Company Overview
Crawford & Company B (CRD.B) is a leading global provider of claims management and outsourcing solutions to insurance companies and self-insured entities. The company's roots trace back to 1941 when founder Jim Crawford established the business in Atlanta, Georgia. Over the past eight decades, Crawford & Company has grown into a diversified professional services firm with an expansive global footprint, serving clients in more than 70 countries.
The company's business model is centered around four core operating segments: North America Loss Adjusting, International Operations, Broadspire, and Platform Solutions. The North America Loss Adjusting segment provides property and casualty claims management services to the insurance industry in the United States and Canada. The International Operations segment offers similar services globally outside of North America, while the Broadspire segment focuses on third-party administration for workers' compensation, liability, and disability claims. Finally, the Platform Solutions segment encompasses the company's Contractor Connection, Networks, and Subrogation service lines.
Historical Growth and Expansion
Crawford & Company's growth trajectory has been marked by significant milestones and strategic expansions. In the 1960s and 1970s, the company embarked on a geographic expansion, establishing offices across the United States and venturing into international markets. This period saw Crawford open operations in Canada, the Caribbean, and the United Kingdom, laying the foundation for its global presence. The company's success during this time was driven by its commitment to providing high-quality claims management services and developing innovative solutions to meet the evolving needs of the insurance industry.
The 1980s and 1990s witnessed further international expansion for Crawford, with the company establishing a presence in Europe, Asia, and Latin America. This period also saw a diversification of service offerings, as Crawford added third-party administration, medical management, and catastrophe response capabilities to its portfolio. These strategic moves allowed the company to broaden its client base and tap into new market opportunities worldwide.
In recent decades, Crawford has demonstrated resilience in the face of industry challenges. The global financial crisis of 2008-2009 had a significant impact on the insurance industry, putting pressure on the company's revenues and profitability. In response, Crawford implemented cost-cutting measures, streamlined operations, and invested in technology to improve efficiency and productivity. These efforts have helped the company maintain its position as a dominant player in the claims management industry, leveraging its extensive global network and deep industry expertise to provide comprehensive solutions to its clients.
Recent Financial Performance
During the third quarter of 2024, Crawford & Company reported consolidated revenues before reimbursements of $329.4 million, consistent with the prior year period. This top-line performance was supported by strong growth in the International Operations and Broadspire segments, offsetting declines in the Platform Solutions unit. The company's GAAP net income attributable to shareholders was $9.5 million, or $0.19 per diluted share, compared to $12.3 million, or $0.25 per diluted share, in the year-ago quarter.
For the most recent fiscal year (2023), Crawford & Company reported total revenue of $1.32 billion, net income of $30.61 million, operating cash flow of $103.79 million, and free cash flow of $67.19 million. In the most recent quarter (Q3 2024), the company generated revenue of $342.73 million, net income of $9.45 million, operating cash flow of $19.35 million, and free cash flow of $8.35 million. The slight year-over-year revenue increase of 0.20% in Q3 2024 was driven by growth in the International Operations and Broadspire segments, partially offset by a decline in the Platform Solutions segment.
Segment Performance
Crawford's North America Loss Adjusting segment generated $79.3 million in revenues, flat compared to the prior year period. The segment's operating earnings declined to $5.4 million, or 6.9% of revenues, from $10.5 million, or 13.1% of revenues, in the third quarter of 2023. The decrease was primarily due to lower claims volumes in the U.S. and Canada, as well as increased expenses in the company's Global Technical Services division. The slight revenue decrease of 0.8% was mainly attributed to a decline in high-frequency, low-severity cases received in Canada related to the loss of a customer.
The International Operations segment reported a 7.8% increase in revenues to $105.7 million, driven by growth across all geographic regions. Operating earnings for this unit rose to $5.1 million, or 4.9% of revenues, compared to $2.2 million, or 2.2% of revenues, in the prior year quarter. The improved profitability was attributable to the higher revenues and better operating leverage.
Crawford's Broadspire segment, which provides third-party administration services, recorded a 7.4% revenue increase to $99.0 million. Operating earnings for Broadspire grew to $14.4 million, or 14.5% of revenues, from $13.5 million, or 14.7% of revenues, in the year-ago period. The segment benefited from new client wins, increased medical management utilization, and pricing improvements. Growth was observed in both the Claims Management and Medical Management service lines.
In contrast, the Platform Solutions segment experienced a 24.3% decline in revenues to $45.3 million. Operating earnings for this unit decreased to $3.8 million, or 8.5% of revenues, from $8.5 million, or 14.2% of revenues, in the third quarter of 2023. The revenue and profitability declines were primarily driven by lower claims volumes in the Networks and Contractor Connection service lines. The reduction in the Networks service line, where the company provides staff augmentation for clients, was a significant factor in the segment's performance.
Geographic Performance and Market Presence
Crawford & Company operates globally, with significant revenue contributions from various regions. The United States remains the company's largest market, accounting for approximately 60% of total revenue. Other key markets include the United Kingdom, Canada, Australia, and Europe. This diverse geographic footprint has helped Crawford navigate regional economic fluctuations and capitalize on growth opportunities across different markets.
Financial Position and Liquidity
As of the latest reported quarter, Crawford & Company maintained a solid financial position. The company's debt-to-equity ratio stood at 1.64, indicating a moderate level of leverage. Cash on hand amounted to $52.34 million, providing a buffer for operational needs and potential investment opportunities. Additionally, Crawford had access to $207.30 million under its credit facility, enhancing its financial flexibility.
The company's liquidity ratios remained healthy, with both the current ratio and quick ratio at 1.28. This suggests that Crawford has sufficient short-term assets to cover its immediate liabilities, indicating a stable financial position.
Outlook and Future Prospects
Looking ahead, Crawford & Company management remains cautiously optimistic about the company's future performance. For the full year 2024, the company expects consolidated revenues before reimbursements to be in the range of $1.26 billion to $1.30 billion, with adjusted EBITDA between $105 million and $115 million. This guidance reflects the company's ability to navigate industry headwinds and capitalize on growth opportunities across its diversified service offerings.
Conclusion
Despite the near-term challenges faced by the Platform Solutions segment, Crawford & Company's overall business model has demonstrated resilience. The company's strong competitive position, global scale, and diversified revenue streams have enabled it to weather fluctuations in claims volumes and industry conditions. With a stable financial performance, growing revenue and profitability over the past few years, and a strong liquidity position, Crawford & Company is well-positioned to deliver long-term value for its shareholders. As the company continues to invest in technology, talent, and operational excellence, it remains poised to capitalize on opportunities in the evolving claims management and outsourcing industry.