Q3 2021 Crawford & Co Earnings Call
Yeah.
Good morning, My name is Phyllis and I will be your conference facilitator today.
At this time I would like to welcome everyone to the Crawford <unk> company third 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. C 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 then operator will assist you.
As a reminder, ladies and gentlemen, this conference is being recorded today Tuesday November night, 2021 now I would like to introduce Tammy Stevenson Crawford <unk> Company's general counsel. Thank you fill up.
Some of the 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 are expected future operating results and financial condition, our ability to grow our revenues and reduce our operating.
Spencers expectations regarding our anticipated contributions to our underfunded defined 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 and our ability to pay dividends in the future.
The company's actual results achieved in future quarters could differ materially from the results that maybe implied by such forward looking statements.
The company undertakes no obligation to publicly release revisions to 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, you are reminded that operating results from any historical period are not necessarily indicative of results to be expected for any future period.
For a complete discussion regarding factors, which could affect the companys financial performance. Please refer to the company's Form 10-Q for the quarter ended September 32021.
File with the Securities and Exchange Commission, particularly the information under the headings risk factors and management's discussion and analysis of financial condition and results of operations as well as subsequent company's 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 right.
Thank you Tammy good morning, and welcome to <unk> third quarter 2021 earnings call. Joining me today is Bruce Swain, our Chief Financial Officer, Joseph Blanco, Our President and Tammy Stevenson, Our general counsel after our prepared remarks, we will open the call for your questions Crawford delivered strong topline results in the third quarter.
With revenue, increasing 14% compared to the prior year. We are very pleased with the organic growth that we've seen in the quarter. Our long term growth strategy is enabling us to advance towards envision future, which is underscored by the strong momentum, we're seeing across loss adjusting tpa and platform solutions.
In the U S. We're making significant traction with a top five carrier clients and this is evident in our revenue growth for both loss adjusting and platform solutions.
During the quarter Crawford deployed a record number of resources more than twice the number of resources deployed at the peak of an active weather season.
It reflects the increased penetration that Crawford has in the U S market and the expanded relationships Crawford has developed with top carriers.
True to our previously communicated strategy platform had the steepest growth followed by loss adjusting and Tpa, Despite a login management revenue recovery.
U S tpa delivery expansion in both revenue and profit compared to last year.
Overall, we believe our strategic approach built around our three pillars of expertise quality and digital is resonating in the marketplace.
While we are pleased with the top line growth we delivered in the quarter. There are pockets of the business that Rick water attention to improve profitability.
On a non-GAAP basis EPS for CRD, a and was 24 and 25 cents for CRD B. This was a decline from 34 cents for both CRD, a and CRD b in the prior year period Bruce.
Bruce will go into the drivers in more detail later on today's call.
We've seen margin pressures in our international business as we are experiencing an uneven recovery given the prolonged challenges presented by COVID-19.
And other drivers in Canada, Asia, Latin America and Europe.
Revenue and profitability headwinds have impacted Canada in particular as Canadian P&C market recorded record profit given lower claims costs amidst a particularly benign claims environment and lower economic activity due to COVID-19.
This has resulted in revenue pressures not only for us, but for the broader Canadian loss adjusting sector.
In Asia, we're resetting our approach to better exploit the opportunities of the region.
We continue to be bullish about our H b a N Crawford, Colorado acquisitions made in late 2020, but we're lagging in our value realization timeline, mainly due to the impact of COVID-19.
In Europe, our Tpa book of business is largely weighted towards travel and entertainment, which has seen a disproportionate decline in profitability as a result of the delayed COVID-19 recovery during the second half of 2020 one.
Given the elongated timeline for this recovery, we are taking a fresh look at challenged businesses to ensure we are operating at optimized levels to realize benefits of top line growth in both the near term and long term.
As an example, we have specific plans to diversify our business in Europe, which will take some time, but eventually lead to a stronger book of business than what we have today.
We believe our recent acquisition of boss Boon is a step in that direction.
We're also making measured investments in Asia to better align with the opportunities in the region and be less dependent on weather.
