Q2 2021 Crawford & Co Earnings Call
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Good morning, My name is Misty and I will be your conference facilitator today.
At this time I would like to welcome everyone to the Crawford <unk> Company second quarter 2021 earnings release Conference call.
In conjunction with this call.
A supplementary financial presentation is available on our website at Www Dot C. R. A W. D O dot com.
Under the Investor Relations section.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer period.
Instructions will follow at that time.
Should anyone need assistance at any time during this conference. Please press Star then zero and an operator will assist you.
As a reminder, ladies and gentlemen, this conference is being recorded today Wednesday August 4th 2021.
Some other matters to be discussed in this conference call and in the supplementary financial presentation may include forward looking statements that involve risks and uncertainties.
These statements may relate to among other things the impact of COVID-19, our expected future operating results and financial condition, our ability to grow our revenues and reduce our operating expenses.
Expectations regarding our anticipated contributions to our unfunded.
And the defined benefit pension plans.
Collectability of our billed and Unbilled accounts receivable.
Financial results from our recently completed acquisitions.
Our continued compliance with the financial and other covenants contained in our financing agreements, our long term capital resource and liquidity requirements.
Requirements and our ability to pay dividends in the future.
The company's actual results achieved in future quarters could differ materially from results that may be implied by such forward looking statements.
The company undertakes no obligation to publicly release revisions to any forward looking statements made on this conference call to reflect events or circumstances occurring after the date of this call or to reflect the current of unanticipated events.
In addition, we're reminded that operating results for any historical period are not necessarily indicative of results to be expected for any.
Future period.
For complete discussion regarding factors, which could affect the companys financial performance. Please refer to the company's form to index Q for the quarter ended June 30th 2021 filed with the Securities and Exchange Commission, particularly the information under the heading risk factors.
And management discussion and analyst of financial condition and results of operations.
As well as subsequent company filings with the SEC.
This presentation also includes certain non-GAAP financial measures.
Under SEC rules.
As required a reconciliation is provided for those measures to the most.
The comparable GAAP measures.
I would now like to introduce Mr. Rohit Verma, Chief Executive Officer of Crawford <unk> Company ROIC you may begin your conference.
Thank you so much Mr. <unk>, good morning, and welcome to our second quarter 2021 earnings call. Joining me today is rich today, and our Chief Financial Officer, Joseph <unk>, President and Jim Jim Kucinski, Our Deputy General Counsel.
After our prepared remarks, we will open the call for your questions.
Crawford delivered exceptional results in the second quarter with revenue, increasing 14% and non-GAAP EPS for CRD, a growing 32% year over year to 25.
Importantly, <unk> strength across the business. Despite the absence of significant weather related activity as claim volumes increase and our platform solutions business supported the transformation of the loss adjusted industry.
Most notably we have had 3 consecutive quarters of year over year revenue growth. Despite the continued impact of COVID-19 on our business and humanity in general.
Our financial position remains strong with a robust balance sheet, which is reinforced by the business is solid cash generation.
We are continuing to draw on our competitive position in the market and the advantages of our global scale.
This performance would not be possible without the unwavering commitment of our global workforce.
The resilience allows us to deliver on our purpose.
Hey out while strengthening our resolve to achieve excellence in client service, while maintaining a sharp focus.
In addition, the continued support and confidence of our clients has been critical and corporate success.
We're also executing on on enhanced strategy, which is shaping our results very favorably.
Building up our loss adjusting business by acquiring greater expertise and increasing the rigor on quality, which has resulted in double digit growth in our U S market operations.
Similarly on pronounced focus on carrier and managing general agent markets enabled by our digital and analytics capabilities has resulted in a USD beer business growing by 10% over the prior year period.
Lastly, our platform solutions business remains a major transformational engine for Crawford and the industry at large as it delivered 39% revenue growth, while fueling improvement in underlying margins.
We will look to build on this momentum in the second half of the year, while being cognizant of the impact of Covid variance spreading across the globe.
By re imagining the ecosystem of claims we are differentiating Crawford from our competition.
Quality expertise and digital are the 3 pillars of this differentiation.
Additionally, we are investing in emerging areas, including data and analytics for our Tpa business, expanding our corporate legal services footprint.
Waiting in our platform solutions business.
Overall, we are well positioned and remain confident that our continued success with deliver value to our shareholders and further our purpose of restoring and enhancing lives businesses and communities.
