Crawford(CRD_A) - 2024 Q2 - Quarterly Results

Q2 2024 Financial Performance Overview Crawford & Company's Q2 2024 results show slight revenue decline, stable GAAP net income, and modest non-GAAP improvements CEO Commentary The CEO noted strong Q2 2024 operating earnings growth and improved margins in three segments, particularly Broadspire, despite challenging comparisons and weather impacts on Platform Solutions - Three of four business segments achieved operating earnings growth and improved margins despite challenging prior-year weather comparisons[3] - The company secured $23 million in new and enhanced business, maintaining a robust sales pipeline[3] - Broadspire achieved a record quarter with strong revenue growth and significant margin improvement[4] - Platform Solutions was negatively impacted by the absence of severe weather, as carriers had sufficient capacity for current claim volumes[4] Consolidated Financial Results Q2 2024 consolidated results show a slight revenue decrease, stable GAAP net income and EPS, and modest increases in non-GAAP net income and EPS GAAP Consolidated Results - Q2 2024 vs Q2 2023 | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Revenues before reimbursements | $314.2M | $324.6M | | Net income attributable to shareholders | $8.6M | $8.4M | | Diluted EPS (CRD-A and CRD-B) | $0.17 | $0.17 | Non-GAAP Consolidated Results - Q2 2024 vs Q2 2023 | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Non-GAAP Diluted EPS | $0.25 | $0.24 | | Non-GAAP Net income | $12.4M | $12.0M | | Consolidated adjusted operating earnings | $22.1M | $22.8M | | Consolidated adjusted EBITDA | $30.6M | $31.5M | - Foreign currency exchange rates negatively impacted revenues before reimbursements by $1.9 million, resulting in a 3% year-over-year decrease on a constant dollar basis[4] Segment Performance Analysis This section analyzes the individual financial performance of the company's four operating segments, highlighting revenue, operating earnings, and margin trends North America Loss Adjusting North America Loss Adjusting reported nearly flat revenues but increased operating earnings to $4.9 million, improving its operating margin to 6.4% North America Loss Adjusting Performance - Q2 2024 vs Q2 2023 | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Revenues before reimbursements | $76.0M | $76.4M | | Operating Earnings | $4.9M | $3.9M | | Operating Margin | 6.4% | 5.1% | International Operations International Operations achieved strong Q2 2024 growth, with revenues up 7.3% to $102.3 million and operating earnings rising to $5.7 million International Operations Performance - Q2 2024 vs Q2 2023 | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Revenues before reimbursements | $102.3M | $95.3M | | Operating Earnings | $5.7M | $3.7M | | Operating Margin | 5.6% | 3.9% | Broadspire Broadspire achieved a record quarter with revenues growing 11.3% to $97.1 million and operating earnings surging to $15.1 million Broadspire Performance - Q2 2024 vs Q2 2023 | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Revenues before reimbursements | $97.1M | $87.2M | | Operating Earnings | $15.1M | $8.1M | | Operating Margin | 15.5% | 9.3% | Platform Solutions Platform Solutions faced a challenging quarter with revenues declining 40.8% to $38.8 million due to reduced weather-related claim volumes Platform Solutions Performance - Q2 2024 vs Q2 2023 | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Revenues before reimbursements | $38.8M | $65.6M | | Operating Earnings | $1.5M | $8.1M | | Operating Margin | 3.8% | 12.3% | Financial Condition and Other Matters This section reviews the company's corporate costs, balance sheet position, and cash flow activities, providing insight into its financial health and liquidity Corporate Costs and Expenses Unallocated corporate costs significantly increased to $5.1 million in Q2 2024, primarily due to higher professional fees and reserves, alongside a 2.6% rise in SG&A expenses - Unallocated corporate costs increased from $1.1 million in Q2 2023 to $5.1 million in Q2 2024, primarily due to higher professional fees and other reserves[9] - SG&A expenses increased by $1.8 million (2.6%) in Q2 2024, driven by professional fees, IT costs, and compensation expenses[10] Balance Sheet and Cash Flow As of June 30, 2024, cash decreased to $46.7 million while total debt rose to $233.8 million, with operations using $8.3 million in cash during the first