Our business in the UK and Australia continue to perform well as we witness positive growth this quarter compared to last year.
Overall, we feel good about the long term health of our business and expect organic growth momentum to continue as we go forward.
While.
<unk> growth is the bedrock of our growth strategy, we continue to evaluate opportunities to take greater market share through acquisition of expertise and digital capabilities.
Conscious of the increased competition for deals we remain disciplined buyers in terms of our criteria.
First and foremost the targets must align with our strategy and fill a specific gap in our capability geography or scale.
Bolstering our expertise is a core priority for us and we will continue to onboard teams of specialists around the world to lift outs and acquisitions.
While the independent loss adjusting market continues to consolidate there are still several opportunities to fill out gaps in products and geographies.
As such we will remain focused on selectively investing in P&C market with favorable economics, and where we see value in further scaling our ecosystem of claims.
To that end, we recently made three strategic acquisitions, each of which aligns well with our strategic pillars.
Praxis consulting gives us a platform into subrogation, a new area of digital expertise critical to our business and carrier clients.
While egesta provides digitally enabled and differentiated capabilities in the contents valuation space.
Moreover, our acquisition of boss Boon builds out our construction and injury based claims capabilities in Holland, continuing to diversify our European business.
Joseph will provide more detail on each of these acquisitions shortly.
As we look out over the next few quarters, our focus will be on successfully on boarding. These businesses. In addition to realizing the value that formed the basis of these acquisitions.
We recognize that our continued success is rooted in our purpose people and strategy.
Our strategic evolution, along with our commitment to service excellence will position us to execute on our growth strategy and differentiate Crawford from our competition and most importantly allow us to continue our purpose of restoring and enhancing lives businesses and communities.
Crawford strong revenue growth and.
And disciplined M&A activity serves as an example of how our strategy execution is paying off.
Along with the COVID-19 environment relaxing economic activity rebounding and other measures, we're taking to drive productivity and cost efficiency.
We remain confident in our future and the direction of Crawford.
With that I'd like to hand, the call over to Joseph who will walk through more details on our recent acquisitions as well as the progress we're making in our individual businesses.
Thanks, Rod and August Crawford acquired he gesture the contents valuation leader in North America, aligning with our strategic pillars of expertise in digital E. Gesture specializes in contents valuation, which establishes the cost of replacing belongings and a home or business when they are damaged or stolen.
He just as full year 2020 revenues totaled $14 million.
The acquisition of each gesture brings critical mass and as a digital component to crawford's existing contents valuation service for la suggesting in North America at.
At the same time it gives us access to the steadily growing $500 million North American content market.
Given the increasing adoption of content inclusive home insurance policies the market opportunity for third party content claims service providers is significant.
He just your solution and digital platform cover all aspects of contents claims from start to finish including inventory and valuation services from the desk in the field and via SaaS offering.
This ensures that the process is streamlined controlling costs and increasing transparency, while allowing adjusters to do more work from the desk.
Importantly, it gives carriers data and analytics, which drives improved underwriting decisions.
<unk> is the leader in Canada with a blue chip client roster. We believe we can significantly accelerate each esters U S growth.
Crawford is making inroads into the fragmented and growing subrogation market with the acquisition of practice consulting a leading provider of outsource subrogation claims management and recovering services in the U S.
Practice, you utilize his decades of industry expert experience, coupled with proprietary data analytics software to identify and manage subrogation claims through the recovery proxy process Craig.
Practice is full year 2020 revenues totaled $14 3 million.
This acquisition marks Crawford's formal entry into the $1 billion subrogation recovery market.
Practices led by a tenured team, whose execution capability and long standing client relationships provide a proven and trusted service offering to Crawford customers.
The acquisition aligns with our overall platform solution strategy to drive transformation within the industry and will allow us to gain significant market share in an area of the claims ecosystem, where Crawford is currently underpenetrated.
We believe that practice will build upon our strategic pillar of expertise and add innovation to Crawford's extensive array of claims solutions and market presence.