As I mentioned, we are making significant progress further positioning the business for future growth and cash generation.
Our enhanced operating structure and culture of empowerment are creating a better focus from management, allowing us to deliver on customer needs and simplifying our capital allocation framework.
As part of our envision future, we believe our re imagined and simplifies customer solutions will streamline the most aggravating processes in the insurance ecosystem, while harmonizing the business.
The quality of our services and solutions with industry benchmark globally, and inspire prominent industry experts to join us on our purpose.
Combination of innovation quality and people will foster trust and come from our customers to choose us to enhance their brand.
Further our GSO specific strategies are aimed at advancing these efforts through expertise that is deep and eminent digital that simplifies and quality that sets the benchmark.
Our loss adjusting strategy is focused on further unlocking speed accuracy on simplicity to elevate our position in the marketplace.
On the major and complex law side demand for export adjuster is rising rapidly as claims become more complex and carriers look to outsource more of that business.
We are continuing to develop our bench of exports to become the market leader for the complex claims business.
Through the second quarter, we hired 14th expression as adjusters, marking solid progress on our 3 year goal.
We are gaining the most traction in the U S. As the economic activity starts to recover on the demand for our specialist adjusters continues to rise.
Our strategy for the volume segment is to differentiate ourselves by streamlining low complexity high frequency claims processing using digital simplification and quality.
Our client relationships global reach and investments in innovation on our competitive advantage, which we believe will enable us to capture market and improve our margin.
In fact, we are already seeing the impact from other digital investments we have made in Australia on the UK. Our platform solutions business is a major transformation of the driver for us as we aim to re imagine the traditional loss adjusting by bringing together network resources and technology that transforms the card insurance claims value chain.
Gold is to embed Crawford within the insurance ecosystem and for Crawford to touch every property claims that is processed or.
Our focus for platform solutions is to scale the business and create a strong workflow.
Right through to the bottom line.
The second quarter saw the highest number of transactions in the last 2 years.
As the economic environment improves we expect the overall economics of the platform solutions segment to continue to follow suit.
Turning to GPA, our strategy encompasses 3 areas to gain profitable market share North America, <unk> Bar Crawford International Tpa and Crawford legal services.
In North America, we're leveraging technology and data insights to differentiate in the MGA captive and carrier outsource market and we're gaining traction there.
As we've already written 60, new programs and 12, new carrier MGA relationships year to date.
From an international perspective, we're differentiating.
Through our digital product offering by creating a new mobility system.
However, Canada, and Europe, which represent our 2 largest areas outside the U S. Along with other international television operations have been severely impacted by Covid.
As we shared with you the majority of our business is outside the U S are skewed towards travel and entertainment.
We're capturing market share by growing corporate legal services in areas, where we are allowed to complement our core loss adjusting business with the ownership of our law firm.
Through the second quarter, we have grown the number of partner level attorneys that drive the bulk of this business.
Crawford has committed to addressing the ESG factors most material to our operations.
During the second quarter Michel Gerard was named Nonexecutive Board Chair.
In addition to being the first woman elected to board share for Crawford Michel brings over 25 years of expertise and people strategy talent acquisition and operations improvement.
Michelle's contributions over the past 2 years as a member of the corporate board of directors have added depth and strength to the board and I look forward to continuing to benefit from our energy experience with guidance as she assumes the role of board chair.
We remain steadfast in our commitment to diversity equity and inclusion and we are committed to cultivating a safe inclusive environment in which everyone is unique perspectives and experiences I've heard and value.
As a key component to our success, we are continuously devoted to protecting the safety and well being of our employees.
The pandemic has also put it into perspective and reminded us to appreciate the value of work life balance.
We are proud to say that Crawford and Leslie prioritize the health and safety of employees and as a result, we've been able to see a high level of performance on engagement through the pandemic.
Going into the back half of the year, we on a healthy financial position with the liquidity necessary to respond and adapt to persistent challenges presented by the changing economic environment as well as evolving client demands.
Our positive earnings results and reinforced balance sheet give us tremendous flexibility to move forward with making investments for the long term benefit of the company as well as enabling us to continue our quarterly dividend at <unk> per share for both the RDA and CRD V. Further highlighting our commitment to deliver shareholder value.
