Part I. Financial Information Item 1. Financial Statements The company's financial statements for the period ended September 30, 2023, reflect a significant turnaround from a net loss to a net income, with increased revenues, higher total assets, and improved operating cash flow Condensed Consolidated Statements of Operations Highlights (In thousands) | Indicator (In thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenues before reimbursements | $325,594 | $294,924 | $959,251 | $867,294 | | Total Revenues | $337,660 | $306,417 | $995,994 | $897,858 | | Goodwill impairment | $0 | $36,808 | $0 | $36,808 | | Income (Loss) Before Income Taxes | $18,955 | $(28,538) | $48,507 | $(12,351) | | Net Income (Loss) Attributable to Shareholders | $12,319 | $(15,144) | $31,427 | $(4,218) | | Diluted EPS (Class A) | $0.25 | $(0.31) | $0.63 | $(0.08) | Condensed Consolidated Balance Sheet Highlights (In thousands) | Indicator (In thousands) | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $379,991 | $351,267 | | Goodwill | $76,637 | $76,622 | | TOTAL ASSETS | $827,191 | $791,507 | | Total Current Liabilities | $290,681 | $279,487 | | Long-term debt and finance leases | $201,487 | $211,810 | | Total Shareholders' Investment | $162,970 | $123,378 | | TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT | $827,191 | $791,507 | Condensed Consolidated Statements of Cash Flows Highlights (In thousands) | Indicator (In thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $68,077 | $(16,195) | | Net cash used in investing activities | $(27,683) | $(48,193) | | Net cash (used in) provided by financing activities | $(38,070) | $46,931 | - The company operates through four reportable segments: North America Loss Adjusting, International Operations, Broadspire, and Platform Solutions31 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported robust revenue growth and substantial operating earnings improvement across most segments, with strong liquidity and significantly improved cash flow from operations Results of Operations Consolidated revenues before reimbursements increased significantly in Q3 and YTD 2023, driven by segment growth and the absence of prior-year goodwill impairment Consolidated Revenues Before Reimbursements (in thousands) | Period | 2023 | 2022 | % Variance | % Variance (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $325,594 | $294,924 | 10.4% | 10.2% | | Nine Months Ended Sep 30 | $959,251 | $867,294 | 10.6% | 12.5% | - A pretax non-cash goodwill impairment of $36.8 million was recognized in Q3 2022, impacting the North America Loss Adjusting ($3.4 million), International Operations ($22.7 million), and Platform Solutions ($10.7 million) segments, with no such impairment occurring in 2023119196 Segment Operating Earnings (in thousands) | Segment | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | North America Loss Adjusting | $10,468 | $3,750 | $22,433 | $10,533 | | International Operations | $2,197 | $(3,922) | $8,974 | $(7,648) | | Broadspire | $13,532 | $6,198 | $29,607 | $20,299 | | Platform Solutions | $8,523 | $10,080 | $26,595 | $22,714 | Segment Performance North America Loss Adjusting, International Operations, and Broadspire segments showed strong revenue growth and improved operating earnings, while Platform Solutions experienced a decline - North America Loss Adjusting: Q3 revenue grew 18.8% to $79.4 million, driven by a 34.1% increase in U.S. revenues from new and existing clients, with operating margin improving significantly from 5.6% to 13.2%137140 - International Operations: Q3 revenue increased 13.9% to $98.1 million, with the U.K. showing strong 51.0% growth, and the segment returned to profitability with a 2.2% operating margin, a sharp recovery from a (4.6)% margin in Q3 2022149152 - Broadspire: Q3 revenue rose 12.7% to $88.3 million, with strong growth in both Claims Management (+9.2%) and Medical Management (+16.3%), and operating margin nearly doubled from 7.9% to 15.3%161165 - Platform Solutions: Q3 revenue decreased 6.0% to $59.8 million, primarily due to a 16.3% decline in the Networks service line, leading to a contraction in operating margin from 15.8% to 14.2%172175 Liquidity, Capital Resources, and Financial Condition The company's financial position strengthened with increased working capital, robust operating cash flow, and strong total liquidity, while net borrowings decreased - Cash provided by operating activities was $68.1 million for the nine months ended Sep 30, 2023, a stark contrast to the $16.2 million used in the same period of 2022200 - Total liquidity was $281.2 million at September 30, 2023, consisting of $49.2 million in cash and $232.0 million in additional borrowing capacity under the credit facility205 - Net borrowings from the revolving credit facility decreased by $22.8 million in the first nine months of 2023, compared to a net increase of $84.8 million in the prior-year period202 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk exposures since the disclosures in its 2022 Annual Report on Form 10-K - There have been no material changes in the company's market risk exposures since December 31, 2022216 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective due to a material weakness in IT general controls within U.K. operations, with remediation underway - A material weakness in internal control over financial reporting persists, related to ineffective IT general controls (ITGCs) in the areas of change management and logical access within the U.K. operations219 - Due to this material weakness, the CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2023218 - Management is implementing a remediation plan involving improved documentation, enhanced training, and new automated tools, with an expected completion date during fiscal year 2023222223 Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 trading plans during the third quarter of 2023 - No directors or officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended September 30, 2023225 Part II. Other Information Item 1A. Risk Factors The company refers to its 2022 Form 10-K for risk factors, indicating no new material risks in this quarterly report - The company directs stakeholders to the risk factors detailed in its 2022 Form 10-K, suggesting no new material risks have been identified in this quarter227 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company continued its share repurchase program in Q3 2023, repurchasing 63,103 shares, with 1,730,268 shares remaining authorized Share Repurchases in Q3 2023 | Period | Class | Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | :--- | | July 2023 | CRD-A / CRD-B | 0 | N/A | | August 2023 | CRD-B | 9,637 | $9.14 | | September 2023 | CRD-B | 53,466 | $9.25 | | Total Q3 2023 | CRD-B | 63,103 | N/A | - As of September 30, 2023, the company had authorization to repurchase an additional 1,730,268 shares under its program, which is effective through December 31, 2024228229 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including officer certifications and Inline XBRL data files - The exhibits filed with this report include required CEO and CFO certifications and interactive data files (XBRL)231
Crawford(CRD_B) - 2023 Q3 - Quarterly Report