revenue growth, aided by strength within Networks and positive contributions from Praxis. At the same time, Broadspire continues a steady return toward pre-Covid activity levels,” commented Mr. Rohit Verma, chief executive officer of Crawford & Company. “Our International Operations remain challenged; however, we are encouraged by the early results of the corrective actions we have implemented, and we remain focused on driving change within this business.”
“I am proud of the way our team responded to recent storm activity in the U.S. including record-high deployments to assist with claims. This has enabled us to deliver excellent service for our clients while building a solid foundation to support momentum going into the fourth quarter. We remain confident in our strategy and our ability to drive growth, take market share, and return value for all our stakeholders,” concluded Mr. Verma.
Segment Results for the Third Quarter
North America Loss Adjusting
North America Loss Adjusting revenues before reimbursements were $66.8 million in the third quarter of 2022, increasing 3.9% from $64.3 million in the third quarter of 2021, including $1.9 million from the edjuster, Inc. acquisition.
The segment had operating earnings of $3.7 million in the 2022 third quarter, decreasing from $4.4 million in the third quarter of 2021. The operating margin was 5.5% in the 2022 quarter and 6.8% in the 2021 quarter.
International Operations
International Operations revenues before reimbursements were $86.1 million in the third quarter of 2022, down (6.3)% from $91.9 million in the same period of 2021, including $1.4 million from the BosBoon and Van Dijk acquisitions. Absent foreign exchange rate decreases of $10.1 million, revenues would have been $96.2 million for the 2022 third quarter.
Operating losses were $(3.8) million in the 2022 third quarter, decreasing from earnings of $1.9 million in the 2021 period. The segment’s operating margin for the 2022 quarter was (4.5)% as compared with 2.1% in the 2021 quarter.
Broadspire
Broadspire segment revenues before reimbursements were $78.4 million in the 2022 third quarter, increasing 3.4% from $75.8 million in the 2021 third quarter.
Broadspire recorded operating earnings of $6.2 million in the third quarter of 2022, representing an operating margin of 7.9%, increasing from $6.9 million, or 9.2% of revenues, in the 2021 third quarter.
Platform Solutions
Platform Solutions revenues before reimbursements were $63.7 million in the third quarter of 2022, up 12.7% from $56.5 million in the same period of 2021, including $5.4 million from the Praxis Consulting acquisition.
Operating earnings were $10.1 million in the 2022 third quarter, increasing over the $9.7 million in the 2021 period. The segment’s operating margin for the 2022 quarter was 15.8% as compared with 17.2% in the 2021 quarter.
Unallocated Corporate and Shared Costs and Credits, Net
Unallocated corporate costs were $1.9 million in the third quarter of 2022, compared with $2.2 million in the same period of 2021. Primary components of this variance were a reduction in incentive compensation, partially offset by the absence of a CEWS benefit in 2021, and an increase in self-insurance costs.
Goodwill Impairment
The Company recognized a $36.8 million pre-tax non-cash goodwill impairment in the third quarter of 2022. This impairment reduced the carrying value of North American Loss Adjusting and Platform Solutions goodwill by $3.4 million and $10.7 million, respectively. The Company's International Operations goodwill was fully impaired with a charge of $22.7 million. This charge was partially offset by a $15.9 million reduction in income tax expense, for a net impact of $20.9 million, or $0.43 per share. Due to the non-discrete income tax treatment of the goodwill impairment, the income tax benefit of the impairment will normalize during the fourth quarter, resulting in a lower anticipated full-year income tax benefit of $3.4 million.
Other Matters
For the 2022 third quarter, the Company recognized no benefit from CEWS as compared with an overall benefit of $1.8 million in the 2021 third quarter recorded between North America Loss Adjusting and Unallocated Corporate Costs.
In addition, the Company recognized a pretax contingent earnout expense totaling $0.9 million in the 2022 third quarter 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.
Balance Sheet and Cash Flow
The Company’s consolidated cash and cash equivalents position as of September 30, 2022, totaled $33.1 million, compared with $53.2 million at December 31, 2021. The Company’s total debt outstanding as of September 30, 2022, totaled $257.4 million, compared with $175.0 million at December 31, 2021.
The Company’s operations used $16.2 million of cash during the first nine months of 2022, compared with $20.0 million provided in 2021. The increase in cash used by operating activities was driven by a $19.9 million increase in the use of payroll and related tax accruals, increased incentive compensation payments of $10.4 million, a $6.5 million increase in the use of billed and unbilled receivables, and $6.1 million of prior year CEWS benefits received that were not present in 2022, offset by a $9.0 million reduction in pension contributions.
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 three quarters of 2022, compared with $9.0 million in contributions to the U.S. plan and $0.5 million to the U.K. plans in 2021.
During 2022, the Company repurchased 2,656,474 shares of CRD-A and 963,472 shares of CRD-B at an average per share cost of $7.41 and $7.32, respectively. The total cost of share repurchases during 2022 was $26.7 million. There were no shares repurchased during the 2022 third quarter.
Conference Call
As previously announced, Crawford & Company will host a conference call on November 9, 2022, at 8:30 a.m. Eastern Time to discuss its third quarter 2022 results. The conference call can be accessed live by dialing 1-888-396-8049 and using Conference ID 62792241. 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 December 9, 2022. You may dial 1-877-674-7070 and use passcode 792241# 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, goodwill impairment, amortization of customer-relationship intangible assets, contingent earnout adjustments, 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, goodwill impairment, contingent earnout adjustments, 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, defined benefit pension costs or credits for our frozen U.S. pension plan, 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, and contingent earnout adjustments 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. 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.
Goodwill impairments arise from time to time due to various factors, but are not allocated to our operating segments since they historically have not regularly impacted our performance and are not expected to impact our future performance on a regular 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:
| Nine Months Ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | September 30,2021 | September 30,2022 | September 30,2021 | |||||||||||||
| Geographic Area | Currency | % of total | equivalent | % of total | equivalent | % of total | equivalent | % of total | ||||||||
| U.S. | 62.1 | % | 60.8 | % | 60.4 | % | 58.9 | % | ||||||||
| U.K. | 8.7 | % | 11.3 | % | 10.0 | % | 11.6 | % | ||||||||
| Canada | CAD | 8.7 | % | 7.3 | % | 8.6 | % | 7.8 | % | |||||||
| Australia | AUD | 8.3 | % | 7.0 | % | 7.3 | % | 7.2 | % | |||||||
| Europe | 7.0 | % | 7.6 | % | 7.8 | % | 8.2 | % | ||||||||
| Rest of World | Various | 5.2 | % | 6.0 | % | 5.9 | % | 6.3 | % | |||||||
| Total Revenues, before reimbursements | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
All values are in British Pounds.