As part of our capital allocation strategy, we will continue to evaluate opportunities to extend our market leading position through prudent investment and the launch of new innovative solutions.
Part of this is our thoughts on M&A strategy, we're committed to employing a consistent framework and are staying disciplined in our valuation approach instead of following the market.
Having said that we feel good about the pipeline we currently have.
Our continued success is rooted in our purpose people and strategy and we're keeping our eyes on the road ahead.
We believe that our strategic evolution supported by a resilient global workforce and top bench of experts along with our commitment to service excellence will position us well to execute on our growth strategy.
At the same time, we will improve our competitive positioning bolster our cash generation capability and deliver value to our shareholders and most importantly will allow us to deliver on our purpose.
With that I would like to turn the call over to Joseph Thank you Rod.
Turning to our results in a bit more operational detail from.
From a weather standpoint, there were not any material storms during the second quarter.
However, we are still seeing spill over activity from the winter storms in the U S earlier this year.
From an economic standpoint, although global business activity continues to increase it has not yet recovered to pre pandemic levels. This was most notable outside of the U S. While claims activity increased meaningfully in the quarter driven by the U S claims growth of 22%.
The varying vaccine rollouts and rolling Lockdowns across the world continue to be a headwind for our casualty business in both loss adjusting and tpa.
In terms of cat events, the impact of all U S cat is up $9.5 million year over year.
Continued work from Q1 weather events combined with increased utilization on programs with 2 top 5 carriers positively impacted our second quarter with overall search revenues, increasing $6.7 billion year over year to $37 million.
As a reminder, we saw record storm activity in the second half from 2020, which included 30 named storms.
As a result, our Q3 and Q4.2020 included approximately $82 million worth of surge revenue while.
While weather activity by its nature is unpredictable, we will see more challenging comparisons in the back half of the year given the high activity in the second half of last year.
Now I want to point to the employment picture in the U S and how it relates to Crawford business.
The unemployment rate versus pandemic levels has come down significantly over the past several months.
While our <unk> business in the U S is improving and claims are nearing pre pandemic levels, a medical management business is still lagging.
This is in part because of the natural lag in treatment from claims initiation, but it is exacerbated by institutional and personal pandemic related decisions.
Depressed the number of medical procedures.
Despite this we are optimistic that our <unk> business will continue trending towards normalization as we move into the back half of 2021.
Turning to our Gsl's, starting with loss adjusting.
Suggesting achieved 6% revenue growth in the second quarter.
We are seeing recovering economic activity in the U S and increasing demand from Adrian complex specialists adjusters, which is driving our investment in talent.
Rob mentioned earlier, we made over 46 critical hires across GTS, including C fast inland marine and construction.
Solid progress on our 3 year goal on.
On the volume side, we are investing in quality in digital primarily in Australia, and the U K and we're seeing growth in those areas.
Platform solutions as a major transformational segment for Crawford and we're starting to see it become a key contributor of profit.
More work remains however in terms of gaining scale to improve margins.
<unk> mentioned the volume of transactions is increasing in the second quarter, we saw the highest number of quarterly transactions in the past 2 years.
Our catastrophe business within the platform solutions segments was a core driver of growth in the second quarter.
Despite the non weather during the quarter flow through for platform solutions was strong.
We continued to increase transaction volumes, we will continue to see better flow through.
We're also encouraged by the momentum. We go look is building and we look forward to seeing thats become a critical contributor to our top and bottom line in the coming years.
Moving to our Tpa business.
The decreased economic activity continues to be reflected in tpa as earnings.
June 2021 U S. Casualty claims volumes remained approximately 5% below pre COVID-19 levels compared to the first quarter of 2020 before the Covid related shutdowns began.
Medical management services show clinical activity is still below pre pandemic levels that we're seeing some temporary benefits from COVID-19 related claims.
Although we have experienced further weakness in Canada and Europe, we are seeing signs of recovery in the U S. As employment levels of business activities begin to improve.
We expect this to continue to help our tpa business in future quarters.
We won close to $20 billion of new and enhanced business in the quarter predominantly within our loss adjusting and tpa businesses.
Strong signs that our focus on our re imagine claims ecosystem is resonating with our customers.
We also retained 96% of our brought by our renewable business through the second quarter.
Our NPS increased to 46 up 1 point compared to last quarter.