Another acquisition that we believe will enhance <unk> capabilities in the law, suggesting space as Boston another one's based specialty loss adjusting firm that we acquired just last month.
Spoon offers crawford and opportunity to cross sell expertise and cross utilized gesture capacity accelerating the combined growth of our two companies.
Boston also adds a number of specialists law suggestion restart network, bringing crawford's, Netherlands talent strengths to over 100 adjusters.
Boston <unk> full year, 2020 revenues totaled $3 $4 million.
We believe this acquisition supports our strategic pillar of expertise and aligns deeply with Crawford purpose and envision future.
A reinvigorated M&A activity is evidence of our confidence in Crawford's financial position.
Our net funded debt to EBITDA at the end of the quarter was approximately 1.4 times unless I'm, one eight times when including our early fourth quarter acquisitions.
Turning now to our business line results for the quarter.
In law, suggesting we're seeing recovering economic activity in the U S and increasing demand for major and complex specialists adjusters, which is driving our investment in talent.
We've added 62, new specialist adjusters year to date, marking solid progress on our three year goal.
We are gaining the most traction in the U S. As economic activity starts to recover and the demand for specialists adjusters continues to rise.
On the volume side, we are investing in quality in digital primarily in Australia, and the U K and are seeing growth in those areas.
As discussed earlier, we continue to face headwinds in margin pressures in our Canada, and Asia businesses, but remain more optimistic as we head into 2022.
Our networks business within the platform solutions segment was a core driver of growth in the third quarter in light of Hurricane Ida revenue growth for platform solutions was strong.
As we continued to increased transaction volume, we will ultimately realize better flow through.
We remain encouraged by the momentum. We go look is building and we look forward to seeing this become a critical contributor to our top and bottom line in the coming years.
And our contractor connection business, we continue to invest in quality assurance and business development resources, which are laying the groundwork for future growth.
Finally, moving to our Tpa business the decreased economic activity continues to be reflected in tpa as operating earnings.
Medical management services show clinical activity is still below pre pandemic levels that we are seeing some temporary benefits from COVID-19 related claims.
Canada, and Europe, which represent our two largest areas outside the U S. Along with other international Tpa operations have been severely impacted by Covid given that the majority of our business outside of the U S is skewed towards travel and entertainment.
We are seeing signs of recovery in the U S as employment levels and business activity begin to improve.
We expect this to continue to help our tpa business in future quarters.
We also remain cautiously optimistic that 2022 will be a recovery year for international Tpa businesses as travel activity begins to normalize.
We won close to $37 billion of new and enhanced business in the quarter, a strong sign that our focus on our re imagine claims ecosystem is resonating with our customers.
We also retained 94% of our U S broad spire business through the third quarter we.
We increased our NPS score to 49 up three points from the second quarter reinforcing our continued confidence in our service levels and highlighting opportunities where we can further enhance our value proposition.
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 third quarter were $288 5 million up 14% over the $253 1 million in the prior year's third quarter presented on a constant dollar basis to the prior year revenues before reimbursements totaled 279.1.
Milligan.
GAAP diluted EPS in the 2021 third quarter was 20.
And 21 for CRD b compared to EPS of <unk> 46 for CRD, a and CRD b in the 2020 period.
On a non-GAAP basis third quarter 2021 diluted EPS was <unk> 24 for <unk>.
<unk> to 'twenty five cents for CRD b compared with 34 cents per boat CRD, a and CRD b in the 2020 period.
The company's non-GAAP operating earnings totaled $28 million in the 2021 third quarter were seven 2% of revenues decreasing from $28 1 million or 11, 1% of revenues in the prior year period.
Consolidated adjusted EBITDA was $29 5 million in the 2021 third quarter were 10, 2% of revenues compared to the $35 1 million or 13, 8% of revenues in the 2020 quarter.
I will now review the operating performance of each of our segments.
Crawford Ros adjusting revenues totaled $124 million, increasing 11, 8% from $110 9 million reported in last year's quarter.
Foreign exchange rate benefits totaled approximately $6 6 million in the 2021 third quarter.