Following is a reconciliation of consolidated operating earnings to net (loss) income attributable to shareholders of Crawford & Company on a GAAP basis:
| Three Months Ended | Nine Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||||||
| Operating earnings: | ||||||||||||
| North America Loss Adjusting | $ | 3,678 | $ | 4,362 | $ | 10,508 | $ | 11,804 | ||||
| International Operations | (3,849 | ) | 1,947 | (7,623 | ) | 3,400 | ||||||
| Broadspire | 6,198 | 6,939 | 20,299 | 20,243 | ||||||||
| Platform Solutions | 10,080 | 9,724 | 22,714 | 22,833 | ||||||||
| Unallocated corporate and shared costs, net | (1,907 | ) | (2,173 | ) | (5,732 | ) | (4,835 | ) | ||||
| Consolidated operating earnings | 14,200 | 20,799 | 40,166 | 53,445 | ||||||||
| (Deduct) add: | ||||||||||||
| Net corporate interest expense | (2,903 | ) | (1,648 | ) | (6,201 | ) | (4,443 | ) | ||||
| Stock option expense | (142 | ) | (296 | ) | (478 | ) | (700 | ) | ||||
| Amortization expense | (1,998 | ) | (2,877 | ) | (5,784 | ) | (8,426 | ) | ||||
| Goodwill impairment | (36,808 | ) | — | (36,808 | ) | — | ||||||
| Contingent earnout adjustments | (887 | ) | — | (3,246 | ) | — | ||||||
| Income tax benefit (provision) | 13,286 | (4,866 | ) | 8,092 | (10,927 | ) | ||||||
| Net loss attributable to noncontrolling interests | 108 | 83 | 41 | 90 | ||||||||
| Net (loss) income attributable to shareholders of Crawford & Company | $ | (15,144 | ) | $ | 11,195 | $ | (4,218 | ) | $ | 29,039 |
Following is a reconciliation of net (loss) income attributable to shareholders of Crawford & Company on a GAAP basis to non-GAAP adjusted EBITDA:
| Three Months Ended | Nine Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | September 30,<br>2022 | September 30,<br>2021 | September 30,<br>2022 | September 30,<br>2021 | ||||||
| Net (loss) income attributable to shareholders of Crawford & Company | $ | (15,144 | ) | $ | 11,195 | $ | (4,218 | ) | $ | 29,039 |
| Add (deduct): | ||||||||||
| Depreciation and amortization | 8,924 | 9,826 | 27,379 | 30,768 | ||||||
| Stock-based compensation | 808 | 2,001 | 4,218 | 5,564 | ||||||
| Net corporate interest expense | 2,903 | 1,648 | 6,201 | 4,443 | ||||||
| Goodwill impairment | 36,808 | — | 36,808 | — | ||||||
| Contingent earnout adjustments | 887 | — | 3,246 | — | ||||||
| Income tax (benefit) provision | (13,286 | ) | 4,866 | (8,092 | ) | 10,927 | ||||
| Non-GAAP adjusted EBITDA | $ | 21,900 | $ | 29,536 | $ | 65,542 | $ | 80,741 |
Following is a reconciliation of operating cash flow to free cash flow for the nine months ended September 30, 2022 and 2021:
| Nine Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | September 30, 2022 | September 30, 2021 | Change | ||||||
| Net Cash (Used in) Provided by Operating Activities | $ | (16,195 | ) | $ | 20,043 | $ | (36,238 | ) | |
| Less: | |||||||||
| Property & Equipment Purchases, net | (4,983 | ) | (5,251 | ) | 268 | ||||
| Capitalized Software (internal and external costs) | (19,933 | ) | (15,372 | ) | (4,561 | ) | |||
| Free Cash Flow | $ | (41,111 | ) | $ | (580 | ) | $ | (40,531 | ) |
Following are the reconciliations of GAAP Pretax (Loss) Earnings, Net (Loss) Income and (Loss) Earnings Per Share to related non-GAAP Adjusted figures, which reflect 2022 before goodwill impairment, amortization of intangible assets, and contingent earnout adjustments, and for 2021 exclude the amortization of intangible assets:
| Three Months Ended September 30, 2022 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | Pretax (loss) earnings | Net (loss) income <br>attributable to Crawford & Company | Diluted (loss) earnings per <br>CRD-A <br>share | Diluted (loss) earnings per <br>CRD-B <br>share | ||||||||
| GAAP | $ | (28,538 | ) | $ | (15,144 | ) | $ | (0.31 | ) | $ | (0.31 | ) |
| Adjustments: | ||||||||||||
| Amortization of intangible assets | 1,998 | 1,499 | 0.03 | 0.03 | ||||||||
| Goodwill impairment | 36,808 | 20,908 | 0.43 | 0.43 | ||||||||
| Contingent earnout adjustments | 887 | 657 | 0.01 | 0.01 | ||||||||
| Non-GAAP Adjusted | $ | 11,155 | $ | 7,920 | $ | 0.16 | $ | 0.16 | ||||
| Three Months Ended September 30, 2021 | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| (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 | $ | 15,978 | $ | 11,195 | $ | 0.20 | $ | 0.21 | ||||
| Adjustments: | ||||||||||||
| Amortization of intangible assets | 2,877 | 2,158 | 0.04 | 0.04 | ||||||||
| Non-GAAP Adjusted | $ | 18,855 | $ | 13,353 | $ | 0.24 | $ | 0.25 | ||||
| Nine Months Ended September 30, 2022 | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (in thousands) | Pretax (loss) earnings | Net (loss) income <br>attributable to Crawford & Company | Diluted (loss) earnings per <br>CRD-A<br>share(1) | Diluted (loss) earnings per <br>CRD-B <br>share | ||||||||
| GAAP | $ | (12,351 | ) | $ | (4,218 | ) | $ | (0.08 | ) | $ | (0.09 | ) |
| Adjustments: | ||||||||||||
| Amortization of intangible assets | 5,784 | 4,338 | 0.09 | 0.09 | ||||||||
| Goodwill impairment | 36,808 | 20,908 | 0.42 | 0.42 | ||||||||
| Contingent earnout adjustments | 3,246 | 2,403 | 0.05 | 0.05 | ||||||||
| Non-GAAP Adjusted | $ | 33,487 | $ | 23,431 | $ | 0.47 | $ | 0.47 | ||||
| Nine Months Ended September 30, 2021 | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| (in thousands) | Pretax earnings | Net income <br>attributable to Crawford & Company | Diluted <br>earnings per <br>CRD-A <br>share | Diluted <br>earnings per <br>CRD-B <br>share(1) | ||||||||
| GAAP | $ | 39,876 | $ | 29,039 | $ | 0.53 | $ | 0.54 | ||||
| Adjustments: | ||||||||||||
| Amortization of intangible assets | 8,426 | 6,320 | 0.12 | 0.12 | ||||||||
| Non-GAAP Adjusted | $ | 48,302 | $ | 35,359 | $ | 0.65 | $ | 0.65 |
(1) Sum of reconciling items may differ from total due to rounding of individual components.
