Crawford(CRD_B) - 2023 Q4 - Annual Results

Financial Highlights Fourth Quarter 2023 Performance In Q4 2023, Crawford & Company reported decreased revenues to $296.1 million, with GAAP net loss narrowing to $(0.8) million while non-GAAP net income and adjusted operating earnings declined Q4 2023 GAAP Consolidated Results | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Revenues before reimbursements (in millions) | $296.1 | $322.2 | | Net loss attributable to shareholders (in millions) | $(0.8) | $(14.1) | | Diluted loss per share (CRD-A & CRD-B) | $(0.02) | $(0.29) | Q4 2023 Non-GAAP Consolidated Results | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Net income attributable to shareholders (in millions) | $3.3 | $11.4 | | Diluted earnings per share (CRD-A/CRD-B) | $0.06/$0.07 | $0.23/$0.23 | | Consolidated adjusted operating earnings (in millions) | $7.8 | $23.4 | | Consolidated adjusted EBITDA (in millions) | $15.7 | $30.8 | - On a constant dollar basis, Q4 2023 revenues before reimbursements decreased by 9% compared to the prior-year quarter[4] Full Year 2023 Performance Full year 2023 saw record revenues of $1.267 billion, a 7% increase, with GAAP net income turning profitable at $30.6 million and non-GAAP results showing strong growth Full Year 2023 GAAP Consolidated Results | Metric | Full Year 2023 | Full Year 2022 | | :--- | :--- | :--- | | Revenues before reimbursements (in billions) | $1.267 | $1.189 | | Net income (loss) attributable to shareholders (in millions) | $30.6 | $(18.3) | | Diluted earnings (loss) per share (CRD-A/CRD-B) | $0.61/$0.62 | $(0.37)/$(0.37) | Full Year 2023 Non-GAAP Consolidated Results | Metric | Full Year 2023 | Full Year 2022 | | :--- | :--- | :--- | | Net income attributable to shareholders (in millions) | $47.0 | $33.4 | | Diluted earnings per share (CRD-A & CRD-B) | $0.95 | $0.67 | | Consolidated adjusted operating earnings (in millions) | $85.4 | $61.9 | | Consolidated adjusted EBITDA (in millions) | $118.7 | $94.7 | - On a constant dollar basis, full-year 2023 revenues before reimbursements increased by 8% over 2022[6] Management Commentary Management highlighted 2023 as a strong year with record consolidated revenue of $1.27 billion and enhanced margins, despite Q4 being impacted by benign weather, while expressing optimism for 2024 market share expansion - 2023 was a record-setting year with consolidated revenue of $1.27 billion and a 38% increase in operating earnings from 2022[7] - Fourth-quarter performance was impacted by benign weather activity, leading to lower weather-related revenue compared to Q4 2022, which had several severe weather events[7] - Despite the weather impact, both the Broadspire and International businesses achieved double-digit revenue growth in Q4 2023[7] Segment Performance North America Loss Adjusting The North America Loss Adjusting segment experienced a 10.3% revenue decrease in Q4 2023 with operating earnings falling to $0.8 million, but full-year revenue increased by 10.5% to $303.6 million with improved operating margin North America Loss Adjusting Performance | Period | Revenues (in millions) | Operating Earnings (in millions) | Operating Margin | | :--- | :--- | :--- | :--- | | Q4 2023 | $69.7 | $0.8 | 1.1% | | Q4 2022 | $77.7 | $8.6 | 11.0% | | FY 2023 | $303.6 | $23.2 | 7.6% | | FY 2022 | $274.8 | $19.1 | 7.0% | International Operations International Operations showed significant improvement, with Q4 2023 revenues growing 9.9% to $97.2 million and achieving an operating profit of $2.2 million, while full-year revenues increased 7.0% to $382.4 million with a $11.2 million operating profit International Operations Performance | Period | Revenues (in millions) | Operating Earnings (Loss) (in millions) | Operating Margin | | :--- | :--- | :--- | :--- | | Q4 2023 | $97.2 | $2.2 | 2.3% | | Q4 2022 | $88.4 | $(5.3) | (6.0)% | | FY 2023 | $382.4 | $11.2 | 2.9% | | FY 2022 | $357.5 | $(12.9) | (3.6)% | Broadspire Broadspire delivered strong results, with Q4 2023 revenues increasing 17.2% to $92.1 million and operating earnings nearly doubling to $12.3 million, contributing to full-year revenue growth of 13.4% to $355.7 million and a 55% rise in operating earnings Broadspire Performance | Period | Revenues (in millions) | Operating Earnings (in millions) | Operating Margin | | :--- | :--- | :--- | :--- | | Q4 2023 | $92.1 | $12.3 | 13.3% | | Q4 2022 | $78.6 | $6.7 | 8.6% | | FY 2023 | $355.7 | $41.9 | 11.8% | | FY 2022 | $313.6 | $27.0 | 8.6% | Platform Solutions Platform Solutions faced challenges, with Q4 2023 revenues declining 52.0% to $37.2 million and operating earnings dropping to $1.9 million, leading to full-year revenue down 7.5% to $225.5 million and decreased operating earnings Platform Solutions Performance | Period | Revenues (in millions) | Operating Earnings (in millions) | Operating Margin | | :--- | :--- | :--- | :--- | | Q4 2023 | $37.2 | $1.9 | 5.2% | | Q4 2022 | $77.4 | $13.0 | 16.8% | | FY 2023 | $225.5 | $28.5 | 12.7% | | FY 2022 | $243.7 | $35.7 | 14.7% | Unallocated Corporate and Shared Costs Unallocated corporate costs significantly increased in 2023, reaching $9.4 million in Q4 and $19.4 million for the full year, primarily due to higher self-insurance, compensation, and professional fees - Fourth-quarter unallocated costs increased to $9.4 million, primarily due to higher self-insurance, compensation, professional fees, and support