Q2 2021 Crawford & Co Earnings Call
Yeah.
Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily and until that time. Your lines will again be placed on music hold thank you for your patience.
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Good morning, My name is Misty and I will be here, what's the comp.
Facilitator today.
At this time I would like to welcome everyone to the Crawford and company second quarter 2021 earnings release Conference call.
In conjunction with this call and stuff.
Momentary financial presentation is available on our website at Www Dot C. R. A W. D O dot com and.
And the Investor Relations section.
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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 of 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 of it matters to be discussed and this conference call and in the supplementary financial presentation may include forward looking statements that involve risk and uncertainties.
These statements may relate to among other things the impact of COVID-19.
Our expected future operating results and financial condition, and our ability to grow our revenues and reduce our operating expenses expectations regarding our anticipated contributions to our unfunded.
And the defined benefit.
The pension plans, the collectibility of our of billed and Unbilled accounts receivable.
Financial results from our recently completed acquisitions.
And our continued compliance with the financial and other covenants contained in our financing agreements, our long term capital resource and liquidity.
Requirements, and our ability to pay dividends and the future.
The company's actual results achieved in future quarters could differ materially from the adults that may be implied by such forward looking statements. The.
The company undertakes no obligation to publicly release revisions to the any forward looking statements made in this conference call to reflect events or circumstances occurring after the date of this call or to reflect the occurrence of unanticipated events.
In addition, we're reminded the operating results for any historical period are not necessarily indicative of results to be expenses for any.
Future period.
For complete discussion regarding factors, which could affect the companys financial performance. Please refer to the company's form 10-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 the.
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 as defined under SEC rules.
As required a reconciliation is provided for those measures to the most directly comparable GAAP measures.
I would now like to introduce Mr. Rohit Verma, Chief Executive Officer of Crawford and company ROE. It you may begin your conference. Thank you so much Misty and good morning, and welcome to our second quarter, 2020, 1 and earnings call. Joining me today is Bruce Swain, Our Chief Financial Officer, Joseph Blanco, our President and Jim and Jim Kucinski.
Our Deputy General counsel.
After our prepared remarks, we will open the call for your questions.
Crawford delivered exceptional results and the second quarter with revenue, increasing 14% and non-GAAP EPS for CRD, a growing 32% year over year of 225 cents and.
Importantly, we saw 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 of adjusting 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 and general.
Our financial position remains strong with a robust balance sheet, which is reinforced by the business of solid cash generation.
We are continuing to draw on our competitive position and the market and the advantages of our global scale.
That said this performance would not be possible without the unwavering commitment of our global work force.
The resilience allows us to deliver on our purpose day.
In and day out while strengthening our resolve to achieve excellence and client service, while maintaining a sharp client focus and.
In addition, the continuous support and confidence of our clients has been critical and Crawford and success.
We're also executing on and enhance strategy, which is shaping our results very favorably. We are building up our loss of adjusting business by acquiring greater expertise and increasing the rigor on quality, which has resulted in double digit growth and our U S market operation.
Similarly, a pronounced focus on carrier and managing general agent markets and enabled by our digital and analytics capabilities has resulted in our U S. D. P of business growing by 10% over the prior year period.
Lastly, our platform solution business remains a major transformation of engine for Crawford and the industry at large as of delivered 39% revenue growth, while fueling improvement in underlying margins.
We will look to build on this momentum and 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.
Additionally, we are investing in emerging areas, including data and analytics for our Tpa business, expanding our corporate legal services footprint and innovating and our platform solutions business.
Overall, we are well positioned and remain confident that our continued success will 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 where 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 simplified customer solutions will streamline the most aggravating processes and the insurance ecosystem, while harmonizing the business.
The quality of our services and solutions will set of industry benchmarks globally and inspire prominent industry experts to join us and our purpose.
This combination of innovation quality and people will foster trust and compel our customers to choose us to enhance their brand.
Further our G. S. L specific strategies are aimed at advancing these efforts through expertise that is deep and imminent digital that simplifies and quality that sets the benchmark.
Our loss of adjusting strategy is focused on further unlock and speed accuracy and simplicity to elevate our position and the marketplace.
On the major and complex law side demand for export of Adjustors 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 experts to become the market leader for the complex claims business.
Through the second quarter, we hired 46 specialists adjusters, marking solid progress on our 3 year goal.
We are gaining the most traction and the U S and the economic activity starts to recover and the demand for our specialist adjusters and continues to rise.