Following is information regarding the weighted average shares used in the computation of basic and diluted earnings per share:
| Three Months Ended | Nine Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| (in thousands) | September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||
| Weighted-Average Shares Used to Compute Basic Earnings Per Share: | ||||||||
| Class A Common Stock | 28,553 | 30,711 | 29,397 | 30,786 | ||||
| Class B Common Stock | 19,848 | 22,407 | 20,202 | 22,438 | ||||
| Weighted-Average Shares Used to Compute Diluted Earnings Per Share: | ||||||||
| Class A Common Stock | 28,553 | 31,954 | 29,397 | 31,916 | ||||
| Class B Common Stock | 19,848 | 22,407 | 20,202 | 22,438 | ||||
| Non-GAAP (1) | ||||||||
| Weighted-Average Shares Used to Compute Diluted Earnings Per Share: | ||||||||
| Class A Common Stock | 28,930 | 31,954 | 29,754 | 31,916 | ||||
| Class B Common Stock | 19,848 | 22,407 | 20,202 | 22,438 |
(1) The Company had a net loss for GAAP reporting during the three and nine months ended September 30, 2022, resulting in no additional dilutive securities added to the basic weighted average shares in calculating diluted weighted average shares for GAAP reporting as their impact would be anti-dilutive. As the Company has Non-GAAP positive net income for the three and nine months ended September 30, 2022, these dilutive securities were added back to calculate Non-GAAP earnings per share.
Further information regarding the Company’s operating results for the three and nine months ended September 30, 2022, financial position as of September 30, 2022, and cash flows for the nine months ended September 30, 2022 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 the world's largest publicly listed independent provider of claims management and outsourcing solutions to carriers, brokers and corporations with an expansive global network serving clients in more than 70 countries. The Company’s shares are traded on the NYSE under the symbols CRD-A and CRD-B. The Company's two classes of stock are substantially identical, except with respect to voting rights and the Company's ability to pay greater cash dividends on the non-voting Class A Common Stock than on the voting Class B Common Stock, subject to certain limitations. In addition, with respect to mergers or similar transactions, holders of Class A Common Stock must receive the same type and amount of consideration as holders of Class B Common Stock, unless different consideration is approved by the holders of 75% of the Class A Common Stock, voting as a class. More information is available at www.crawco.com.
Earnings per share may be different between CRD-A and CRD-B due to the payment of a higher per share dividend on CRD-A than CRD-B, and the impact that has on the earnings per share calculation according to generally accepted accounting principles.
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. |
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CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands, Except Per Share Amounts and Percentages)
| Three Months Ended September 30, | 2022 | 2021 | % Change | |||||
|---|---|---|---|---|---|---|---|---|
| Revenues: | ||||||||
| Revenues Before Reimbursements | $ | 294,924 | $ | 288,500 | 2 | % | ||
| Reimbursements | 11,493 | 9,062 | 27 | % | ||||
| Total Revenues | 306,417 | 297,562 | 3 | % | ||||
| Costs and Expenses: | ||||||||
| Costs of Services Provided, Before Reimbursements | 221,233 | 211,017 | 5 | % | ||||
| Reimbursements | 11,493 | 9,062 | 27 | % | ||||
| Total Costs of Services | 232,726 | 220,079 | 6 | % | ||||
| Selling, General, and Administrative Expenses | 62,983 | 60,759 | 4 | % | ||||
| Corporate Interest Expense, Net | 2,903 | 1,648 | 76 | % | ||||
| Goodwill Impairment | 36,808 | - | nm | |||||
| Total Costs and Expenses | 335,420 | 282,486 | 19 | % | ||||
| Other Income, Net | 465 | 902 | (48 | )% | ||||
| (Loss) Income Before Income Taxes | (28,538 | ) | 15,978 | (279 | )% | |||
| (Benefit) Provision for Income Taxes | (13,286 | ) | 4,866 | (373 | )% | |||
| Net (Loss) Income | (15,252 | ) | 11,112 | (237 | )% | |||
| Net Loss Attributable to Noncontrolling Interests | 108 | 83 | 30 | % | ||||
| Net (Loss) Income Attributable to Shareholders of Crawford & Company | $ | (15,144 | ) | $ | 11,195 | (235 | )% | |
| (Loss) Earnings Per Share - Basic: | ||||||||
| Class A Common Stock | $ | (0.31 | ) | $ | 0.21 | (248 | )% | |
| Class B Common Stock | $ | (0.31 | ) | $ | 0.21 | (248 | )% | |
| (Loss) Earnings Per Share - Diluted: | ||||||||
| Class A Common Stock | $ | (0.31 | ) | $ | 0.20 | (255 | )% | |
| Class B Common Stock | $ | (0.31 | ) | $ | 0.21 | (248 | )% | |
| Cash Dividends Per Share: | ||||||||
| Class A Common Stock | $ | 0.06 | $ | 0.06 | — | |||
| Class B Common Stock | $ | 0.06 | $ | 0.06 | — |
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(In Thousands, Except Per Share Amounts and Percentages)
| Nine Months Ended September 30, | 2022 | 2021 | % Change | |||||
|---|---|---|---|---|---|---|---|---|
| Revenues: | ||||||||
| Revenues Before Reimbursements | $ | 867,294 | $ | 809,138 | 7 | % | ||
| Reimbursements | 30,564 | 27,124 | 13 | % | ||||
| Total Revenues | 897,858 | 836,262 | 7 | % | ||||
| Costs and Expenses: | ||||||||
| Costs of Services Provided, Before Reimbursements | 644,948 | 589,375 | 9 | % | ||||
| Reimbursements | 30,564 | 27,124 | 13 | % | ||||
| Total Costs of Services | 675,512 | 616,499 | 10 | % | ||||