costs[13] - Full-year unallocated costs rose to $19.4 million in 2023 from $7.1 million in 2022, impacted by similar cost increases as the fourth quarter and a gain on a building sale in 2022 that did not recur[13] Financial Condition and Cash Flow Balance Sheet Analysis As of December 31, 2023, the company strengthened its balance sheet by increasing cash to $58.4 million and reducing total debt to $209.1 million Key Balance Sheet Items | Metric | Dec 31, 2023 (in millions) | Dec 31, 2022 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $58.4 | $46.0 | | Total debt outstanding | $209.1 | $238.9 | Cash Flow Analysis The company significantly increased cash from operations to $103.8 million in 2023, driven by improved accounts receivables and higher earnings, and repurchased $2.7 million in shares - Cash provided by operating activities increased to $103.8 million in 2023 from $27.6 million in 2022, mainly due to a $58.4 million improvement in accounts receivables and higher earnings[18] - In 2023, the company repurchased 293,952 shares of CRD-B stock for a total of $2.7 million[18] Other Financial Information 2022 Goodwill Impairment No goodwill impairment was recorded in 2023, contrasting with a $36.8 million pre-tax non-cash impairment recognized in 2022, which had a $33.3 million after-tax impact - There was no goodwill impairment in 2023. In 2022, the company recognized a pre-tax non-cash goodwill impairment of $36.8 million, with an after-tax impact of $33.3 million for that year[14] Presentation Revision of 2023 Quarters An immaterial revision to 2023 interim financial statements reclassified certain income from SG&A reduction to 'Revenues before reimbursements', increasing both revenue and SG&A by identical amounts with no impact on operating earnings or net income - The company revised its interim 2023 financial presentation, increasing 'Revenues before reimbursements' and 'Selling, general, and administrative expenses' by corresponding amounts, with no impact on operating earnings or net income[15] Other Matters Other financial matters include a pretax contingent earnout expense of $0.9 million in Q4 2023 and $4.0 million for the full year, along with non-service pension costs of $2.2 million in Q4 and $8.6 million for the year - Recognized a pretax contingent earnout expense of $0.9 million in Q4 2023 and $4.0 million for the full year 2023 related to fair value adjustments of acquisition-related liabilities[16] - Non-service pension costs totaled $2.2 million in Q4 2023 and $8.6 million for the full year 2023[16] Non-GAAP Financial Measures and Reconciliations This section details the company's use of non-GAAP financial measures like Operating Earnings and Adjusted EBITDA, which provide a clearer view of operational performance by excluding specific items, and includes comprehensive reconciliations to GAAP counterparts - The company uses Operating Earnings as its primary measure for evaluating segment performance, which excludes items like net corporate interest expense, stock option expense, amortization, and goodwill impairment[20] - Adjusted EBITDA is used by management to evaluate and benchmark operational results and is defined as net income adjusted for depreciation, amortization, interest, taxes, stock-based compensation, and other specific non-operating items[20] Full Year 2023 GAAP to Non-GAAP Reconciliation Summary | Metric (in thousands) | GAAP | Adjustments | Non-GAAP Adjusted | | :--- | :--- | :--- | :--- | | Pretax earnings | $47,357 | $20,416 | $67,773 | | Net income attributable to Crawford & Co. | $30,609 | $16,410 | $47,019 | | Diluted EPS (CRD-A/CRD-B) | $0.61/$0.62 | $0.33/$0.33 | $0.95/$0.95 | Condensed Consolidated Financial Statements Condensed Consolidated Statements of Operations For full year 2023, total revenues increased by 7% to $1.317 billion, with the company achieving a net income of $30.3 million, a significant improvement from a $(18.5) million net loss in 2022 Full Year Statement of Operations Summary | Metric (in thousands) | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Total Revenues | $1,316,919 | $1,231,226 | | Total Costs and Expenses | $1,261,389 | $1,227,741 | | Net Income (Loss) | $30,260 | $(18,532) | | Diluted EPS (Class A) | $0.61 | $(0.37) | Condensed Consolidated Balance Sheets As of December 31, 2023, total assets slightly increased to $799.2 million, total liabilities decreased to $659.4 million, and total shareholders' investment rose to $139.8 million Balance Sheet Summary | Metric (in thousands) | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $369,346 | $351,267 | | Total Assets | $799,199 | $791,507 | | Total Current Liabilities | $299,292 | $279,487 | | Total Liabilities | $659,368 | $668,129 | | Total Shareholders' Investment | $139,831 | $123,378 | Condensed Consolidated Statements of Cash Flows For 2023, net cash from operating activities significantly increased to $103.8 million, with net cash used in investing activities at $36.6 million and financing activities at $54.7 million, resulting in a $12.9 million increase in cash and cash equivalents Cash Flow Summary | Metric (in thousands) | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $103,790 | $27,634 | | Net cash used in investing activities | $(36,596) | $(57,876) | | Net cash (used in) provided by financing activities | $(54,680) | $25,940 | | Increase (decrease) in cash | $12,900 | $(7,044) |