The segment reported operating earnings of $7 1 million in the 2021 third quarter were five 7% of revenues decreasing from the $14 1 million.
Were 12, 7% of revenues in the prior year quarter.
Margins were pressured due to ongoing investments in talent recruitment and weakness in certain international markets.
Revenues for Crawford platform solutions were $64 3 million in the 2021 third quarter up 27% from $53 3 million in the prior year quarter Foreign exchange rate benefits totaled 600000 for the quarter.
Operating earnings in Crawford platform solutions totaled $11 million or 17, 1% of revenues in the 2021 third quarter, increasing over operating earnings of $10 7 million or 20% of revenues in the 2020 quarter.
Continued investment into our contractor connection business weighed on margins in the quarter.
Crawford Tpa solutions revenues were $100 2 million in the 2021 third quarter, increasing 12, 7% from $88 9 million in the 2020 period.
In exchange rate benefits totaled $2 1 million in the 2021 third quarter.
Crawford Tpa solutions operating earnings were $5 million during the 2021 third quarter, increasing over last year's third quarter operating earnings of $4 3 million.
The operating margin in this segment was 5% in the 2021 quarter and four 8% in the 2020 period.
Weakness in our international businesses offset the continued recovery in our U S Tpa business.
Unallocated corporate costs were $2 3 million in the 2021 third quarter compared to cost of $1 1 million in the same period of 2020. This increase was primarily due to an increase in professional fees compared to 2020 and a reduction in Qs benefits.
During the 2021 third quarter the company recognized a pre tax benefit from Qs totaling $1 8 million as compared to $4 7 million in the 2020 quarter.
The company does not expect to recognize any further benefits from Qs Following October 2021.
During the first nine months of 2021, the company repurchased approximately 531000 shares of CRD, a and 111000 shares of CRD B at an average cost per share of $9 63.
And $8 68, respectively.
The total cost of share repurchases during 2021 was $6 1 million.
Subsequent to quarter end, the Companys board of directors authorized a repurchase of up to $2 1 million shares of CRD, a and CRD B through December 31 2023.
Also subsequent to quarter end the company renegotiated its revolving credit agreement for a new five year term. The new agreement gives the company better terms improved pricing and enhanced financial flexibility to support our strategic objectives.
The company's cash and cash equivalent position as of September 32021 totaled $36 9 million compared to $44 7 million as of December 31, 2020.
Our total receivables were up $37 7 million from year end, largely driven by hurricane item.
The impact of M&A and increases in certain international operations, we expect hurricane either receivables.
To be substantially collected by year end.
Goodwill and intangible assets increased by $23 6 million from 2020 as a result of the HPA group and recent <unk> acquisitions.
We made $9 million and contributions to our U S defined benefit pension plan for 2021.
Compared with $3 million in contributions to the U S plan through the first nine months of 2020.
The company's total debt outstanding as of September 32021 totaled $146 million compared to $113 6 million as of December 31, 2020, reflecting borrowings for the <unk> acquisition.
Net debt stood at $103 7 million as of September 32021, while our leverage ratio under our credit agreement closed at 1.38 times EBITDA.
Additionally, our pension liability was down to $36 9 million at the end of the third quarter.
Looking at the pro forma for the practice and boss Bon acquisitions as if they closed and were funded as of September 32021, including all upfront consideration. Our net debt would have been $148 2 million as of September 32021, or a pro forma leverage ratio of one point.
Seven nine times, EBITDA, which is well within our target operating range.
Cash provided by operations totaled $20 million during 2021, decreasing $37 3 million compared to year to date 2020.
Our operating cash flow was down for three primary reasons.
We had $21 million growth in receivables from hurricane item.
$6 million and higher pension contributions in the U S.
The year over year, $11 2 million dollar impact from the cares Act and Qs.
Free cash flow was negative 580000 for the first nine months of 2021 compared with the prior year's positive $33 7 million free.
Free cash flow generation remains an area of focus for us throughout the remainder of the year.
With that I would like to turn the call back to <unk> for concluding remarks.