| Selling, General, and Administrative Expenses | 193,222 | 178,120 | 8 | % | ||||
| Corporate Interest Expense, Net | 6,201 | 4,443 | 40 | % | ||||
| Goodwill Impairment | 36,808 | - | nm | |||||
| Total Costs and Expenses | 911,743 | 799,062 | 14 | % | ||||
| Other Income, Net | 1,534 | 2,676 | (43 | )% | ||||
| (Loss) Income Before Income Taxes | (12,351 | ) | 39,876 | (131 | )% | |||
| (Benefit) Provision for Income Taxes | (8,092 | ) | 10,927 | (174 | )% | |||
| Net (Loss) Income | (4,259 | ) | 28,949 | (115 | )% | |||
| Net Loss Attributable to Noncontrolling Interests | 41 | 90 | (54 | )% | ||||
| Net (Loss) Income Attributable to Shareholders of Crawford & Company | $ | (4,218 | ) | $ | 29,039 | (115 | )% | |
| (Loss) Earnings Per Share - Basic: | ||||||||
| Class A Common Stock | $ | (0.08 | ) | $ | 0.55 | (115 | )% | |
| Class B Common Stock | $ | (0.09 | ) | $ | 0.55 | (116 | )% | |
| (Loss) Earnings Per Share - Diluted: | ||||||||
| Class A Common Stock | $ | (0.08 | ) | $ | 0.53 | (115 | )% | |
| Class B Common Stock | $ | (0.09 | ) | $ | 0.54 | (117 | )% | |
| Cash Dividends Per Share: | ||||||||
| Class A Common Stock | $ | 0.18 | $ | 0.18 | — | |||
| Class B Common Stock | $ | 0.18 | $ | 0.18 | — |
CRAWFORD & COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2022 and December 31, 2021
Unaudited
(In Thousands, Except Par Values)
| December 31, | |||||
|---|---|---|---|---|---|
| 2021 | |||||
| ASSETS | |||||
| Current Assets: | |||||
| Cash and Cash Equivalents | 33,099 | $ | 53,228 | ||
| Accounts Receivable, Net | 137,360 | 134,458 | |||
| Unbilled Revenues, at Estimated Billable Amounts | 134,646 | 118,722 | |||
| Income Taxes Receivable | 23,099 | 4,936 | |||
| Prepaid Expenses and Other Current Assets | 35,532 | 34,576 | |||
| Total Current Assets | 363,736 | 345,920 | |||
| Net Property and Equipment | 28,407 | 33,721 | |||
| Other Assets: | |||||
| Operating Lease Right-of-Use Asset, Net | 96,364 | 99,369 | |||
| Goodwill | 76,783 | 116,526 | |||
| Intangible Assets Arising from Business Acquisitions, Net | 91,285 | 97,571 | |||
| Capitalized Software Costs, Net | 79,605 | 75,802 | |||
| Deferred Income Tax Assets | 22,285 | 21,266 | |||
| Other Noncurrent Assets | 62,103 | 62,464 | |||
| Total Other Assets | 428,425 | 472,998 | |||
| Total Assets | 820,568 | $ | 852,639 | ||
| LIABILITIES AND SHAREHOLDERS’ INVESTMENT | |||||
| Current Liabilities: | |||||
| Short-Term Borrowings | 37,696 | $ | 10,704 | ||
| Accounts Payable | 42,182 | 48,470 | |||
| Accrued Compensation and Related Costs | 72,889 | 96,018 | |||
| Self-Insured Risks | 14,578 | 13,222 | |||
| Income Taxes Payable | — | 1,200 | |||
| Operating Lease Liability | 23,354 | 25,238 | |||
| Other Accrued Liabilities | 60,116 | 76,884 | |||
| Deferred Revenues | 29,876 | 32,119 | |||
| Total Current Liabilities | 280,691 | 303,855 | |||
| Noncurrent Liabilities: | |||||
| Long-Term Debt and Finance Leases, Less Current Installments | 219,680 | 164,315 | |||
| Operating Lease Liability | 86,556 | 88,408 | |||
| Deferred Revenues | 24,716 | 23,786 | |||
| Accrued Pension Liabilities | 10,218 | 17,892 | |||
| Other Noncurrent Liabilities | 37,374 | 42,986 | |||
| Total Noncurrent Liabilities | 378,544 | 337,387 | |||
| Shareholders’ Investment: | |||||
| Class A Common Stock, 1.00 Par Value | 28,557 | 30,996 | |||
| Class B Common Stock, 1.00 Par Value | 19,848 | 20,812 | |||
| Additional Paid-in Capital | 78,364 | 74,229 | |||
| Retained Earnings | 230,085 | 266,369 | |||
| Accumulated Other Comprehensive Loss | (193,971 | ) | (180,441 | ) | |
| Shareholders’ Investment Attributable to Shareholders of Crawford & Company | 162,883 | 211,965 | |||
| Noncontrolling Interests | (1,550 | ) | (568 | ) | |
| Total Shareholders’ Investment | 161,333 | 211,397 | |||
| Total Liabilities and Shareholders’ Investment | 820,568 | $ | 852,639 |
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 September 30,
| North America Loss Adjusting | % | International Operations | % | Broadspire | % | Platform Solutions | % | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||
| Revenues Before Reimbursements | $ | 66,822 | $ | 64,334 | 3.9% | $ | 86,066 | $ | 91,888 | (6.3)% | $ | 78,381 | $ | 75,804 | 3.4% | $ | 63,655 | $ | 56,474 | 12.7% | ||||||||
| Direct Compensation, Fringe Benefits & Non-Employee Labor | 48,476 | 45,706 | 6.1% | 61,515 | 62,505 | (1.6)% | 49,863 | 47,187 | 5.7% | 42,106 | 37,904 | 11.1% | ||||||||||||||||
| % of Revenues Before Reimbursements | 72.5 | % | 71.0 | % | 71.5 | % | 68.0 | % | 63.6 | % | 62.2 | % | 66.1 | % | 67.1 | % | ||||||||||||
| Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor | 14,668 | 14,266 | 2.8% | 28,400 | 27,437 | 3.5% | 22,320 | 21,678 | 3.0% | 11,469 | 8,846 | 29.7% | ||||||||||||||||
| % of Revenues Before Reimbursements | 22.0 | % | 22.2 | % | 33.0 | % | 29.9 | % | 28.5 | % | 28.6 | % | 18.0 | % | 15.7 | % | ||||||||||||
| Total Operating Expenses | 63,144 | 59,972 | 5.3% | 89,915 | 89,942 | (0.0)% | 72,183 | 68,865 | 4.8% | 53,575 | 46,750 | 14.6% | ||||||||||||||||
| Operating Earnings (Loss) (1) | $ | 3,678 | $ | 4,362 | (15.7)% | $ | (3,849 | ) | $ | 1,947 | (297.7)% | $ | 6,198 | $ | 6,939 | (10.7)% | $ | 10,080 | $ | 9,724 | 3.7% | |||||||
| % of Revenues Before Reimbursements | 5.5 | % | 6.8 | % | (4.5 | )% | 2.1 | % | 7.9 | % | 9.2 | % | 15.8 | % | 17.2 | % |
Nine Months Ended September 30,