US confidence in our service levels and highlighting opportunities, where we can further enhance our value proposition.
Lastly, we are excited to see increased customer interactions during the second quarter. We've recorded over 2500 engagements with many being in person as COVID-19 restrictions eased up further.
Further underscoring the business is continuing to normalize.
That said the environment as it relates to Covid is changing daily and although we remain cautiously optimistic we are monitoring the situation closely.
With that let me turn the call over to Bruce for a deeper look at our financial performance.
Thank you Joseph.
Companywide revenues before reimbursements in the 2021 second quarter were 267.5 million up 14% over the $234.4 million on the prior year second quarter.
Presented on a constant dollar basis to the prior year revenues before reimbursements totaled $255.2 million.
GAAP diluted EPS from the 2021 second quarter was 22 for boats CRD, a and CRD b compared to EPS of <unk> 11 per boat CRD, a and CRD b in the 2020 period.
On a non-GAAP basis second quarter 2021 diluted EPS was <unk> 25 cents for CRD, a and <unk> 26 cents for CRD b compared with 19 per boat CRD, a and CRD b in the 2020 period.
The company's non-GAAP operating earnings totaled $19.6 million in the 2021 second quarter or 7.3% of revenues increasing over the $18.2 million or 7.8% of revenues in the prior year period.
Consolidated adjusted EBITDA was $29 million into 2021 second quarter were 10, 8% of revenues up 14% over the $25.5 million or 10, 9% of revenues in the 2020 quarter.
I will now review the second quarter performance of each of our segments.
Crawford loss adjusting revenues totaled $116 million, increasing 6% from $109.1 million reported in last year's quarter.
Foreign exchange rate benefits totaled approximately $8.7 million in the second quarter of 2021.
The segment reported operating earnings of $6.2 million in the 2021 second quarter were 5.3% of revenues decreasing from the $10 million or 9.2% of revenues in the prior year quarter.
Margins were pressured due to the ongoing investments in talent recruitment and weakness in certain international markets.
Revenues for Crawford platform solutions were $51.1 million in the 2021 second quarter up 39% from $36.7 million in the prior year quarter Foreign exchange rate benefits totaled 700000 for the quarter.
Operating earnings in Crawford platform solutions totaled $10.4 million or 23% of revenues in the 2021 second quarter, increasing 45% from where operating earnings of $7.1 million or 19, 5% of revenues into 2020 quarter.
Crawford Tpa solutions revenues were $104 million in the 2021 second quarter, increasing 13% from $88.7 million in the 2020 period.
Foreign exchange rate benefits totaled $2.8 million in the 2021 second quarter.
Crawford Tpa solutions operating earnings were $4.7 million during the second quarter of 2021.
Third to last year's second quarter operating earnings of $3.1 million.
The operating margin in this segment was 4.7% in the 2021 quarter and 3.5% in the 2020 quarter.
Unallocated corporate costs were $1.7 million in the second quarter of 2021 compared to cost of $2.1 million in the same period of 2020.
This decrease was primarily due to a reduction in severance cost present in 2021, partially offset by an increase in self insurance costs and professional fees and a lower credit from the Canada emergency wage subsidy also known as queues.
During the 2021 second quarter the company recognized a pre tax benefit from Qs totaling $2.2 million as compared to a benefit of $4.3 million in the 2020 quarter.
The company does not expect to recognize any further benefit from Qs during the remainder of 2021.
During 2021, the company repurchased approximately 256000 shares of CRD, a and <unk> 81000 shares of CRD B at an average per share cost of $9.9 and $8.28, respectively.
The total cost of share repurchases during 2021 was $3 million.
We have experienced some recovery from the negative economic impact of COVID-19 in recent months, particularly in the U S compared to the significant revenue reductions in the prior year.
Certain parts of our international operations continue to be impacted by Lockdowns and a slow recovery.
The company's cash and cash equivalent position as of June 32021 totaled $44.7 million unchanged from December 31, 2020, the company made $4.5 million in contributions to its U S defined benefit pension plan in 2021, compared with $3 million in 2020.
The Companys total debt outstanding as of June 32021 totaled $125 million compared with $113.6 million as of December 31, 2020.
Net debt stood at $80.3 million as of June 32021, while our leverage ratio under our credit agreement closer to a very strong 1.07 times EBITDA.
<unk>, our pension liability was down to $44.2 million at the end of the second quarter.
