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Crawford & Company Reports 2022 Third Quarter Results

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:

 

 

Three Months Ended

 

 

Nine Months Ended

 

(in thousands)

 

September 30,

2022

 

 

September 30,

2021

 

 

September 30,

2022

 

 

September 30,

2021

 

Geographic Area

Currency

USD

equivalent

 

% of

total

 

 

USD

equivalent

 

% of

total

 

 

USD

equivalent

 

% of

total

 

 

USD

equivalent

 

% of

total

 

U.S.

USD

$

183,197

 

 

62.1

%

 

$

175,553

 

 

60.8

%

 

$

523,650

 

 

60.4

%

 

$

476,669

 

 

58.9

%

U.K.

GBP

 

25,534

 

 

8.7

%

 

 

32,527

 

 

11.3

%

 

 

86,726

 

 

10.0

%

 

 

93,741

 

 

11.6

%

Canada

CAD

 

25,661

 

 

8.7

%

 

 

21,102

 

 

7.3

%

 

 

74,596

 

 

8.6

%

 

 

63,139

 

 

7.8

%

Australia

AUD

 

24,601

 

 

8.3

%

 

 

20,132

 

 

7.0

%

 

 

63,052

 

 

7.3

%

 

 

58,652

 

 

7.2

%

Europe

EUR

 

20,535

 

 

7.0

%

 

 

21,807

 

 

7.6

%

 

 

68,217

 

 

7.8

%

 

 

66,508

 

 

8.2

%

Rest of World

Various

 

15,396

 

 

5.2

%

 

 

17,379

 

 

6.0

%

 

 

51,053

 

 

5.9

%

 

 

50,429

 

 

6.3

%

Total Revenues, before reimbursements

$

294,924

 

 

100.0

%

 

$

288,500

 

 

100.0

%

 

$

867,294

 

 

100.0

%

 

$

809,138

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

2022

 

September 30,

2021

 

 

September 30,

2022

 

September 30,

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

attributable to Crawford & Company

 

Diluted (loss)

earnings per

CRD-A

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

 

(in thousands)

Pretax earnings

 

Net income

attributable to Crawford & Company

 

Diluted

earnings per

CRD-A

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

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2022

 

(in thousands)

Pretax (loss) earnings

 

Net (loss) income

attributable to Crawford & Company

 

Diluted (loss)

earnings per

CRD-A

share(1)

 

Diluted (loss)

earnings per

CRD-B

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

attributable to Crawford & Company

 

Diluted

earnings per

CRD-A

share

 

Diluted

earnings per

CRD-B

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®

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 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 percent of CRD-A, 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-Investor-News-and-Events, Crawford-Financial

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 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)

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

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

 

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.

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