| North America Loss Adjusting | % | International Operations | % | Broadspire | % | Platforms Solutions | % | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||
| Revenues Before Reimbursements | $ | 197,035 | $ | 176,844 | 11.4% | $ | 269,048 | $ | 269,624 | (0.2)% | $ | 234,949 | $ | 225,982 | 4.0% | $ | 166,262 | $ | 136,688 | 21.6% | |||||||||
| \ | |||||||||||||||||||||||||||||
| Direct Compensation, Fringe Benefits & Non-Employee Labor | 143,386 | 126,584 | 13.3% | 189,819 | 185,643 | 2.2% | 147,611 | 139,025 | 6.2% | 110,424 | 87,472 | 26.2% | |||||||||||||||||
| % of Revenues Before Reimbursements | 72.8 | % | 71.6 | % | 70.6 | % | 68.9 | % | 62.8 | % | 61.5 | % | 66.4 | % | 64.0 | % | |||||||||||||
| Expenses Other than Reimbursements, Direct Compensation, Fringe Benefits & Non-Employee Labor | 43,141 | 38,456 | 12.2% | 86,852 | 80,581 | 7.8% | 67,039 | 66,714 | 0.5% | 33,124 | 26,383 | 25.6% | |||||||||||||||||
| % of Revenues Before Reimbursements | 21.9 | % | 21.7 | % | 32.3 | % | 29.9 | % | 28.5 | % | 29.5 | % | 19.9 | % | 19.3 | % | |||||||||||||
| Total Operating Expenses | 186,527 | 165,040 | 13.0% | 276,671 | 266,224 | 3.9% | 214,650 | 205,739 | 4.3% | 143,548 | 113,855 | 26.1% | |||||||||||||||||
| Operating Earnings (1) | $ | 10,508 | $ | 11,804 | (11.0)% | $ | (7,623 | ) | $ | 3,400 | (324.2)% | $ | 20,299 | $ | 20,243 | 0.3% | $ | 22,714 | $ | 22,833 | (0.5)% | ||||||||
| % of Revenues Before Reimbursements | 5.3 | % | 6.7 | % | (2.8 | )% | 1.3 | % | 8.6 | % | 9.0 | % | 13.7 | % | 16.7 | % |
(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, goodwill impairment, amortization of customer-relationship intangible assets, 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 September 30, 2022 and September 30, 2021
Unaudited
(In Thousands)
| 2022 | 2021 | |||||
|---|---|---|---|---|---|---|
| Cash Flows From Operating Activities: | ||||||
| Net (loss) income | $ | (4,259 | ) | $ | 28,949 | |
| Reconciliation of net (loss) income to net cash (used in) provided by operating activities: | ||||||
| Depreciation and amortization | 27,379 | 30,768 | ||||
| Goodwill impairment | 36,808 | — | ||||
| Stock-based compensation | 4,218 | 5,564 | ||||
| Gain on sale of property and equipment | (1,562 | ) | (38 | ) | ||
| Increase in contingent consideration valuation | 3,246 | — | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable, net | (9,329 | ) | (7,352 | ) | ||
| Unbilled revenues, net | (23,537 | ) | (18,990 | ) | ||
| Accrued or prepaid income taxes | (23,162 | ) | (8,627 | ) | ||
| Accounts payable and accrued liabilities | (20,612 | ) | 6,798 | |||
| Deferred revenues | (191 | ) | 2,130 | |||
| Accrued retirement costs | (1,684 | ) | (13,243 | ) | ||
| Prepaid expenses and other operating activities | (3,510 | ) | (5,916 | ) | ||
| Net cash (used in) provided by operating activities | (16,195 | ) | 20,043 | |||
| Cash Flows From Investing Activities: | ||||||
| Acquisitions of property and equipment | (4,983 | ) | (5,251 | ) | ||
| Capitalization of computer software costs | (19,933 | ) | (15,372 | ) | ||
| Proceeds from settlement of life insurance policies | — | 4,937 | ||||
| Payments for business acquisitions, net of cash acquired | (26,309 | ) | (23,141 | ) | ||
| Cash proceeds from sale of property and equipment | 3,032 | — | ||||
| Net cash used in investing activities | (48,193 | ) | (38,827 | ) | ||
| Cash Flows From Financing Activities: | ||||||
| Cash dividends paid | (8,938 | ) | (9,577 | ) | ||
| Repurchases of common stock | (26,749 | ) | (6,076 | ) | ||
| Increases in short-term and revolving credit facility borrowings | 99,952 | 58,449 | ||||
| Payments on short-term and revolving credit facility borrowings | (15,129 | ) | (31,808 | ) | ||
| Payments of contingent consideration on acquisitions | (2,118 | ) | (1,683 | ) | ||
| Other financing activities | (87 | ) | 629 | |||
| Net cash provided by financing activities | 46,931 | 9,934 | ||||
| Effects of exchange rate changes on cash and cash equivalents | (2,351 | ) | 1,123 | |||
| Decrease in cash, cash equivalents, and restricted cash(1) | (19,808 | ) | (7,727 | ) | ||
| Cash, cash equivalents, and restricted cash at beginning of year(1) | 53,689 | 44,656 | ||||
| Cash, cash equivalents, and restricted cash at end of period(1) | $ | 33,881 | $ | 36,929 |
(1)The 2022 amounts include beginning restricted cash of $461 at December 31, 2021, and ending restricted cash of $782 at September 30, 2022, which we present as part of "Prepaid expenses and other current assets" on the Balance Sheets.
Crawford & Company Third Quarter 2022 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 ca se 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 three 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, n et corporate interest expense, stock option expense, amortization of customer-relationship intangible assets, contingent earnout adjustments, goodwill impairments, 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 and the Company's ability to pay greater cash dividends on the non-voting Class A Common Stock than on the voting Class B Common Stock, subject to certain limitations. In addition, with respect to mergers or similar transactions, holders of Class A Common Stock must receive the same type and amount of consideration as holders of Class B Common Stock, unless different consideration is approved by the holders of 75% of the Class A Common Stock, voting as a class. 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 cos ts 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.