We are encouraged by our operating cash flow. So far in 2021 cash provided by operations totaled $10.5 million during 2021, decreasing $1.5 million compared to 2020 day.
The decrease in cash provided by operating activities was primarily due to higher pension contributions and growth in receivables, partially offset by higher net income in 2021.
Free cash flow was negative $1.7 million for the first 6 months of 2021 compared with the prior year's negative $2.3 million are.
Our free cash flow generation remains a top priority for the company.
With that I would like to turn the call back to ROA for concluding remarks. Thank you Bruce as we look towards the second half of 2021, we are focused on maintaining our leading position within the industry through innovation and best in class solutions on a global footprint and empower teams all around the world give us the reach and.
<unk> to meet the changing needs of the industry.
Crawford emphasis on our people and delivering service excellence from our clients will always remain at the forefront of our priorities.
Im confident in our ability to deliver superior results for our shareholders over the long term as you remain committed to fulfilling our purpose of restoring and enhancing lives businesses and communities.
Thank you for your time today operator, please open the call for questions.
At this time, if you would like to ask a question. Please press Star then the number 1 on your telephone keypad.
So on your question press the pound key.
If you are using a speakerphone please pick up the handset before asking the question, we'll pause for a moment to compile the Q&A roster.
Yeah.
Your first question comes from the line of Alex Bolton with Raymond James.
Hey, guys on calling in on behalf of Greg Peters.
Good morning, Good morning, Alex Good morning.
Maybe first talk about.
The.
The lower margins and loss adjusted.
No.
Average from the 46 suggestions that youre kind of making the investments towards.
You talked about the demand for these experts can you comment on if you're seeing wage inflation.
For these hires.
Thank you so much for your question.
<unk> cash value, yes, you're absolutely right.
That was the only place we had our moderate margin diluted a little bit from 2020.
3 factors driving that first you already talked about which is we are investing in getting more exports on no question about it.
I would say that as you bring those experts then it takes about.
6 months or so to ramp up to get the revenue lift from that.
<unk>.
That certainly has been 1 factor in the margin the second factor in the margin has been.
Just long tailed claims.
It's we've got a pretty significant width, that's building up as a result of these long tailed claims and in significant parts of the world outside the U S. We are paid on what is called scaled fees, which basically we don't get paid on to the claim actually settles so thats.
And the second part and then the third and final part there is weakness in some of our operations, which is somewhat impacted by COVID-19 somewhat impacted by competitive dynamics. As an example in Asia. We are seeing some weakness which is putting a drag on our margins. So those are the 3 big factors. Your other question are we seeing wage.
<unk> I would say more in pockets than a secular wage inflation in this sector.
So.
Where the competitive dynamics are pretty strongly conducted you are seeing some wage inflation, but it's I would say, it's mainly in pockets so far.
Okay, Perfect and then maybe just broadly across the board.
I guess seeing expenses other than.
Direct compensation coming down.
Within the segments, maybe you can touch on.
Initiatives on our efforts there are many accomplishments you've made.
Sure.
We value.
The thing that we talk about within the organization is that we on a company focused on growth but were expense aware.
We have been working hard at our non comp expenses.
For some time now and I think if you look at our history, we've taken our non comp expenses from being somewhere around 20 somewhere between 24% to 26% of our revenue down into the into the very low twenties are big factors for this and I'm sure Bruce can touch upon them in greater detail, obviously travel.
As light travel is significantly lower than say 2019 levels.
And even 2020 levels as.
As well as <unk> been slowly chopping away on a rent if you go back and look at our rent at 1 point used to be about somewhere between 4 and 5% we brought it below 4% and.
And working towards it so I would say those are probably the 2 predominant factors, but there are other things that we've been doing for a for a few years now around procurement around.
Building efficiency in our processes, which is helping the non comp expenses.
I don't know Bruce if you want to add anything no I think thats I think thats it.
That's a good overview of the main drivers.
Okay and then.
Within platform solutions.
<unk> seen significant growth, there probably suffered comps going into the back half of the year.
Is it right to think that growth will be.
A little tougher going into the back half, yes look we 2 things Youre right first and foremost we're excited about our platforms business, we think that that.
It's a business that has strong potential both topline and bottom line for the company looking forward.
