Crawford & Company — Q1 2024 Form 10-Q
Business context and period. Crawford provides claims management and outsourcing services to insurers and self-insured entities in more than 70 countries. This unaudited report covers the three months ended March 31, 2024; comparisons are with Q1 2023 unless stated otherwise. Results from many international operations are consolidated on a two-month delay.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue before reimbursements | $301.7 million | $316.3 million | Down 4.6% |
| Total revenue | $313.1 million | $327.9 million | Down 4.5% |
| Income before income taxes | $3.8 million | $16.0 million | Down 76.1% |
| Net income | $2.8 million | $10.7 million | Down 74.1% |
| Net income attributable to Crawford shareholders | $2.8 million | $10.7 million | Down 73.4% |
| Diluted EPS, both share classes | $0.06 | $0.22 | Down $0.16 |
| Operating cash flow | $(19.8) million | $(0.4) million | Greater cash use |
| Cash and cash equivalents, at quarter-end | $45.2 million | $58.4 million at Dec. 31, 2023 | Down $13.2 million |
| Borrowings and finance leases | $230.2 million | $209.1 million at Dec. 31, 2023 | Up $21.1 million |
Revenue before reimbursements declined mainly because Platform Solutions normalized from Hurricane Ian-related work in Q1 2023. Consolidated cases received decreased 4.0%. Selling, general and administrative expense rose 15.9% to $77.3 million, largely due to professional fees, IT costs, bad debt expense, and compensation-related costs. The effective tax rate was 27.4%, versus 32.9% in Q1 2023.
Operating cash flow was pressured by lower earnings, incentive compensation payments, and working-capital movements, including a $25.8 million decrease in accounts payable and accrued liabilities. Investing used $9.6 million, principally for $8.0 million of capitalized software and $1.5 million of property and equipment. Financing provided $16.1 million, including increased revolving-credit borrowings. The company paid $3.4 million in dividends and repurchased $0.7 million of shares.
Segments and material changes
| Segment | Revenue before reimbursements | Segment operating earnings | Key comparison |
|---|---|---|---|
| North America Loss Adjusting | $77.4 million, down 0.3% | $4.5 million, down from $8.1 million | Milder weather reduced activity and utilization; cases fell 15.2%, including fewer Canadian Contractor Connection referrals following a client loss. |
| International Operations | $98.1 million, up 6.8% | $1.7 million, down from $3.0 million | Revenue grew in the U.K., Europe and Latin America, but earnings were affected by prior-year Australia flood work, lower Legal Services productivity, and higher indirect costs. Cases rose 7.2%. |
| Broadspire | $94.3 million, up 12.2% | $12.8 million, up from $7.9 million | Growth from new client programs, Medical Management, pricing, and utilization; cases rose 5.4%. |
| Platform Solutions | $31.9 million, down 49.2% | $1.1 million, down from $10.0 million | Networks revenue fell as Hurricane Ian claims handled in the prior-year quarter wound down; Contractor Connection also declined. Cases fell 22.6%. |
Consolidated segment operating earnings decreased to $20.1 million from $29.0 million. Unallocated corporate and shared costs increased to $8.0 million from $4.1 million, further weighing on pretax income. Foreign exchange increased reported revenue before reimbursements by approximately $0.9 million; excluding currency effects, it declined 4.9%.
Liquidity, outlook, risks, and other items
- Liquidity and debt: Working capital was approximately $81.7 million. The company reported $45.2 million of cash and $208.7 million of additional borrowing capacity, or $253.9 million of total liquidity. The credit facility had $8.9 million of letters of credit outstanding. Borrowings typically peak in the first half due to incentive compensation, pension contributions, and working-capital needs.
- Outlook: Management estimated a 2024 effective tax rate of approximately 30%–32%, including known discrete items as of March 31. The filing provides no specific revenue or earnings guidance and cautions that weather activity and macroeconomic uncertainties make Q1 results not necessarily indicative of full-year results. Management did not expect further discretionary U.S. defined-benefit pension contributions during the remainder of 2024.
- Cash obligations: The company expected $8.5 million of contingent earnout payments in the next 12 months. It contributed $0.6 million to U.K. pension plans during Q1 and none to its U.S. plan.
- Risks and contingencies: Risks include claims-referral volumes, weather and catastrophe activity, client retention and creditworthiness, competition, inflation and cost recovery, foreign exchange, personnel, technology and cybersecurity, acquisitions, pension funding, financing covenants, and geopolitical events. Litigation and regulatory matters arise in the ordinary course; management stated provisions were made for probable and reasonably estimable matters, while noting that an uninsured adverse outcome could materially affect results, financial position, or cash flows.
- Other items: The company held $508.5 million in client custodial accounts at March 31; these funds are not available for general operations and are not recorded as company assets. No goodwill impairment indicators were identified in Q1. Management concluded disclosure controls were effective, and the auditor’s interim review found no material modifications needed for GAAP conformity; this was a review, not an audit.
Investor verification points
- Track whether Platform Solutions can sustain results after the prior-year Hurricane Ian work rolled off, and whether Networks revenue recovers.
- Assess whether Broadspire growth and improved margins continue, and whether North America Loss Adjusting case volumes stabilize after the Canadian client loss and lower weather activity.
- Monitor operating cash flow, working capital, incentive compensation payments, revolving-credit use, and compliance with credit-facility covenants.
- Verify the drivers and persistence of higher SG&A and unallocated corporate costs, including professional fees, IT, bad debt, and compensation expenses.
- Review the 2024 tax-rate estimate, pension funding needs, and the timing and amount of contingent earnout payments.