3 3 Growth momentum continued in both Platforms Solutions and North American Loss Adjusting Our efforts to increase penetration with top-5 carrier clients are bearing fruit Broadspire continues to experience a steady recovery towards pre-pandemic levels Growth driven by new client wins along with increased pricing Margin challenges persist across certain pockets of International Operations Implemented margin improvement actions in the U.K. and Europe Latin America benefitted from cost efficiency actions Australia and Asia benefitted from weather-driven growth Key Highlights Third Quarter 2022 Q3 2022 METRICS GAAP Non-GAAP $294.9M $306.0M Revenues $(0.31) $0.16 CRD-A & CRD-B EPS $(15.1M) $7.9M Net (Loss) Income Ongoing investments driving improvement Crawford’s top-line momentum continued in Q3, driven by strategic investments across the business
Ensuring our top line success translates into expanded profitability to support our long-term growth strategy Our Roadmap to Support Margin Improvement 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 ORGANIC DIGITAL that simplifies QUALITY that sets the industry benchmark EXPERTISE that is deep and eminent INORGANIC Long-term Growth Strategy ADJACENCIES Bolster presence in P&C ecosystem and deepen customer wallet share GEOGRAPHIES P&C market growth and claims outsourcing tailwinds SCALE Existing businesses to drive margin improvement
We’re committed to employing a disciplined approach to capital allocation Investing in long-term growth through Cap Ex and M&A Share buyback program a core component of our capital allocation strategy Our Capital Allocation Strategy Acquire adjacent services to bolster presence in claims ecosystem Bolster 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 Regular quarterly dividend of $0.06 per share for CRD-A and CRD-B Our M&A Approach
Operational Overview
7 Impact Across Our Global Service Lines (GSLs) Third Quarter 2022 Performance Q3 revenue growth of 3.9% over prior year, due to continued market recovery in Canada, increased activity related to Hurricane Fiona and inclusion of edjuster Prior year included Hurricane Ida impacts and CEWS benefits Onboarded over 80 specialist adjusters year to date, ahead of our three-year goal of recruiting 200 specialists Q3 revenue growth of 3.4% over prior year, driven by increased economic activity, new and existing business growth along with healthy pricing Making a solid recovery toward pre-pandemic levels of claims volumes Q3 revenue declined 6.3% from prior year. FX rates reduced revenue by $10.1 million Margin pressures continue to impact certain business lines in the U.K. and Europe Latin America is recovering, with cost actions bearing fruit in Chile, Brazil and Peru Strength in Australia driven by record flooding activity, while Asia performance improvement benefitting from weather activity in Malaysia and the Philippines Q3 Revenues $66.8M “OE” refers to Operating Earnings 23% of total Q3 revenues North America Loss Adjusting Q3 OE¹ $3.7M International Operations 29% of total Q3 revenues Broadspire (US-only) 26% of total Q3 revenues Q3 revenue growth of 12.7% over prior year, driven by increased activity in Networks and inclusion of Praxis Softness in Contractor Connection due to a benign claims environment; onboarded a new top-5 carrier and expect to see contributions in 2023 Platform Solutions (US-only) 22% of total Q3 revenues Q3 Revenues $86.1M Q3 OE $(3.8M) Q3 Revenues $78.4M Q3 OE $6.2M Q3 Revenues $63.7M Q3 OE $10.1M
Our investments in the business based on our key pillars are showing signs of progress Executing on Our Long-Term Strategy DIGITAL that simplifies QUALITY that sets the industry benchmark EXPERTISE that is deep and eminent #1 Choice for a top-5 carrier, moving up from #6 Record # of adjusters deployed in the immediate aftermath of Hurricane Ian¹ ~85% Reduction in time to onboard and deploy adjusters (1) Impact expected to be recognized in Q4 2022
Net Promoter Score NPS remains at a healthy level of 47 Actively looking for opportunities to improve our score Added $24.5 million in new and enhanced business in Q3 2022 New and Renewal Business Activity¹ Retained 95.5% of our Broadspire business year to date Increasing market share with key carrier clients 9 Customer Excellence (1) Estimated new and enhanced revenue won during 2022 47 NPS 95.5% a Retained Broadspire business New and enhanced business won $24.5M
Progressing our Diversity, Equity and Inclusion Initiatives Favorable results from recent Pulse Survey on Diversity, Equity and Inclusion (DEI) at Crawford; ahead of industry benchmarks DEI continues to be our top strategic priority and core to our culture I do not face any bias due to my personal identity. 88 66 Senior leadership supports diversity and inclusion at Crawford. 82 80 This organization is committed to the fair treatment of all employees. 81 75 Professional Services Norm Overall Crawford I believe that no matter how much I know there is always something new to learn. 97 35
Financial Overview
(1) See appendix for non-GAAP explanation and reconciliation of non-GAAP measures. 12 Third Quarter 2022 Financial Summary Quarter Ended September 30, September 30, ($ in millions, except per share amounts) 2022 2021 % Change Revenues $294.9 $288.5 2% Non-GAAP Revenues excluding foreign exchange fluctuations(1) $306.0 $288.5 6% Net (Loss) Income Attributable to Shareholders of Crawford & Company $(15.1) $11.2 (235)% Diluted (Loss) Earnings per Share CRD-A $(0.31) $0.20 (255)% CRD-B $(0.31) $0.21 (248)% Non-GAAP Diluted Earnings per Share 1 CRD-A $0.16 $0.24 (33)% CRD-B $0.16 $0.25 (36)% Adjusted Operating Earnings 1 $14.2 $20.8 (32)% Adjusted Operating Margin 1 4.8% 7.2% (240bps) Adjusted EBITDA 1 $21.9 $29.5 (26%) Adjusted EBITDA Margin 1 7.4% 10.2% (280bps)