Our strategy for the volume segment is to differentiate ourselves by streamlining low complexity high frequency of claims processing using digital simplification and quality.
Our client relationships global reach and investments and innovation at a competitive advantage, which we believe will enable us to capture market and improve the margin.
In fact, we are already seeing the impact from other digital investments and we have made in Australia and the UK. Our platform solution business is a major transformation of a driver for us as we aim to re imagine the traditional loss of adjusting by bringing together and network resources and technology that transforms the current insurance claims value chain are.
Gold is to embed Crawford within the insurance ecosystem and for Crawford to touch every property claim that is processed.
Our focus for platform solutions is to scale, the business and Korea and the strong workflow.
Right through to the bottom line.
The second quarter saw the highest number of transactions and the last 2 years.
As of the economic environment improves we expect the overall economics of the platform solution segment to continue to follow suit.
Turning to the Tpa or strategy encompasses 3 areas to gain profitable market share North America broad spar Crawford International Tpa and Crawford legal services and.
And North America, we're leveraging technology and data insights to differentiate and the M. G. A captive and carry outsourced market and we're gaining traction there and.
We've already written and 16, 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 businesses outside the U S are skewed towards the travel and entertainment.
We're capturing market share by growing Crawford legal services and areas, where we are allowed to complement our core loss of adjusting business with the ownership of a law firm.
Through the second quarter, we have grown the number of partner level of 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 and.
In addition to being the first woman and elected to board share for Crawford Michel brings over 25 years of expertise and people the strategy talent acquisition and operations improvement.
The michelle's contributions over the past 2 years as a member of the Crawford Board of directors have added depth and strength of the board and I look forward to continuing to benefit from and energy experience and guidance and she assumes the role of the board chair.
We remain steadfast in our commitment of diversity equity and inclusion and we are committed to cultivating a safe inclusive environment, and which everyone's unique perspectives and experiences of heart and valued.
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're proud to say, the 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 and engagement through the pandemic.
Going into the back half of the year weird and 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.
The 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 6 cents per share for both of the RDA and CRD B 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 as I talked with the M&A strategy, we're committed to employing a consistent framework and are staying disciplined and 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.
And he believed that our strategic evolution supported by a resilient global work force 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 and 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 and a bit more operational detail.
From a weather standpoint, there were not any material storms during the second quarter. However, we are still seeing spillover activity from the winter storms and 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 very and vaccine rollouts and rolling Lockdowns across the world continue to be.
The headwind for our casualty business and both law, suggesting 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 the increased utilization and 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 and the second half of 2020, which included 30 named storms.
As a result, our Q3 and Q4.2020 included approximately $82 million worth of surge revenue well weather activity by its nature of unpredictable, we will see more challenging comparisons and the back half of the year given the high activity and the second half of last year.
Now and want to point to the employment picture and the U S and how it relates to Crawford's business.
The unemployment rate versus the pandemic levels has come down significantly over the past several months.
While our <unk> business and the U S is improving and claims are nearing pre pandemic levels, our medical management business is still lagging.
This is in part because of the natural lag and treatment from claim of initiation, but is exacerbated by institutional and personal pandemic related decisions that are depressed the number of medical procedures.
Spite this we are optimistic that our broad spire business will continue trending towards normalization as we move into the back half of 2020.1.
Turning to our Gsl's, starting with la suggesting.
The all suggesting achieved 6% revenue growth and the second quarter.
We are seeing recovering economic activity and the U S and increasing demand for major and complex specialist adjusters, which is driving our investment and talent.
The road 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 the volume side, we are investing in quality and digital primarily and 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.
The road mentioned the volume of transactions is increasing and the second quarter. We saw the highest number of quarterly transactions and the past 2 years.
Our catastrophe business within the platform solutions segments was a core driver of growth and the second quarter.
Despite benign weather during the quarter flow through for platform solutions was strong.
We continue 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 does become a critical contributor to our top and bottom line and the coming years.
Moving to our Tpa business.
The decreased economic activity continues to be reflected and tpa as earnings.
As of 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 and the U S as employment levels and 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 and the quarter predominantly within our loss adjusting and tpa businesses of <unk>.
Strong signs that our focus on the re imagine claims ecosystem is resonating with our customers.
We also retained 96% of our bright spot of renewable business through the second quarter.
Our NPS increased to 46 up 1 point compared to last quarter, giving us confidence and 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 recorded over 2500 engagements with many being in person as COVID-19 restrictions eased up further underscoring the business is continuing to normalize.