Thank you so much Bruce as we have stated before our strategy is to drive organic growth through our three pillars of differentiation quality expertise and digital we continue to make significant progress on our strategy further positioning the business for future growth and cash generation in.
In addition, a cultural transformation to increase empowerment is creating a better focus for management, allowing us to deliver on customer needs and simplify our capital allocation framework.
As part of our envision future, we believe our re imagined and simplified customer solutions combined with the quality of our service will Foster trust and capella customers to choose us to enhance their brand.
Turning to our strategy again within loss adjusting our client relationships global reach and investments in innovation are significant competitive advantages, enabling us to capture market share and improve margins.
As you know we think of this business in two verticals major and complex claims and volume claims on the major and complex side, we intend to develop a deep bench of expertise that will enable us to become market leader on.
On the volume side, our strategy is to differentiate ourselves through digital simplification and best in class quality. We believe this will give us low to mid single digit revenue growth.
Turning to our platform solutions. This business continues to be a major transformation of driver as we aim to re imagine their traditional claims process.
Our goal is to embed Crawford within the insurance ecosystem and touched every property claim that is processed.
Our ongoing focus is to scale this business, creating a strong flow through to the bottom line.
We expect this business to deliver double digit growth over the cycle.
In North America, our Tpa business is leveraging technology and data insights to differentiate in the MGA captive and carrier outsource market.
From an international perspective, we are differentiating through a digital product offering by creating a new mobility system.
Lastly, we're also capturing market share by growing corporate legal services in areas that complement our core loss adjusting business or.
Our expectation from this business is to grow mid single digits.
As we see the light around the corner of Covid, we remain focused on executing our strategy and realizing value from our investments in people technology, new acquisitions and relationships.
We remain steadfast in our commitment to diversity equity and inclusion and we are committed to cultivating a safe including environment. It's everyone's unique perspectives and experiences are heard and valued.
We are confident in our ability to deliver superior results for our shareholders over the long term and we look forward to the journey ahead as we continue our relentless pursuit of restoring and enhancing lives businesses and communities.
So much for your time today Phyllis please open the call for questions.
At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad to withdraw your question press. The pound key if you are using a speakerphone. Please pick up your handset before asking your question well pause for just a moment to compile.
The Q&A roster.
Your first question comes from the line of Mark Hughes with Truest superiority.
Hi, Mark Yeah. Thank you good morning.
On.
Quarterly earnings.
Sure.
The EBIT.
Mark you.
You went through March.
Bye.
I Wonder if you could just kind of.
The address that question more broadly.
<unk>.
In the <unk>.
And the drop down to earnings.
No.
You characterize what you saw in <unk>.
Q3.
You may be able to get more operating leverage in the future.
Mark can you hear me okay.
Mark.
Yes, yes.
Oh I can hear you now so I think.
Right.
I apologize, let me, let me rephrase that I that was my mistake.
Air pod issue.
Alright question briefly was you had very good top line growth kind of limited pull through to the EBIT line.
I think you've addressed some of that but I wonder if you could just kind of globally talk about your ability to get operating leverage across these different segments.
Yes, Mark that's a very very good question. So obviously, you've seen that we've driven quite a significant topline growth. It's something that we have been talking about I would say for at least the last two years as we were investing in sales and other capabilities to drive that growth. So we feel very good about the momentum that we've created I think when you look at our international.
Business and we called out some of that we've seen certainly a lower pace of recovery I think when we were sitting at the same time last year. We were all anticipating by Q2 of 2021, we should see a secular recovery across the globe from Covid and as a result of that we held on to what I would say.
<unk> resources within our businesses to plan for that recovery expected that a recovery to come in also in markets like Canada, We had benefit from Qs and we applied that benefit to the intended purpose of that benefit and that is to preserve our staffing levels in anticipation of things coming back. We all know things have not come back at the same pace.
We expected to obviously us being an exception.
As a result of that the shortfall in revenue and a lot of places has gone straight to the bottom line, creating a disproportionate impact on our earnings as compared to the revenue growth that we've seen in the U S and that's really the underlying position that.
