Crawford & Company Reports 2024 Second Quarter Results

Crawford & Company® (NYSE:CRD), is pleased to announce its financial results for the second quarter ended June 30, 2024. Based in Atlanta, Crawford & Company (NYSE:CRD) 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. Refer to the Company's website (www.crawco.com) for more information.

Rohit Verma, president and chief executive officer of Crawford & Company, commented, "Our growth strategy and initiatives are yielding results. Despite a difficult comparison due to weather events last year, three of our four business segments showed operating earnings growth with improved margins in the quarter. This enabled us to achieve consolidated earnings consistent with last year and reflects Crawford's diversified revenue model with a healthy balance between weather and non-weather dependent businesses. We added $23 million in new and enhanced business in the quarter, and our pipeline remains robust. As we move through the back half of 2024, I am optimistic about the overall direction of the Company and believe we are well-positioned to drive enhanced value for customers and shareholders."

GAAP Consolidated Results

Second Quarter 2024

• Revenues before reimbursements of $314.2 million, compared to $324.6 million for the 2023 second quarter
• Net income attributable to shareholders of $8.6 million, increasing from the $8.4 million in the same period last year
• Diluted earnings per share of $0.17 for both CRD-A and CRD-B, unchanged from diluted earnings per share of $0.17 for both share classes in the prior year second quarter

Non-GAAP Consolidated Results

Second Quarter 2024

• Diluted earnings per share, on a non-GAAP basis, totaled $0.25 for both CRD-A and CRD-B in the 2024 second quarter, compared with $0.24 for both share classes in the prior year second quarter
• Net income attributable to shareholders, on a non-GAAP basis, totaled $12.4 million in the 2024 second quarter, compared with $12.0 million in the same period last year
• Consolidated adjusted operating earnings, on a non-GAAP basis, were $22.1 million, or 7.0% of revenues before reimbursements in the 2024 second quarter, compared with $22.8 million, or 7.0% of revenues, in the 2023 second quarter
• Consolidated adjusted EBITDA, a non-GAAP financial measure, was $30.6 million, or 9.7% of revenues before reimbursements in the 2024 second quarter, compared with $31.5 million, or 9.7% of revenues, in the 2023 second quarter
• Foreign currency exchange rates decreased revenues before reimbursements by $1.9 million or less than (1)%. Presented on a constant dollar basis to the prior year period, revenues before reimbursements totaled $316.1 million, decreasing (3)% from the 2023 second quarter

Mr. Verma continued, "Our second quarter performance was highlighted by strong revenue growth and margin improvement at Broadspire, resulting in another record quarter for this business. Additionally, we achieved continued improvement over the prior year period in our International Operations segment. Our North American Loss Adjusting business achieved improved margin performance and consistent revenues quarter over quarter, despite a decline in extreme weather events, reflecting the segment's increased market share in the industry. The absence of severe weather continued to impact weather-related demand for our Platform Solutions business as carriers have capacity to meet current volumes. However, we remain well positioned to respond to seasonal storm activity. Our balance sheet remains strong, providing us flexibility to execute our strategic growth strategy."

Segment Results for the Second Quarter

North America Loss Adjusting

North America Loss Adjusting revenues before reimbursements were $76.0 million in the second quarter of 2024, decreasing (0.4)% from $76.4 million in the second quarter of 2023.

The segment had operating earnings of $4.9 million in the 2024 second quarter, increasing from $3.9 million in the second quarter of 2023. The operating margin was 6.4% in the 2024 quarter and 5.1% in the 2023 quarter.

International Operations

International Operations revenues before reimbursements were $102.3 million in the second quarter of 2024, up 7.3% from $95.3 million in the same period of 2023. Absent foreign exchange rate decreases of $1.5 million, revenues would have been $103.7 million for the 2024 second quarter.

Operating earnings were $5.7 million in the 2024 second quarter, increasing from $3.7 million in the 2023 period. The segment's operating margin for the 2024 quarter was 5.6% as compared with 3.9% in the 2023 quarter.

Broadspire

Broadspire segment revenues before reimbursements were a new quarterly record of $97.1 million in the 2024 second quarter, increasing 11.3% from $87.2 million in the 2023 second quarter.

