Crawford & Company — Q1 2021 Form 10-Q
Business context and period. The filing covers the three months ended March 31, 2021, compared with Q1 2020. Crawford provides claims management and outsourcing services in more than 70 countries. Effective January 1, 2021, it reorganized reporting into Crawford Loss Adjusting, Crawford TPA Solutions and Crawford Platform Solutions; comparative segment figures were reclassified. Results from certain international operations are reported on a two-month lag.
Financial performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue before reimbursements | $253.2 million | $237.5 million |
| Total revenue | $262.2 million | $246.0 million |
| Income (loss) before income taxes | $8.5 million | $(21.6) million |
| Net income (loss) | $6.0 million | $(13.2) million |
| Net income (loss) attributable to Crawford shareholders | $6.1 million | $(11.4) million |
| Basic and diluted EPS, Class A / Class B | $0.11 / $0.11 | $(0.21) / $(0.23) |
| Cash from (used in) operating activities | $1.6 million | $(8.0) million |
Revenue before reimbursements rose 6.6% year over year, or 4.4% at constant exchange rates; foreign exchange added about $5.3 million. Total segment operating earnings increased to $14.2 million from $10.1 million. Q1 2020 included $17.7 million of goodwill impairment and $5.7 million of restructuring costs; neither recurred in Q1 2021. These prior-year items materially affect the earnings comparison.
Segments and margins
| Segment | Revenue before reimbursements | Operating earnings | Operating margin |
|---|---|---|---|
| Loss Adjusting | $112.5 million, +5.1% | $4.9 million (prior: $0.7 million) | 4.3% (prior: 0.6%) |
| TPA Solutions | $98.2 million, +0.3% | $4.7 million (prior: $6.3 million) | 4.8% (prior: 6.4%) |
| Platform Solutions | $42.4 million, +30.7% | $4.6 million (prior: $3.1 million) | 10.9% (prior: 9.7%) |
Loss Adjusting benefited from weather-related activity and lower administrative support costs. TPA Solutions was pressured by COVID-related economic weakness, lower U.S. and Canadian activity, and reduced medical management revenue; cases received declined 9.3%. Platform Solutions grew with U.S. weather-related activity, new clients and WeGoLook volumes; cases received increased 19.4%. Overall cases received rose 0.5%.
Consolidated costs of services before reimbursements were $185.2 million, up from $177.6 million; SG&A was $58.7 million, up from $55.8 million. The effective tax rate was 29.1%, versus 39.2% in Q1 2020, primarily reflecting the prior-year impairment. Management estimated a 2021 effective tax rate of approximately 29%–31%. A Canadian wage subsidy reduced Q1 2021 compensation expense by $1.9 million.
Cash, debt and liquidity
- Cash was $42.7 million at March 31, 2021, versus $44.7 million at year-end 2020. Operating cash flow was positive $1.6 million; investing activities used $5.7 million and financing activities provided $0.6 million.
- Borrowings and finance leases, including current installments, totaled $119.2 million, compared with $113.6 million at December 31, 2020. Current liabilities were $235.2 million and current assets were $315.1 million; reported working capital was approximately $79.9 million.
- Management reported $232.6 million of additional borrowing capacity based on trailing-twelve-month EBITDA and total liquidity of $275.3 million including cash. Separately, available balance under the credit facility was $317.1 million, including $11.5 million of outstanding letters of credit.
- Quarterly dividends paid were $3.2 million; share repurchases totaled $1.2 million. The company expects to contribute $9.0 million to its U.S. defined benefit pension plan in 2021, with no further U.K. plan contributions expected for the year.
Outlook, risks and notable items
Management estimated that COVID-19 reduced Q1 2021 revenue by $5–$10 million versus the prior-year period and warned that the pandemic’s continuing economic effects could materially affect future revenue, earnings and cash flow. Future case volumes are uncertain and depend on claim referrals, weather and catastrophe activity, employment and workplace injury levels, outsourcing decisions, and client retention. No specific full-year revenue or earnings guidance was provided.
Other identified risks include foreign exchange and interest-rate movements, pension funding obligations, client credit and collections, competition, acquisition integration, employee recruitment and retention, cybersecurity, technology integration, credit-facility availability and covenant compliance, and potential goodwill impairment. The company reported ordinary-course claims, indemnification matters and regulatory or employment-related claims; management stated that provisions were made for probable and reasonably estimable matters. The maximum possible acquisition earnout was $15.6 million; the recorded contingent earnout liability was $8.8 million. HBA Group, an Australian legal-services business acquired in November 2020, was reflected in the quarter through the company’s delayed reporting convention.
The interim financial statements received an independent accountant’s review, not an audit. Management concluded disclosure controls were effective at providing reasonable assurance; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether case volumes and revenue trends—especially TPA Solutions’ declines and Platform Solutions’ weather- and client-driven growth—persist beyond Q1.
- How much reported growth reflects foreign exchange, acquisitions, weather-related activity and the Canadian wage subsidy, rather than recurring underlying demand.
- Cash conversion, receivables and unbilled revenue growth, and the timing and collectability of customer balances.
- Credit-facility capacity and covenant headroom, debt repayment needs, and the planned $9.0 million U.S. pension contribution.
- Acquisition integration and earnout outcomes, and the exposure to COVID-19, claims volumes, litigation, cybersecurity and other disclosed risks.