That we are coming from we feel that some of the steps that we're taking as an example, the diversification of business in Europe that is absolutely going to take longer but other places where we believe that we need to just rightsize the operation to match the incoming volume of claims a little bit faster could do but so our anticipation is that when we.
For Q2 of next year, we will start to see impact of of some of these actions as we progress through the next couple of quarters.
Bruce I don't know if you want to add any more color to it.
No I think that's a good summary.
Understood. Thank you.
When you think about the Ida cleans or cat claims and in this quarter, obviously another meaningful event.
Hum.
How do you view your ability to monetize those events I think.
Maybe sometimes in the past.
Adjusters, the cat Adjustors, who have been able to capture more of the economics for themselves and it became more of a.
You know a hot market and.
I don't know whether this is your experience but others.
I had to pay up for those claims adjusters and so the extra volume ends up being.
Marginal profitability, how would you characterize the situation as you experienced in Q3 with Ida.
Yes, another very good question, Mark So I would probably answer this in three parts right. So first part is that if you look at the size of either and you compare that it was about a 25% to $35 billion event and we compare that to other events that we've serviced in the past the number of people that we deployed was significantly more than what we've done in the past.
That's a great evidence in demonstrating that our penetration in the U S carrier market, particularly the large top five top 10 carrier market is gaining traction because we wouldn't have been able to really deploy that many people and have the kind of revenue impact that youre seeing in the past from a similar size event.
Part two is that because we have we are now a much more formidable player in this space, we have a little more leverage on economics, where we've got the adjusters, who know that we are probably providers of work throughout the year as opposed to only during the Gulf Hurricane season, and that creates some level of loyalty and the number three.
Is that last year, we invested significantly and trained 500, new cat Adjustors and we expect to hit a larger number over the course of the next 12 to 18 months and we believe that by doing that we're actually not only bringing new workforce to this space, which creates a better demand supply economics, but also by bringing this war.
Of course, and we create a greater loyalty towards the Crawford brand and should see better economics coming out of that so that's sort of a three part answer to your question.
Yeah that's helpful.
And then.
You, obviously, you've got a lot of traction with a couple of major carrier partners.
You can't help it but what's the opportunity for perhaps others is there a is there a pipeline.
Do you feel like you're getting some broader momentum perhaps.
We do feel that we're getting broader momentum in fact, if you look at our U S results in isolation I think the momentum is quite evident.
We also feel very good about the quality and the breadth of relationships that we're building in the U S market. While claims volume obviously is a complex equation of what's happening with the weather what's happening with the internal staffing we believe that the foundation of our relationships has gotten stronger and we think that we will continue to see a greater <unk>.
And our market share in fact with a couple of the players we had targeted to have about 20% to 25% market share with them and we believe that we're touching 30% to 35% market share with them already.
Excellent. Thank you very much.
Thank you Mark.
Your next question comes from the line of Kevin Spanky with Barrington Research.
Hi, good morning.
Hey, guys good morning.
<unk>.
Wanted to ask about.
New business I believe you mentioned $37 million in new business was that.
Specific to tpa or was it across your segments.
That was that was total business that would be one.
Tpa just tends to always have a higher share because its more quantifiable business because it's a contract business.
Okay.
I think last quarter, you were able to break it down into new business wins across the segments I don't know if you're able to.
To.
To do that and you mentioned tpa as more quantifiable, but any maybe any more color on that front.
Bruce you want to touch upon that.
I mean, we've seen.
We've seen new business growth from from all three of our segments I don't have the segment by segment breakdown in front of me, but we are seeing traction in all of our segments Kevin.
Yes, Okay. If you look for the year, we've won about $80 million of new business in the first three quarters for the year, we feel very good about that that sort of momentum and.
It's hard to comment about what Q4 will that will bring but.
That momentum we're seeing to continue in terms of the new business wins.
Across all three segments.
Right, Okay, no I mean clearly the.
The momentum is showing up if you just.
I think it was $20 million last quarter.
And then $13 million in the first quarter now $37 million so yes.