Broadspire recorded operating earnings of $15.1 million in the second quarter of 2024, representing an operating margin of 15.5%, increasing from $8.1 million, or 9.3% of revenues, in the 2023 second quarter.

Platform Solutions

Platform Solutions revenues before reimbursements were $38.8 million in the second quarter of 2024, down (40.8)% from $65.6 million in the same period of 2023 as the Networks service line had significantly reduced weather related claim volumes.

Operating earnings were $1.5 million in the 2024 second quarter, decreasing from the $8.1 million in the 2023 period. The segment's operating margin for the 2024 quarter was 3.8% as compared with 12.3% in the 2023 quarter.

Unallocated Corporate and Shared Costs and Credits, Net

Unallocated corporate costs were $5.1 million in the second quarter of 2024, compared with $1.1 million in the same period of 2023. The increase in the 2024 second quarter was primarily due to an increase in professional fees and other reserves.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses ("SG&A") increased $1.8 million, or 2.6%, in the three months ended June 30, 2024 as compared with the 2023 period. The increase was primarily due to professional fees, IT costs, and compensation expense, including taxes and benefits.

Other Matters

The Company recognized pretax contingent earnout expenses totaling $0.4 million in the 2024 second quarter, compared to $0.7 million in the same period of 2023, 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 $2.4 million in the 2024 second quarter compared with $2.1 million in the 2023 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 June 30, 2024, totaled $46.7 million, compared with $58.4 million at December 31, 2023. The Company's total debt outstanding as of June 30, 2024, totaled $233.8 million, compared with $209.1 million at December 31, 2023.

The Company's operations used $8.3 million of cash during the first six months of 2024, compared with $27.2 million provided in 2023. The increase in cash used was due primarily to $13.5 million lower operating earnings, $16.7 million net change in incentive compensation, and a $5.9 million increase in other working capital items over the prior year.

The Company made no contributions to its U.S. defined benefit pension plan and $1.2 million in contributions to its U.K. plans for the first half of 2024, compared with no contributions to the U.S. plan and $1.0 million to the U.K. plans in 2023.

During the first six months of 2024, the Company didn't repurchase any shares of CRD-A, but repurchased 230,861 shares of CRD-B at an average per share cost of $8.98. There were no shares repurchased during the first six months of 2023. The total cost of share repurchases during 2024 was $2.1 million.

Conference Call

As previously announced, Crawford & Company will host a conference call on August 6, 2024, at 8:30 a.m. Eastern Time to discuss its second quarter 2024 results. The conference call can be accessed live by dialing 1-888-259-6580 and using Conference ID 95332233. 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 September 5, 2024. You may dial 1-877-674-7070 and use passcode 332233# 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 acquisition-related intangible assets, contingent earnout adjustments, non-service pension costs, 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, 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 acquisition-related intangible assets, contingent earnout adjustments, and non-service pension costs 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 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:

Following is a reconciliation of consolidated operating earnings to net income attributable to shareholders of Crawford & Company on a GAAP basis:

Following is a reconciliation of net income attributable to shareholders of Crawford & Company on a GAAP basis to non-GAAP adjusted EBITDA:

Following is a reconciliation of operating cash flow to free cash flow for the six months ended June 30, 2024 and 2023:

Non-GAAP consolidated results for 2024 and 2023 exclude the non-cash, after-tax adjustments for amortization of intangible assets, non-service-related pension costs, and contingent earnout adjustment.

Following are the reconciliations of GAAP Pretax Earnings, Net Income and Earnings Per Share to related non-GAAP Adjusted figures, which reflect each of 2024 and 2023 before amortization of intangible assets, non-service related pension costs and contingent earnout adjustments:

Following is information regarding the weighted average shares used in the computation of basic and diluted earnings per share:

Further information regarding the Company's operating results for the three and six months ended June 30, 2024, financial position as of June 30, 2024, and cash flows for the six months ended June 30, 2024 is shown on the attached unaudited condensed consolidated financial statements.

About Crawford & Company

Based in Atlanta, Crawford & Company (NYSE:CRD) 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.

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