half Balance Sheet Key Items | Metric | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $46.7M | $58.4M | | Total Debt Outstanding | $233.8M | $209.1M | - Cash used by operations totaled $8.3 million in the first six months of 2024, a shift from $27.2 million provided in the prior-year period[12] - The company repurchased 230,861 shares of CRD-B stock for $2.1 million during the first half of 2024[12] Non-GAAP Measures and Reconciliations This section defines the non-GAAP financial measures used by the company and provides detailed reconciliations to their most directly comparable GAAP equivalents Explanation of Non-GAAP Measures The company uses non-GAAP measures like 'Revenues before reimbursements,' 'Operating earnings,' and 'Adjusted EBITDA' to assess performance by excluding specific items for clearer operational insights - Operating earnings serve as the primary financial performance measure for senior management's evaluation, resource allocation, and compensation decisions[14] - Adjusted EBITDA is defined as net income attributable to shareholders, adjusted for depreciation, amortization, net corporate interest, contingent earnouts, non-service pension costs, income taxes, and stock-based compensation[15] Reconciliation Tables This section provides detailed reconciliation tables bridging GAAP to non-GAAP financial measures, including consolidated operating earnings, adjusted EBITDA, and adjusted EPS for Q2 2024 and 2023 Reconciliation of GAAP to Non-GAAP Adjusted EPS (Q2 2024) | Metric | Amount | | :--- | :--- | | GAAP Diluted EPS | $0.17 | | Amortization of intangible assets | $0.03 | | Non-service related pension costs | $0.04 | | Contingent earnout adjustments | $0.01 | | Non-GAAP Adjusted Diluted EPS | $0.25 | Reconciliation of Net Income to Adjusted EBITDA (Q2 2024 vs Q2 2023, in thousands) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net income attributable to shareholders | $8,584 | $8,427 | | Add: Depreciation and amortization | $8,845 | $9,191 | | Add: Stock-based compensation | $1,613 | $1,586 | | Add: Net corporate interest expense | $4,256 | $4,309 | | Add: Non-service pension costs | $2,399 | $2,095 | | Add: Contingent earnout adjustments | $430 | $725 | | Add: Income tax provision | $4,486 | $5,206 | | Non-GAAP adjusted EBITDA | $30,613 | $31,539 | Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including statements of operations, balance sheets, segment results, and cash flows Condensed Consolidated Statements of Operations This statement details the company's revenues, costs, and net income for the three and six months ended June 30, 2024, with comparative 2023 figures Statement of Operations Summary - Six Months Ended June 30 | Metric (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Revenues Before Reimbursements | $615,881 | $640,890 | | Total Revenues | $639,926 | $665,567 | | Income Before Income Taxes | $16,814 | $29,552 | | Net Income Attributable to Shareholders | $11,421 | $19,108 | | Diluted EPS | $0.23 | $0.39 | Condensed Consolidated Balance Sheets The balance sheet provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' investment as of June 30, 2024, versus December 31, 2023 Balance Sheet Summary (in thousands) | Metric | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $351,995 | $369,346 | | Total Assets | $785,812 | $799,199 | | Total Current Liabilities | $272,224 | $299,292 | | Total Liabilities | $636,105 | $659,368 | | Total Shareholders' Investment | $149,707 | $139,831 | Summary Results by Operating Segment This section provides a detailed financial breakdown for each of the company's four operating segments, including revenues, expenses, and operating earnings for Q2 2024 Operating Earnings by Segment - Six Months Ended June 30 (in thousands) | Segment | 2024 | 2023 | | :--- | :--- | :--- | | North America Loss Adjusting | $9,364 | $11,965 | | International Operations | $7,392 | $6,777 | | Broadspire | $27,895 | $16,075 | | Platform Solutions | $2,584 | $18,072 | Condensed Consolidated Statements of Cash Flows This statement details the sources and uses of cash for the six months ended June 30, 2024, categorized by operating, investing, and financing activities Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(8,253) | $27,169 | | Net cash used in investing activities | $(18,449) | $(17,945) | | Net cash provided by (used in) financing activities | $15,655 | $(8,478) | | (Decrease) Increase in cash | $(11,202) | $1,808 |