North America Loss Adjusting Q3 Highlights Q3 revenue growth of 3.9% over prior year, driven by continued recovery in Canada, increased activity related to Hurricane Fiona and inclusion of edjuster Prior year included Hurricane Ida impacts and CEWS benefits Onboarded over 80 specialist adjusters year to date, ahead of our three-year goal of recruiting 200 specialists Operating Results (3Q 2022 v. 3Q 2021) Revenues of $66.8 million versus $64.3 million Constant dollar revenues of $67.8 million Gross profit of $12.2 million versus $12.6 million Gross profit margin of 18.2% versus 19.6% Operating earnings of $3.7 million versus $4.4 million Operating margin of 5.5% versus 6.8% Three months ended (in thousands, except percentages) September 30, 2022 September 30, 2021 Variance Revenues $66,822 $64,334 3.9% Direct expenses 54,658 51,704 5.7% Gross profit 12,164 12,631 (3.7)% Indirect expenses 8,486 8,269 2.6% Operating earnings $3,678 $4,362 (15.7)% Gross profit margin 18.2% 19.6% (1.4)% Operating margin 5.5% 6.8% (1.3)% Total cases received 72,112 78,422 (8.0)% Full time equivalent employees 2,083 1,736 21.1%
International Operations Q3 Highlights Q3 revenue declined 6.3% from prior year. FX rates reduced revenue by $10.1 million Margin pressures continue to impact certain business lines in the U.K. and Europe Latin America is recovering, with cost actions bearing fruit in Chile, Brazil and Peru Strength in Australia driven by record flooding activity, while Asia performance improvement benefitting from weather activity in Malaysia and the Philippines Operating Results (3Q 2022 v. 3Q 2021) Revenues of $86.1 million versus $91.9 million Constant dollar revenues of $96.2 million Gross profit of $9.6 million versus $14.0 million Gross profit margin of 11.2% versus 15.2% Operating loss of $(3.8) million versus earnings of $1.9 million Operating margin of (4.5)% versus 2.1% Three months ended (in thousands, except percentages) September 30, 2022 September 30, 2021 Variance Revenues $86,066 $91,888 (6.3)% Direct expenses 76,447 77,904 (1.9)% Gross profit 9,619 13,984 (31.2)% Indirect expenses 13,468 12,037 11.9% Operating (loss) earnings $(3,849) $1,947 (297.7)% Gross profit margin 11.2% 15.2% (4.0)% Operating margin (4.5)% 2.1% (6.6)% Total cases received 123,270 113,368 8.7% Full time equivalent employees 3,665 3,603 1.2%
Broadspire Q3 Highlights Q3 revenue growth of 3.4% over prior year, driven by increased economic activity, new and existing business growth along with healthy pricing Making a solid recovery toward pre-pandemic levels of claims volumes Operating Results (3Q 2022 v. 3Q 2021) Revenues of $78.4 million versus $75.8 million Gross profit of $17.9 million versus $17.0 million Gross profit margin of 22.8% versus 22.5% Operating earnings of $6.2 million versus $6.9 million Operating margin of 7.9% versus 9.2.% Three months ended (in thousands, except percentages) September 30, 2022 September 30, 2021 Variance Revenues $78,381 $75,804 3.4% Direct expenses 60,494 58,775 2.9% Gross profit 17,887 17,029 5.0% Indirect expenses 11,689 10,090 15.8% Operating earnings $6,198 $6,939 (10.7)% Gross profit margin 22.8% 22.5% 0.3% Operating margin 7.9% 9.2% (1.3)% Total cases received 141,658 124,703 13.6% Full time equivalent employees 2,535 2,263 12.0%
Platform Solutions Q3 Highlights Q3 revenue growth of 12.7% over prior year, driven by increased activity in Networks and inclusion of Praxis Softness in Contractor Connection due to a benign claims environment; onboarded a new top-5 carrier and expect to see contributions in 2023 Operating Results (3Q 2022 v. 3Q 2021) Revenues of $63.7 million versus $56.5 million Gross profit of $15.6 million versus $13.9 million Gross profit margin of 24.5% versus 24.6% Operating earnings of $10.1 million versus $9.7 million Operating margin of 15.8% versus 17.2% Three months ended (in thousands, except percentages) September 30, 2022 September 30, 2021 Variance Revenues $63,655 $56,474 12.7% Direct expenses 48,054 42,594 12.8% Gross profit 15,601 13,880 12.4% Indirect expenses 5,521 4,156 32.8% Operating earnings $10,080 $9,724 3.7% Gross profit margin 24.5% 24.6% (0.1)% Operating margin 15.8% 17.2% (1.4)% Total cases received 150,192 114,255 31.5% Full time equivalent employees 1,349 1,123 20.1%
Additional Financial Matters Unallocated Corporate and Shared Costs and Credits Unallocated corporate costs of $1.9 million in 2022 compared to $2.2 million in the prior year period Primary components of this variance were a reduction in incentive compensation, partially offset by the Canada Emergency Wage Subsidy ("CEWS") benefit in 2021 (not present in 2022), and an increase in other unallocated costs Canada Emergency Wage Subsidy No benefit from CEWS in 2022, compared to a benefit of $1.8 million in the prior year period recorded between North America Loss Adjusting and Unallocated Corporate Costs Goodwill Impairment Recognized a $36.8 million non-cash goodwill impairment, partially offset by a $15.9 million reduction in income tax expense, for a net impact of $20.9 million, or $0.43 per share Due to the non-discrete income tax treatment of the goodwill impairment, the income tax benefit will normalize in the fourth quarter, resulting in a lower full-year tax benefit of $3.4 million Contingent Earnout Adjustment Recognized a pretax contingent earnout expense totaling approximately $0.9 million in the 2022 third quarter Based on favorable changes to projections of certain acquired entities Share Repurchases There were no shares repurchased in the 2022 third quarter Repurchased 2,656,474 shares of CRD-A and 963,472 shares of CRD-B at an average cost per share of $7.41 and $7.32, respectively, during 2022 Total cost of share repurchases during 2022 was $26.7 million
(1) See Appendix for non-GAAP explanation and reconciliation Balance Sheet Highlights Unaudited ($ in thousands) September 30, 2022 December 31, 2019 December 31, 2021 December 31, 2018 Change Change Cash and cash equivalents $ 33,099 $ 53,228 $ (20,129 ) Accounts receivable, net 137,360 134,458 2,902 Unbilled revenues, net 134,646 118,722 15,924 Total receivables 272,006 253,180 18,826 Goodwill 76,783 116,526 (39,743) Intangible assets arising from business acquisitions, net 91,285 97,571 (6,286) Deferred revenues 54,592 55,905 (1,313) Pension liabilities 10,218 17,892 (7,674 ) Short-term borrowings and current portion of finance leases 37,696 10,704 26,992 Long-term debt, less current portion 219,680 164,315 55,365 Total debt 257,376 175,019 82,357 Total stockholders' equity attributable to Crawford & Company 162,883 211,965 (49,082 ) Net debt 1 224,277 121,791 102,486
19 Net Debt and Pension Liability $224.3 million $10.2 million Net debt at $224.3 million Pension liability at $10.2 million $106.4 million $105.2 million Leverage Ratio of 2.84x EBITDA at end of Q3 2022 Funded Ratio of 92.8% at end of Q3 2022
