Part I. Financial Information This section presents Crawford & Company's unaudited condensed consolidated financial statements and related disclosures for the first quarter of 2023 Item 1. Financial Statements Crawford & Company reported significantly increased profitability and revenue growth in Q1 2023, with improved cash flow and a stronger balance sheet Condensed Consolidated Statements of Operations Net income more than doubled to $10.7 million in Q1 2023, driven by a 12.8% increase in total revenues outpacing expense growth Q1 2023 vs Q1 2022 Statement of Operations Highlights | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenues | $324,596 | $287,789 | +12.8% | | Total Costs and Expenses | $306,450 | $280,705 | +9.2% | | Income Before Income Taxes | $16,001 | $7,582 | +111.0% | | Net Income | $10,730 | $5,156 | +108.1% | | Diluted EPS (Class A & B) | $0.22 | $0.10 | +120.0% | Condensed Consolidated Statements of Comprehensive Income Comprehensive income surged to $20.5 million in Q1 2023, primarily due to higher net income and positive foreign currency translation gains Q1 Comprehensive Income Comparison (in thousands) | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | Net Income | $10,730 | $5,156 | | Net foreign currency translation gain (loss) | $7,690 | $(4,952) | | Other Comprehensive Income (Loss) | $9,776 | $(3,276) | | Comprehensive Income | $20,506 | $1,880 | Condensed Consolidated Balance Sheets Total assets increased to $816.0 million by March 31, 2023, leading to growth in total shareholders' investment Balance Sheet Summary (in thousands) | Account | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $368,495 | $351,267 | | Total Assets | $816,025 | $791,507 | | Total Current Liabilities | $286,287 | $279,487 | | Total Liabilities | $674,198 | $668,129 | | Total Shareholders' Investment | $141,827 | $123,378 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly improved to $0.4 million in Q1 2023, reflecting higher net income and favorable working capital changes Q1 Cash Flow Summary (in thousands) | Activity | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(445) | $(15,253) | | Net cash used in investing activities | $(8,641) | $(25,856) | | Net cash provided by financing activities | $5,187 | $37,608 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, segment performance, the 2022 Van Dijk acquisition, fair value measurements, and an increased effective tax rate - The company operates four reportable segments: North America Loss Adjusting, International Operations, Broadspire, and Platform Solutions1781 - On April 1, 2022, the company acquired R.P. van Dijk B.V. ("Van Dijk"), a bodily injury loss adjusting company in the Netherlands, for an initial cash consideration of $4.3 million and a potential earn-out of up to $2.2 million3 - The effective income tax rate increased to 32.9% for Q1 2023 from 32.0% in Q1 2022, primarily due to losses in certain international operations30 - Basic and diluted EPS for both Class A and Class B stock was $0.22 for Q1 2023, up from $0.10 in Q1 20223234 Report of Independent Registered Public Accounting Firm Ernst & Young LLP reviewed the interim financial statements and found no material modifications needed for GAAP conformity - The independent auditors, Ernst & Young LLP, concluded their review stating they are "not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles"23 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management reported strong Q1 2023 revenue and operating earnings growth across all segments, with robust liquidity and ongoing internal control remediation Results of Operations Consolidated revenues before reimbursements grew 12.2% in Q1 2023, driven by strong performance in North America Loss Adjusting and Platform Solutions Q1 2023 Segment Revenue Performance (in thousands) | Segment | Q1 2023 Revenue (in thousands) | Q1 2022 Revenue (in thousands) | YoY Change | Constant Currency YoY Change | | :--- | :--- | :--- | :--- | :--- | | North America Loss Adjusting | $77,127 | $64,438 | 19.7% | 22.3% | | International Operations | $91,863 | $89,272 | 2.9% | 11.6% | | Broadspire | $81,182 | $76,454 | 6.2% | 6.2% | | Platform Solutions | $62,820 | $48,861 | 28.6% | 28.6% | | Total | $312,992 | $279,025 | 12.2% | 15.5% | Q1 2023 Segment Operating Earnings (in thousands) | Segment | Q1 2023 Operating Earnings (in thousands) | Q1 2022 Operating Earnings (Loss) (in thousands) | | :--- | :--- | :--- | | North America Loss Adjusting | $8,065 | $4,135 | | International Operations | $3,035 | $(3,067) | | Broadspire | $7,927 | $6,434 | | Platform Solutions | $9,966 | $8,038 | | Total | $28,993 | $15,540 | - Overall cases received decreased by 6.8%, which management attributes to a reduction of approximately 39,000 high-frequency, low-severity cases that were present in Q1 2022 and generated minimal revenue132 Liquidity, Capital Resources, and Financial Condition The company's financial position strengthened with increased working capital and robust liquidity, while operating cash flow significantly improved - Total liquidity at March 31, 2023, was $235.2 million, consisting of $43.3 million in cash and $191.9 million in available borrowing capacity under its credit facility171 - Cash used in operating activities decreased to $0.4 million in Q1 2023 from $15.3 million in Q1 2022, mainly due to a $5.6 million increase in net income and a $7.7 million reduction in incentive compensation payments168 - The company paid $2.9 million in dividends during Q1 2023, with no shares repurchased, compared to $16.1 million in repurchases in Q1 2022151170 Quantitative and Qualitative Disclosures About Market Risk The company reported no material changes to its market risk exposures since the end of fiscal year 2022 - The company's exposures to market risk have not changed materially since December 31, 2022154 Controls and Procedures Disclosure controls were deemed ineffective due to a material weakness in U.K. ITGCs, with a remediation plan underway for 2023 completion - Disclosure controls and procedures were deemed not effective as of March 31, 2023, because of a material weakness in IT general controls (ITGCs) in the U.K. operations related to change management and logical access156 - Management is implementing a remediation plan that includes improved documentation, enhanced training, and new automated tools, with expected completion during fiscal year 2023157 - Despite the material weakness, management concluded that the condensed consolidated financial statements included in the report are fairly presented in all material respects156 Part II. Other Information This section provides additional disclosures, including risk factors, equity security sales, exhibits, and official signatures for the Form 10-Q Risk Factors Investors are directed to the comprehensive risk factors detailed in the company's 2022 Annual Report on Form 10-K - The report refers to the risk factors discussed in Part I, "Item 1A. Risk Factors" in the Annual Report on Form 10-K for the year ended December 31, 2022, for a comprehensive understanding of potential risks159 Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any shares in Q1 2023, with 1.79 million shares remaining under its repurchase authorization - No shares of CRD-A or CRD-B were repurchased during the three months ended March 31, 202335161 - As of March 31, 2023, there were 1,793,371 shares remaining authorized for repurchase under the company's 2021 Repurchase Authorization160161 Exhibits This section lists all exhibits filed with the Form 10-Q, including required CEO/CFO certifications and XBRL data - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002148163 Signatures The Form 10-Q was officially signed by the Chief Executive Officer and Chief Financial Officer on May 3, 2023 - The report is signed by Rohit Verma (Chief Executive Officer) and W. Bruce Swain (Chief Financial Officer) on May 3, 2023147150
Crawford(CRD_A) - 2023 Q1 - Quarterly Report