That said the environment as it relates to Covid is changing daily and all the.
Though 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.
Thank you Joseph.
Companywide revenues before reimbursements and the 2021 second quarter were 267.5 million up 14% over the $234.4 million and 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 and the 2021 second quarter was 22 cents per boat CRD, a and CRD b compared to EPS of 11 cents per boat CRD, a and CRD b and the 2020 period.
On a non-GAAP basis second quarter 2021 diluted EPS was <unk> 25 cents for CRD, a and 26 cents for CRD b compared with 19 cents per boat CRD, a and CRD b and the 2020 period.
The company's non-GAAP operating earnings totaled $19.6 million and the 2021 second quarter were 7.3% of revenues increasing over the $18.2 million or 7.8 per cent of revenues and the prior year period.
Consolidated adjusted EBITDA was 29 million and the 2021 second quarter were 10.8 per cent of revenues up 14% over the $25.5 million or 10, 9% of revenues and the 2020 quarter.
I will now review the second quarter performance of each of our segments.
Crawford law, suggesting 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 and the second quarter of 2021.
The segment reported operating earnings of $6.2 million and the 2021 second quarter were $5.3 per cent of revenues decreasing from the $10 million or 9.2% of revenues and the prior year quarter.
Margins were pressured due to the ongoing investments and 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 and the prior year quarter Foreign exchange rate benefits totaled 700000 and for the quarter.
Operating earnings and Crawford platform solutions totaled $10.4 million or <unk> 23 per cent of revenues and the 2021 second quarter, increasing 45 per cent for operating earnings of $7.1 million or 19.5 per cent of revenues in the 2020 quarter.
Crawford Tpa solutions revenues were $104 million and the 2021 second quarter, increasing 13% from $88.7 million and the 2000 and 'twenty period.
Foreign exchange rate benefits totaled 2.8 million and the 2021 second quarter.
Crawford Tpa solutions operating earnings were $4.7 million during the second quarter of 2021.
Third the last year's second quarter operating earnings of $3.1 million.
The operating margin and this segment was 4.7% and the 2021 quarter and $3.5 per cent and the 2020 quarter.
Unallocated corporate costs were $1.7 million and the second quarter of 2021 compared to cost of $2.1 million and the same period of 2020.
This decrease was primarily due to a reduction and severance cost president and 2021, partially offset by an increase and self insurance costs and professional fees and a lower credit from the Canada emergency wage subsidy and 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 and 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 81000 shares of CRD B at an average per share cost of $9.09 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 and the prior year that said 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 of contributions to its U S defined benefit pension plan in 2021, compared with 3 million of 2020.
The company's 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 closed had a very strong 1.07 times EBITDA. Additionally, 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 and 2021 cash provided by operations totaled $10.5 million during 2021, decreasing $1.5 million compared to 2020.
The decrease in cash provided by operating activities was primarily due to higher pension contributions and growth and receivables, partially offset by higher net income and 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.
Our free cash flow generation remains of top priority for the company.
With that I would like to turn the call back to ROE at the for concluding remarks. Thank you Bruce as we look towards the second half of 'twenty 'twenty..1 we are focused on maintaining our leading position within the industry through innovation and best in class solutions, a global footprint and empowered teams all around the world give us the reach.
And agility to meet the changing needs of the industry.
Crawford's emphasis on our people and delivering service excellence to our clients will always remain at the forefront of our priorities.
We are confident and our ability to deliver superior results for our shareholders over the long term as we 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 to withdraw your question press the pound key.
If you are using a speakerphone please pick up the handset before asking the question well pause just 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, I'm, calling and on behalf of the Greg Peters.
Good morning, Good morning, Alex Good morning.
Maybe first talk about and the.
The lower margins and and law, suggesting and I know.
Spirit from the 46 suggestions that youre kind of making the investments towards you know you talked about the demand for these experts can you comment and if you're seeing wage inflation.
For the tires.
Thank you so much for your question great cash by you, Yes, Youre absolutely right.
That was the only place where the margin diluted a little bit from 2020.
3 factors driving that first you already talked about which is we are investing and getting more exports and no question about it and I would say that as you bring those experts and it takes about.
6 months or so the ramp up to get the revenue lift from that and.
And.
That certainly has been 1 factor and the margin the second factor and the margin has been.
Just long tail claims.
We've got a pretty significant width, that's building up as a result of these long tail of 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 until the claim actually settled so that's the.
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're seeing some weakness which is putting a drag on our margin. So those are the 3 big factors. The other question are we seeing wage.
