Crawford & Company — Q1 2022 Form 10-Q
Business context and period: Claims management and outsourcing provider serving clients in more than 70 countries. Results cover the three months ended March 31, 2022, compared with Q1 2021; amounts below are in millions except per-share data. Crawford reorganized reporting into four segments effective January 1, 2022, and reclassified prior-period segment data.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue before reimbursements | $279.0 | $253.2 | +10.2% |
| Total revenue | $287.8 | $262.2 | +9.8% |
| Income before income taxes | $7.6 | $8.5 | −10.9% |
| Net income attributable to Crawford shareholders | $5.1 | $6.1 | −16.0% |
| Basic and diluted EPS, both share classes | $0.10 | $0.11 | Down $0.01 |
| Cash from operating activities | $(15.3) | $1.6 | Declined $16.8 |
- Revenue growth reflected more cases, new-client growth, and acquisitions; foreign exchange reduced reported revenue before reimbursements by $2.8 million. Total cases received rose 18.8% to 463,000.
- Costs of services before reimbursements increased 11.0% to $205.6 million; SG&A rose 10.5% to $64.8 million. The effective tax rate was 32.0%, versus 29.1%, primarily reflecting losses in certain international operations.
- Segment operating earnings: North America Loss Adjusting $4.1 million (down from $4.4 million); International Operations loss $(3.1) million (versus $(0.7) million); Broadspire $6.4 million (versus $6.7 million); Platform Solutions $8.0 million (versus $4.0 million).
- Margins were pressured by compensation and operating-cost growth. Platform Solutions improved on Networks growth and the Praxis acquisition; International Operations profitability weakened despite higher revenue.
Financial position, cash flow, and liquidity
- At March 31, cash and cash equivalents were $49.2 million, down from $53.2 million at year-end. Working capital was approximately $68.2 million, up $26.1 million from December 31, 2021.
- Short- and long-term borrowings and finance leases totaled $232.6 million, versus $175.0 million at year-end. The company reported total liquidity of $249.6 million: $49.2 million cash and $200.4 million available under its credit facility, after considering outstanding letters of credit.
- Operating cash use was $15.3 million; investing cash use was $25.9 million, including $21.3 million for acquisitions. Financing provided $37.6 million, including a $57.8 million net increase in revolving-credit-facility borrowings. Share repurchases were $16.1 million and dividends paid were $3.1 million.
- Management attributed lower operating cash flow mainly to higher incentive-compensation payments, the absence of prior-year Canadian wage-subsidy and other COVID-program receipts, and payroll-tax and prepaid-expense timing.
Material changes, outlook, and risks
- Platform Solutions revenue increased 35.2%, including Networks growth and the Praxis acquisition; International Operations revenue rose 3.2% reported, but foreign exchange reduced its results and the segment recorded an operating loss.
- Q1 included a $1.8 million pretax gain from selling the Canadian head-office building and a $2.1 million contingent-earnout expense, reflecting increased projections for acquired businesses. The 2021 comparison included $1.9 million of Canadian wage-subsidy benefits, with none in Q1 2022.
- The company repurchased 2.22 million shares during the quarter. Its authorization had 3.20 million shares remaining at March 31, 2022.
- No broad revenue or earnings guidance was provided. Management estimated a 2022 effective tax rate of approximately 30%–32% and did not expect further discretionary U.S. defined-benefit pension contributions in 2022. It cautioned that quarterly results may not indicate full-year performance, given weather, pandemics, and macroeconomic uncertainty.
- Risks highlighted include changes in claim volumes and outsourcing, severe weather and disasters, inflation and foreign exchange, client retention and collections, acquisition integration, personnel and technology needs, cybersecurity, pension funding, and compliance with financing covenants. The company said it remained in compliance with disclosure controls; the auditor’s interim review was not an audit opinion.
- After quarter-end, Crawford agreed to acquire assets of Netherlands-based R.P. van Dijk B.V. for $4.4 million upfront and up to $2.2 million contingent consideration; initial acquisition accounting was not complete.
Investor verification checklist
- Track whether revenue growth converts into improved earnings and cash generation, especially in International Operations and Broadspire.
- Review revolving-credit borrowings, available facility capacity, covenant compliance, and the effect of acquisition and buyback spending on leverage.
- Assess unbilled revenue and receivables collection, compensation-cost trends, and working-capital seasonality.
- Verify acquisition integration and earnout assumptions, including Praxis and the post-quarter R.P. van Dijk transaction.
- Monitor case mix and volume quality: the filing notes that some high-frequency, low-severity cases generate limited revenue.