(1) See Appendix for non-GAAP explanation and reconciliation Operating And Free Cash Flow For the period ended September 30, Unaudited ($ in thousands) 2022 2019 2021 2018 Change Change Net (Loss) Income Attributable to Shareholders of Crawford & Company $ (4,218 ) $ 29,039 $ (33,257 ) Depreciation and Other Non-Cash Operating Items 31,556 36,242 (4,686 ) Goodwill Impairment 36,808 — 36,808 Gain on Disposals of Property and Equipment, net (1,562 ) (38 ) (1,524 ) Contingent Earnout Adjustments 3,246 — 3,246 Billed Receivables Change (9,329 ) (7,352 ) (1,977 ) Unbilled Receivables Change (23,537 ) (18,990 ) (4,547 ) Change in Accrued Compensation, 401K, and Other Payroll (19,024 ) 8,612 (27,636 ) Change in Accrued and Prepaid Income Taxes (23,162 ) (8,627 ) (14,535 ) Other Working Capital Changes (6,486 ) (9,317 ) 2,831 U.S. and U.K. Pension Contributions (487 ) (9,526 ) 9,039 Cash Flows from Operating Activities (16,195 ) 20,043 (36,238 ) Property & Equipment Purchases, net (4,983 ) (5,251 ) 268 Capitalized Software (internal and external costs) (19,933 ) (15,372 ) (4,561 ) Free Cash Flow1 $ (41,111 ) $ (580 ) $ (40,531 )
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 22
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, goodwill impairments, 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, goodwill impairments, 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) September 30, 2022 September 30, 2021 Geographic Area Currency USD equivalent % of total USD equivalent % of total U.S. USD $ 183,197 62.1% $ 175,553 60.8% U.K. GBP 25,534 8.7% 32,527 11.3% Canada CAD 25,661 8.7% 21,102 7.3% Australia AUD 24,601 8.3% 20,132 7.0% Europe EUR 20,535 7.0% 21,807 7.6% Rest of World Various 15,396 5.2% 17,379 6.0% Total Revenues, before reimbursements $ 294,924 100.0% $ 288,500 100.0%
Reconciliation of Non-GAAP Items Revenues, Costs of Services Provided, and Operating Earnings Quarter Ended Quarter Ended Quarter Ended Quarter Ended September 30, December 31, September 30, December 31, Unaudited ($ in thousands) 2022 2019 2021 2018 Revenues Before Reimbursements Total Revenues $ 306,417 $ 297,562 Reimbursements (11,493 ) (9,062 ) Revenues Before Reimbursements 294,924 288,500 Costs of Services Provided, Before Reimbursements Total Costs of Services 232,726 220,079 Reimbursements (11,493 ) (9,062 ) Costs of Services Provided, Before Reimbursements $ 221,233 $ 211,017 Quarter Ended Quarter Ended Quarter Ended Quarter Ended September 30, December 31, September 30, December 31, Unaudited ($ in thousands) 2022 2019 2021 2018 Operating Earnings: North America Loss Adjusting $ 3,678 $ 4,362 International Operations (3,849 ) 1,947 US Broadspire 6,198 6,939 Platform Solutions 10,080 9,724 Unallocated corporate and shared costs and credits, net (1,907 ) (2,173 ) Consolidated Operating Earnings 14,200 20,799 (Deduct) Add: Net corporate interest expense (2,903 ) (1,648 ) Stock option expense (142 ) (296 ) Amortization expense (1,998 ) (2,877 ) Goodwill impairment (36,808 ) — Contingent earnout adjustments (887 ) — Income tax (benefit) provision 13,286 (4,866 ) Net income attributable to noncontrolling interests 108 83 Net (Loss) Income Attributable to Shareholders of Crawford & Company $ (15,144) $ 11,195
Reconciliation of Non-GAAP Items (cont.) Adjusted EBITDA ) Quarter Ended Quarter Ended September 30, December 31, September 30, December 31, Unaudited ($ in thousands) 2022 2019 2021 2018 Net (loss) income attributable to shareholders of Crawford & Company $ (15,144 ) $ 11,195 Add: Depreciation and amortization 8,924 9,826 Stock-based compensation 808 2,001 Net corporate interest expense 2,903 1,648 Goodwill impairment 36,808 — Contingent earnout adjustments 887 — Income tax (benefit) provision (13,286 ) 4,866 Adjusted EBITDA $ 21,900 $ 29,536
Reconciliation of Non-GAAP Items (cont.) Net Debt September 30, December 31, December 31, December 31, Unaudited ($ in thousands) 2022 2019 2021 2018 Net Debt Short-term borrowings $ 37,639 $ 10,643 Current installments of finance leases and other obligations 57 61 Long-term debt and finance leases, less current installments 219,680 164,315 Total debt 257,376 175,019 Less: Cash and cash equivalents 33,099 53,228 Net debt $ 224,277 $ 121,791
Reconciliation of Non-GAAP Items (cont.) Segment Gross Profit Three months ended Three months ended ($ in thousands) September 30, 2022 December 31, 2019 September 30, 2021 December 31, 2018 Segment gross profit: North America Loss Adjusting $ 12,164 $ 12,631 International Operations 9,619 13,984 US Broadspire 17,887 17,029 Platform Solutions 15,601 13,880 Segment gross profit 55,271 57,524 Segment indirect costs: North America Loss Adjusting (8,486 ) (8,269 ) International Operations (13,468 ) (12,037 ) US Broadspire (11,689 ) (10,090 ) Platform Solutions (5,521 ) (4,156 ) Unallocated corporate and shared costs, net (1,907 ) (2,173 ) Consolidated operating earnings 14,200 20,799 Net corporate interest expense (2,903 ) (1,648 ) Stock option expense (142 ) (296 ) Amortization expense (1,998 ) (2,877 ) Goodwill impairment (36,808 ) — Contingent earnout adjustments (887 ) — Income tax benefit (provision) 13,286 (4,866 ) Net loss attributable to noncontrolling interests 108 83 Net (loss) income attributable to shareholders of Crawford & Company $ (15,144) $ 11,195
Reconciliation of Third Quarter Non-GAAP Results Three Months Ended September 30, 2022 Unaudited ($ in thousands) Pretax (Loss) Earnings Pretax (Loss) Earnings Net (Loss) Income Attributable to Crawford & Company Net (Loss) Income Attributable to Crawford & Company Diluted (Loss) Earnings per CRD-A Share Diluted (Loss) Earnings per CRD-A Share Diluted(Loss) Earnings per CRD-B Share Diluted (Loss) Earnings per CRD-B Share GAAP $ (28,538 ) $ (15,144 ) $ (0.31 ) $ (0.31 ) Adjustments: Amortization of intangible assets 1,998 1,499 0.03 0.03 Goodwill impairment 36,808 20,908 0.43 0.43 Contingent earnout adjustments 887 657 0.01 0.01 Non-GAAP Adjusted $ 11,155 $ 7,920 $ 0.16 $ 0.16 Three Months Ended September 30, 2021 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 $ 15,978 $ 11, 195 $ 0.20 $ 0.21 Adjustments: Amortization of intangible assets 2,877 2,158 0.04 0.04 Non-GAAP Adjusted $ 18,855 $ 13,353 $ 0.24 $ 0.25 (1) Sum of reconciling items may differ from total due to rounding of individual components