I would say more in pockets than a secular wage inflation in the sector.
So you.
You know where the competitive dynamics are pretty strongly contested you are seeing some wage inflation, but it's I would say, it's mainly and pocket so far.
Okay Perfect and then you know maybe just broadly across the board.
And I guess seen expenses other than.
The direct compensation coming down.
And within the segments, maybe you can touch on you know initiatives of our efforts there and then.
Accomplishments you've made.
Sure.
The thing that we talk about within the organization of that where a company focused on growth, but were expense of where we have been working hard at our non comp expenses and.
For some time now and I think if you look at our history and 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.
Big factors for Us this and I'm sure Bruce can touch upon them and greater detail, obviously travel and as light travel is significantly lower than say 2019 levels and <unk> and even 2020 levels.
Well as we've been slowly chopping away at a rent if you go back and look at our rent at 1 point used to be about somewhere between 4 and 5% of you brought it below 4%.
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.
And.
And the building efficiency in our and our processes, which is helping the non comp expenses.
I don't know Bruce if you want to add anything and I think that's I think that's it that's the that's a good overview of those of the main drivers.
Okay and then.
Within platform solutions.
The significant growth there you know probably tougher comps going into the back half of the year.
And you know as the right to think that growth will be you know a little tougher.
And the back half.
Look we so 2 things here right first and foremost we're excited about our platforms business. We think that that's the business that has strong potential both topline and bottom line for the company looking forward and.
And over the coming Investor events, we were probably going to start to highlight more of what we're doing and that business to create to create more awareness with you guys and other investors.
If you look at our business, despite there being less weather and Q2, we actually had a pretty decent growth and 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.
And to build capability, which is which is the.
Being deployed against the severe convective storm market. So yes the.
The comps for third quarter of it'll definitely be tough you had 30 named storms last year, if we get another 30 named storms.
Don't think that that the comparison will be difficult, but I think being realistic it's hard to predict that and say, whether we're going to have 30.10 or maybe 3 storms. If the storm activity continues and we feel very confident of the storm activity slows and we believe the businesses of resilient you've you've seen the business do well last year, Despite COVID-19 and and we think we'll continue to do fine.
From a comp per comp.
<unk> 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, you know.
Maybe you could speak on.
The auto claims activity, you're seeing with then we go look.
Yes.
No auto insurers.
Seen frequency increase.
Yeah.
Oh look I has been a great story for us it was the the growth of of certainty 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 our driving distances increase and driving frequency increases we believe that we will continue to see growth and that but also we are building that solution and have been building for some time and getting our position from property claims, which we believe further diversifies. The type of claims that we will handle the 2 we go look.
I would say the last couple of quarters, we've had many months of record record volume.
And I think I'm the way of the traction that we're seeing we believe that that volume will continue to increase.
And before the increase as we build.
A better a better following of the property solution. There in addition to the auto solution.
Okay I appreciate all the answers.
Thank you Alex Thank you.
Your next question is from Kevin <unk> with Barrington Research.
Yeah.
Good morning.
And I wanted to.
I wanted to start off by.
The asking about the growth you saw and a loss of adjusting in the U S..15% year over year, you tied that to your hiring of specialty Adjustors and.
And then.
You mentioned.
And 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 and hiring and the.
The major and complex claims business.
Sure Kevin and thank you, so much and and by the way I'm really really excited about are you starting to fall of our stock so.
You and I have not had a chance to really meet in person, but hopefully as the pandemic slows down and we'll get a chance to a chance to catch up.
Great Great observation, yes, the loss of adjusting business and the U S has been growing I would say the most significant factor has been the addition of people, but also I would add the strategy that we have put in place which is to have.
Have a significant quality enhancements and our offering.
As well as the additional sales focus that we've had which has been increasing our market activity. I think of you have mentioned that we had over 2000 interactions and the marketplace.
This quarter.
I think all of those factors are leading to the growth in terms of our target. We have I won't say there'll be of a U S target and we have a global target over the next 3 years to add some of it around 200 to 250 additional exports and those exports are in the areas of our forensic accounting cyber energy 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 high of 46, we believe is the great progress against that goal of 202 hundred to 240 over the next the next 3 years.
Okay great.
What's what's the pipeline of talent looked like for you there in terms of your ability to hire and.
Crawford is.
Being an attractive platform.
For the type of talent.
So and the pipeline looks very good I think the and the work that we've been doing.