And over the coming Investor day events were probably going to start to highlight more of what we're doing in that business to create to create more awareness with you guys on other investors.
Yeah.
If you look at our business.
Despite there being less weather in Q2, we actually had pretty decent growth in that business and the reason for that is that we're trying to move our business to be less dependent on the southeast and Gulf wind exposure, but more focused on.
Continuing to build capability, which is which is.
Being deployed against the severe convective storm markets.
So yes.
The comps for third quarter will definitely be talked to you at 30 named storms last year. If we get another 30 named storms I don't think that comparison will be difficult, but I think being realistic it's hard to.
That and say, whether we're going to have 30.10 or maybe 3 storms. If the storm activity continues we feel very confident if the storm activity slows. We believe the business is resilient you've you've seen the business do well last year. Despite COVID-19 and we think we'll continue to do fine, but from a comp per comp competitive perspective.
This would be a difficult comparison between Q3 of last year and this year. If the weather is significantly different from last year.
Okay, and then lastly.
Maybe you can speak on.
The auto claims activity, you're seeing with then we go look.
Yes.
No auto insurer.
Has seen frequency increase.
Yeah. We go look I has been a great story for US. It was the growth was certainly triggered through the pandemic, but the experience that our clients are having and what we're hearing from our clients. We believe that there will be continued traction today. The bulk of the claim activity that we're seeing and we go look is auto related.
And as driving distances increase and driving frequency increases we believe that we will continue to see growth in that but also we are building that solution and have been building for some time and getting the position from property claims, which we believe further diversifies. The type of claims that we will handle 2 we go look I would.
The last couple of quarters, we've had many months of record record volume.
And I think the way the traction that we're seeing we believe that that volume will continue to increase.
It doesn't increase as we build a bear.
<unk>.
Better following of the property solution. There in addition to the audio solutions.
Okay I appreciate all the answers.
Alex Thank you.
Your next question is from Kevin <unk> with Janssen research.
Good morning.
Good morning.
<unk>.
I wanted to start off by.
Asking about the growth you saw.
Loss adjusting in the U S, 15% year over year, you tie that to your hiring of specialty adjustors.
<unk>.
You mentioned.
We're on track with your 3 year goal there can you just.
Refresh or update us on what the 3 year goal is in terms of.
Driving growth on hiring.
Major and complex claims business.
Sure Kevin Thank you so much and by the way.
Really really excited about you starting to fall on our stock so.
You and I have not had a chance to really meet in person, but hopefully as the pandemic slows down we'll get a chance to.
Chance to catch up.
Great Great observation, yes, the loss adjusting business in the U S has been growing I would say the most significant factor has been the addition of <unk>.
People, but also I would add the strategy that we have put in place which is too.
Have significant quality enhancements and our offering.
As well as the.
The additional sales focus that we've had which has been increasing our market activity I think we've mentioned that we had over 2000 interactions in the marketplace.
In this quarter.
I think all of those factors are leading to the growth in terms of our target. We have I won't say that we have a U S target we have a global target over the next 3 years to add somewhere around 200 to 250 additional exports and those exports are in the areas of our forensic accounting cyber NRG construction some of the very.
Specific skill sets that we believe are going to be needed as we as we look to the future.
So are our higher 46, we believe is a great progress against that goal of 200.200 to 240 over the next next 3 years.
Okay great.
What's the pipeline of talent look like.
Are you there in terms of your ability to hire in.
I guess Crawford has.
Being an attractive platform.
For that type of talent.
So on the pipeline looks very good I think the the work that we've been doing.
On our brand obviously, we have been a non brand for the last 8 plus years now and people feel free.
Crawford.
Synonymous.
2 excellent and claims so we believe that we're becoming an attractive place for adjusters to be Theres a lot of work that we've been doing on culture, as well and I think I've shared that before the culture that we're creating of empowerment culture that we're creating a growth mindset I think as as.
As more and more people are experiencing that theyre realizing.
What a valuable asset that is.
And I think thats, creating a lot of attraction for for adjusters to join us.
Great.
I wanted to ask.
About platform solutions as well.
Specifically.
The strong sequential growth.
On both contractor connection.
The network businesses.
You mentioned no real significant weather activity, so should we think of that.
Sequential growth.
This is just continued ramp up of <unk>.
New business or.
Any other factors or did weather have.
Any sort of meaningful impact in terms of.
