Crawford(CRD_A) - 2024 Q4 - Annual Report

Part I Item 1. Business Crawford & Company is the world's largest publicly listed independent claims management provider, generating $1.293 billion in 2024 revenue across four main segments - Crawford & Company is the world's largest publicly listed independent provider of claims management and outsourcing solutions, serving clients in over 70 countries[15] - The company's services are delivered through four geographic reporting segments: North America Loss Adjusting, International Operations, Broadspire, and Platform Solutions[17][18] - As of December 31, 2024, the company had approximately 10,040 employees, with women comprising 57% of the global workforce and 27% of global senior management[34] - No single customer accounted for 10% or more of consolidated revenues in 2024, 2023, or 2022, though Platform Solutions and International Operations segments have significant customer concentration[24] 2024 Revenue by Segment | Segment | 2024 Revenue (before reimbursements) | % of Total | | :--- | :--- | :--- | | North America Loss Adjusting | $312.8M (24.2%) | 24.2% | | International Operations | $419.9M (32.4%) | 32.4% | | Broadspire | $387.9M (30.0%) | 30.0% | | Platform Solutions | $173.7M (13.4%) | 13.4% | | Total | $1.293 Billion | 100.0% | Item 1A. Risk Factors The company faces material risks including unpredictable claim volumes, client concentration, data security threats, operational challenges, an underfunded pension plan, and intense market competition - A significant portion of revenues depends on claim volumes, which are difficult to forecast due to factors like weather, insurance outsourcing trends, and economic activity[47][51] - The company manages a large amount of sensitive consumer data, and a security breach could result in material loss of business, legal liability, and reputational harm[52][53] - The U.S. qualified defined benefit pension plan is underfunded by $19.0 million, with future funding requirements potentially restricting cash available for operations and investment[74] - The company's credit facility contains covenants requiring compliance with a maximum leverage ratio and a minimum interest coverage ratio, which if breached, could make all outstanding debt immediately due[76][77] - The global claims management market is highly competitive, facing pressure from numerous firms of varying sizes, potential new entrants, and industry consolidation[81][82] - A principal shareholder, Jesse C. Crawford, beneficially owns approximately 68% of the voting Class B Common Stock, giving him control over substantially all matters submitted to shareholders[80] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[90] Item 1C. Cybersecurity The company maintains a global cybersecurity and privacy program aligned with NIST, overseen by the Board, and has reported no material incidents in the last three fiscal years - The company has a global cybersecurity and privacy program to assess, identify, and manage cybersecurity risks, which are evaluated as part of the global Enterprise Risk Management (ERM) program[91][92] - The Board of Directors provides oversight, with the Audit Committee overseeing the information security programs, and the Chief Technology and Information Security Officer (CISO) managing the program and providing quarterly updates[99] - In the last three fiscal years, the company has not experienced any material cybersecurity incidents, and related expenses have been immaterial[97] Item 2. Properties As of December 31, 2024, the company leased 202 office locations, which management deems sufficient for current operations - The company leased 202 office locations as of December 31, 2024, and believes its current office locations are sufficient for its operations[104] Item 3. Legal Proceedings The company is involved in routine legal proceedings, for which management believes adequate provisions have been made without expected material adverse effects - In the normal course of business, the company is named as a defendant in suits related to the settlement or administration of claims, with the majority of these claims covered by insurance[105] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[107] Part II Item 5. Market for the Registrant's Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities The company's Class A and B common stocks trade on the NYSE, with a share repurchase program active and performance tracked against relevant market indices - The company's two classes of common stock, CRD-A and CRD-B, are traded on the New York Stock Exchange (NYSE)[110] - As of December 31, 2024, the company had authorization to repurchase an additional 1,089,809 shares of its common stock through December 31, 2025[112] Total Shareholder Return Comparison (2019-2024) | Company / Index | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Crawford & Company (Class A) | 100.00 | 66.09 | 68.73 | 52.72 | 128.83 | 116.02 | | Crawford & Company (Class B) | 100.00 | 72.62 | 77.57 | 56.97 | 145.08 | 132.58 | | Russell 2000 Index | 100.00 | 119.96 | 137.74 | 109.58 | 128.14 | 142.92 | | S&P Property-Casualty Insurance Index | 100.00 | 106.33 | 124.95 | 148.53 | 164.49 | 219.73 | Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated revenues grew 2.0% to $1.293 billion in 2024, while net income decreased, with the company maintaining debt covenant compliance and outlining key accounting estimates Results of Operations Consolidated revenues grew 2.0% to $1.293 billion in 2024, driven by most segments but offset by a 23.0% decline in Platform Solutions, while net income decreased and SG&A expenses rose - Total cases received decreased by 2.7% in 2024 compared to 2023, primarily driven by declines in North America Loss Adjusting and Platform Solutions[126][127] - Selling, general, and administrative (SG&A) expenses increased by $13.2 million (4.6%) in 2024, mainly due to higher professional fees and IT costs[134] Consolidated Financial Highlights (2024 vs. 2023) | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenues before reimbursements | $1.293 billion | $1.267 billion | 2.0% | | Net Income Attributable to Company | $26.6 million | $30.6 million | (13.1)% | Revenues by Segment (2024 vs. 2023, In thousands) | Segment | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | North America Loss Adjusting | $312,158 | $303,629 | 2.8% | | International Operations | $418,607 | $382,393 | 9.5% | | Broadspire | $388,074 | $355,650 | 9.1% | | Platform Solutions | $173,671 | $225,459 | (23.0)% | Liquidity, Capital Resources, and Financial Condition The company maintains liquidity through operating cash flow and a $450 million credit facility, remaining compliant with debt covenants despite a decrease in operating cash activities in 2024 - The company's primary sources of liquidity are cash from operations and a $450.0 million revolving credit facility that matures on November 5, 2026[257][259] - Cash provided by operating activities decreased from $103.8 million in 2023 to $51.6 million in 2024, a decline of $52.2 million[272] - Capital expenditures, including capitalized software, are forecasted to be between $40.0 million and $45.0 million in 2025[274] Credit Facility Status (as of Dec 31, 2024) | Metric | Value | | :--- | :--- | | Total Facility Size | $450.0 million | | Debt Outstanding | $218.1 million | | Letters of Credit | $8.9 million | | Available Borrowing Capacity | $219.4 million | Financial Covenant Compliance (as of Dec 31, 2024) | Covenant | Ratio | Requirement | | :--- | :--- | :--- | | Leverage Ratio | 1.85 | < 4.50 | | Interest Coverage Ratio | 5.50 | > 2.50 | Critical Accounting Policies and Estimates Critical accounting policies involve significant judgment in revenue recognition, goodwill valuation, pension plan assumptions, and income tax provisions, impacting financial reporting - Revenue recognition for fixed-fee and lifetime claim handling arrangements is sensitive to estimates of historical claim closing rates, where a 1.0% change would impact annual revenue by approximately $0.5 million[299][302] - The valuation of goodwill and indefinite-lived intangible assets is performed annually using a combination of income and market approaches, with discount rates ranging from 13.0% to 17.0% in the 2024 analysis[306][309] - Accounting for defined benefit pension plans involves significant assumptions, where a 0.50% change in the expected return on plan assets would impact 2024 pretax income by approximately $2.1 million[312][322] - The company maintains a valuation allowance of $35.3 million on certain deferred tax assets, primarily related to net operating loss carryforwards in international and domestic operations[330] - The fair value of contingent earnout liabilities from acquisitions is reassessed quarterly, resulting in a benefit of $1.1 million in 2024 compared to an expense of $4.0 million in 2023[339][251] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency fluctuations, with international operations comprising 39.4% of 2024 revenues, and interest rate changes on variable-rate debt - Revenues from international operations were 39.4% of consolidated revenues in 2024, exposing the company to foreign currency exchange rate risk[342] - A hypothetical 10.0% change in foreign currency exchange rates would have impacted 2024 consolidated pretax income by approximately $1.9 million[342] - The company has interest rate risk due to variable-rate borrowings under its Credit Facility, where a 1.0% change in market interest rates would have changed 2024 pretax interest expense by $2.2 million[343] Item 8. Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2022-2024, including statements of operations, balance sheets, cash flows, and comprehensive notes, along with the independent auditor's report Consolidated Statements of Operations Highlights (In thousands) | Line Item | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Total Revenues | $1,340,970 | $1,316,919 | $1,231,226 | | Total Costs and Expenses | $1,289,949 | $1,261,389 | $1,227,741 | | Income Before Income Taxes | $41,112 | $47,357 | $5,046 | | Net Income (Loss) Attributable to Shareholders | $26,596 | $30,609 | $(18,305) | Consolidated Balance Sheets Highlights (In thousands) | Line Item | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $374,227 | $369,346 | | Total Assets | $803,755 | $799,199 | | Total Current Liabilities | $299,727 | $299,292 | | Total Liabilities | $648,204 | $659,368 | | Total Shareholders' Investment | $155,551 | $139,831 | Consolidated Statements of Cash Flows Highlights (In thousands) | Line Item | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $51,619 | $103,790 | $27,634 | | Net cash used in investing activities | $(41,647) | $(36,596) | $(57,876) | | Net cash (used in) provided by financing activities | $(12,862) | $(54,680) | $25,940 | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This item is not applicable to the company - Not applicable[561] Item 9A. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024, with no material changes during the fourth quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2024[564] - Management assessed internal control over financial reporting based on the COSO framework and determined it was effective as of December 31, 2024[567] - There were no changes in internal control over financial reporting during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, the controls[569] Item 9B. Other Information During the fourth quarter of 2024, no directors or officers adopted or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements - No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements during the fourth quarter of 2024[570] Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to the company - Not applicable[571] Part III Items 10, 11, 12, 13, and 14 Information for Items 10-14, covering governance, compensation, and related matters, is incorporated by reference from the company's 2025 Proxy Statement - Information regarding Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, Certain Relationships, and Principal Accountant Fees and Services is incorporated by reference from the Registrant's 2025 Proxy Statement[582][584][585] Part IV Item 15. Exhibits, Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including consolidated financial statements and various certifications - This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and certifications by the CEO and CFO[590][591] Item 16. Form 10-K Summary The company did not provide a summary under this item - None[593]