And our brand obviously, we had been and no 1 brand for the last 8 plus years now and people feel Crawford.
Synonymous.
And 2 excellence and claims so we believe that we're becoming an attractive place for adjusters to be Theres, a lot of work that would be and been doing our culture as well and I think I've shared that before the culture that we're creating of empowerment of the culture that we're creating a growth mindset I think as as as more and more people are experiencing that theyre realize.
<unk>.
And what a valuable asset that is and and I think that's creating a lot of attraction for 4 of adjusters to join us.
Great.
And I wanted to ask.
About the platform solutions as well and.
And specifically.
The strong sequential growth and both contractor connection and.
The network businesses.
Sure.
You mentioned no real significant weather activity, so should we think of that.
<unk> growth.
And it's just continued ramp up of of.
New business or.
Any other factors or did weather have.
Any sort of meaningful impact in terms of.
<unk> and contractor connection and and U S cat.
Sure. So as you know the.
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 the large carriers that ramp up is still going on and so some of the impact of the growth that you're seeing is purely of 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 and my answer to Alex's.
Question, we are increasing our footprint to participate and the severe convective storm, which are a lot more frequent than the heart of gains and they are a lot more localized events than being then being the events that we see which are much talked about and the news, which are the wind events in the Gulf and the southeast and that.
And while the weather has not been too severe you've still seen pockets of the severe convective storms that have led for us to deploy our people and deliver on our mission and deliver on our commitment to our clients. So.
That's the that's another factor of growth, but the large part of the growth is coming from the continued ramp up of the top 5 clients.
Okay, great and.
But what are the legs that we should think about in terms of the ongoing ramp up of those top 5 does that.
And kind of continue to show through for the next couple of quarters here and.
And so I would imagine that I would imagine that that we will continue to see a ramp up of those those clients and but I remember the the space of ramp up often is.
The impacted are influenced by weather as well right and weather picks up and there is severe pressure on the carrier climbed to 2 handle claims quickly and they start to ramp up of what they have with us if they have enough internal capacity to handle the 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 up will continue.
But there's a possibility of the ramp up accelerating if the weather.
It becomes too severe.
Okay understood I did want to circle back on platform solutions in terms of the.
The strong margin the operating.
Operating earnings margin, there and you.
You mentioned that the.
Net margin.
And you have to improve along with the economy I'm, just trying to get a sense and as you build scale and.
At least qualitatively.
And how much more room there is for.
The margin to improve within platform solutions.
And Kevin as you know that the underlying economics and the platform business and extremely attractive. If you look at of pure transaction basis. The out of 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 the contribution margin and this business can be very attractive. So our goal right now is to continue to build scale and this business and create more transaction deposits from say create but handle more transactions. So that we can.
We can get.
2 of better bottom line. So that's the goal qualitatively I would say there is there is still a significant room for us.
And this and this and this business.
Okay, great and.
And maybe a couple of more housekeeping type questions here you mentioned.
The spillover of weather.
Weather claims from the first quarter, specifically related to the winter storm I mean should we think about that spillover as of <unk>.
Meaningful number or the.
Any comment in terms of just the size of our impact of that.
And not not a not a material impact I think we saw most of the the benefit and the and the first quarter.
The tail of going through the second and I think that's kind of largely behind us at this point.
Okay, Good and then.
<unk>.
Are we past the point here Bruce.
And it makes sense to call out of a specific.
And.
Dollar impact of Covid on the business as you have the last few quarters here.
And I think as we as we looked at it and while we still have some pockets in our company and that are being impacted we look at the far East Europe, and Canada as being.
Being 3 areas overall and the Covid impact that we've been disclosing previously has been of consolidated number overall and the second quarter, we didn't see a net impact from Covid.
But we did have certain parts of our company that were that were still continuing to be impacted.
Alright, that's helpful. Thanks for taking the questions and Rohit I look forward at the meeting you in person.
And on the road as well thanks, Thank you Kevin and 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. Verma for closing remark.
Thank you Mr. <unk> and thank you to all our employees clients and shareholders for your continued commitment to Crawford and company, our second quarter results reinforce our confidence and 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 2020.1.
And God bless.
Thank you for participating in today's Crawford and company Conference call. This call will be available for replay beginning at 11.30, a M. Eastern time today through 11.59 P. M. Eastern time on September the fourth 2021.
Conference I'd number for the replay is 95387 to 8 the number to dial for the replay is 805.8583, and 6.7 or 416 <unk>.
214642. Thank you you may now disconnect.
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