Second contractor connection and <unk> Chad.
Sure So as you know.
<unk> added a number of top 5 carriers and we've shared before that it takes 12 to 18 months for us to ramp up the large carriers that ramp up is still going on so some of the impact of the growth that you're seeing is purely the ramp up of those top 5 carriers that we added about 12 to 18 months ago, but I think the other piece, which I mentioned in my answer to Alex's.
Question, we are increasing our footprint to participate on the severe convective storm, which are a lot more frequent than the hurricanes and they are lot more localized events than being then being the events that we see which are much talked about in the news.
On the wind events in the Gulf in the southeast and that while the weather has not been too severe you've still seen pockets of these severe convective storms that have left for us to deploy our people and deliver on our mission and deliver on our commitment to our clients. So.
That's another factor on growth, but the large part of the growth is coming from the continued ramp up of the top 5 clients.
Okay, Great and then.
But what are the legs that we should think about in terms of the.
Ongoing ramp up of those top 5.
Is that.
Kind of continuing to show through for the next couple of quarters here on terms, it's I would imagine that I would imagine that that we will continue to see ramp up of those those clients, but I remember in the space of ramp up often is.
Impacted are influenced by weather as well right of weather picks up and there is severe pressure on the carrier climbed to 2 handle claims quickly they start to ramp up what they have with us if they have enough internal capacity to handle claims because of the weather generally as benign then that ramp up generally tends to be slow. So yes, we I expect that the ramp.
<unk> will continue but there is a possibility of the ramp up accelerating if the weather.
It comes out too severe.
Okay understood I did want to circle back on platform solutions in terms of the.
The strong margin.
Operating earnings margin, there and you mentioned that.
Net margin.
To improve along with the economy I'm, just trying to get a sense as you build scale.
At least qualitatively.
How much more room there is for.
The margin to improve within platform solutions.
Kevin as you know that the underlying economics in the platform business on extremely attractive if you look at a pure transaction basis.
On a pure transaction level the margin is very attractive to us and our goal is to build the scale of the transactions so that that margin.
<unk> to flow through right to the bottom line because once we cover our fixed costs. We believe that the contribution margin in this business can be very attractive. So our goal right now is to continue to build scale in this business and create more transaction deposits from say create but handle more transactions. So that we can.
We can get.
To a better bottom line. So that's the goal qualitatively I would say there is there is still significant room for us.
In this in this in this business.
Okay great.
<unk>.
Maybe a couple more housekeeping type questions here you mentioned.
Spillover of.
Weather claims from the first quarter, specifically related to the winter storm.
Should we think about this spillover as are we.
Meaningful number.
Any comment in terms of the Beast.
Size or impact.
Not not a not a material impact I think we saw most of the benefit in the first quarter.
On the tail going through the second and I think that's kind of largely behind us at this point.
Okay, Good and then.
On.
Are we past the point here Bruce were.
It makes sense to call out a specific.
<unk>.
Dollar impact of Covid on the business as you have the last few quarters here.
I think as we as we looked at it while we still have some pockets in our company that are being impacted we look at that.
Far East Europe, and Canada as being.
Being 3 areas overall and the Covid impact that we've been disclosing previously it's been a consolidated number overall in the second quarter, we didn't see a net impact from from Covid.
But we did have certain parts of our company that were that were still continuing to be impacted.
Alright thats helpful. Thanks for taking the questions and Rohit.
Forward to meeting you in person.
The on road is well thanks, Thanks, Kevin Thanks, Kevin.
Again, if you would like to ask a question press star 1 on your telephone keypad.
I would now like to turn the call back over to Mr. Berman for closing remarks.
Thank you Mr. <unk> and thank you to all our employees clients and shareholders for their continued commitment to Crawford <unk> company, our second quarter results reinforce our confidence in the future of the company and we look forward to taking you on the journey with us as we make our way through the second half of 2021, Thank you and God bless.
Thank you for participating in today's Crawford <unk> Company Conference call.
Call will be available for replay beginning at 11.30, a M. Eastern time today through 11.59 P. M. Eastern time on September 4.2021, the conference I'd number for the replay is.
<unk> 53878 day number to dial for the replay is 805.
858367 or 416.
62146 <unk>. Thank you you may now disconnect.
Okay.
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Okay.
Thank you.
Okay.
Okay.
Okay.
Yes.