Yeah.
Any more comment on just the ability to gain traction on the new business front end.
And what's driving that.
Yes, it's a key driver for that really is the investment that we've made in sales and relationship management over the last three years or so.
And that's what the driver is driver as we believe that as our international operations start to come more in line with how we expected them to be with the rebounding of the economic activity and sort of getting around Covid. We think that will start to see the momentum from our international operations, as well, where particularly in UK, Australia and then more recently.
In Asia, we've been investing in sales and account management infrastructure, but it's not just an investment in sales and account management, but it's also in our operational capabilities, which is evident through the capex that we've that we've put in over the last two to five years as well.
And Kevin maybe maybe maybe maybe an update on that I mean, the the.
Take down I was able to get the breakdown about $16 million in law, suggesting $19 million in tpa with the remainder in platforms.
Alright, great. Thank you.
So when we look at the.
Sequential growth.
And loss adjusting revenue.
Yeah, I guess should we think about that as you mentioned the penetration a greater penetration of.
Our top five top 10 carriers coupled with.
The uptick from Ida as kind of the driver there or.
Yes.
You also was he just are layered into there as well I guess it would have been only one months contribution, but yes. It will be the same.
On this.
Yes look we're excited about the acquisitions, we made we believe that both industrial and practices along with boss Boon over the cycle are going to be significant contributors, but I think for this cycle or this quarter. It was a very small contribution. So the former explanation that you had which is greater traction with the larger clients as well as the.
The impact of Ida certainly helps we've also seen some well what I would call significant volume increases with a lack of staff available to our clients, which has led to more overflow work coming to our end.
As <unk> stated before it's hard to look at sequential quarter sequential quarterly revenue increases because second and third quarter, just tended to be the strongest quarters for us because of the weather activity and sort of other economic activity that picks up during summer we tend to see a lot more overflow claims as a result of that it reflects in our revenues as well as earnings.
But I think like I said before the quality of our relationship the breadth of our relationships have significantly increased over the last couple of years and I believe that from a overall perspective, it'll contribute towards our growth.
Okay great.
Yeah.
Contractor connection.
It was a little bit flattish year over year, but should we think about.
Continued tailwind from the ramp up with I think you started it.
New relationship with a top five carrier or not too long ago.
Just maybe comment on contractor connection and.
The pace of growth and are you.
We're still going to see the benefit of that ramp up going forward.
Yes, we believe so as we've shared with with you all before that contractor connection typically takes 12 to 18 months, where large relationships to ramp up because of the change management involved inside the organization.
We feel very good about our contractor connection business, we continue to enjoy very very high in the high <unk> kind of NPS score from claimants on that business and in all the client conversation that we're having we believe that the clients see the benefit of it clearly and we expect it to continue to build traction.
I think part of the reason for it not having adequate growth.
As you call it flattish growth.
It is also related to.
Construction activity that former insurance perspective slowed down.
And the lead time for contractors have gone up lead time for materials have gone up and that has certainly impacted the.
The business, but I think as things begin to stabilize and normalize more we expect that business do.
Delivering the topline and bottom line growth that it has it still continues to be a significant contributor for us.
Right, Okay, so maybe you're attributing some of that too.
I don't know, what we call kind of the supply chain issues or the labor issues that are.
Impacting.
The economy now or.
Yes, we believe so it's sometimes hard to do it through a causal relationship, but certainly we've seen that contracted capacity is being down and supplier issues is definitely playing a role in it.
Okay No that's helpful.
And can you delve into the.
It's just the platform solutions, the operating earnings margin a bit more I think Bruce you mentioned.
To.
That was.
I believe you said continued penetration in contractor connection, but just just kind of the you know the.
The driver of the platform solutions operating earnings margin in the quarter relative.
To the year ago.
Sure so.
I'll start off and let.
ROE with add a little color at the at the end so.
Platform solution is made up of three businesses, our networks business, which is largely our own catastrophe.
Catastrophe.
Business and whether response contractor connection and then the Wingo look business.
We saw.
Really great results out of our networks business.
Really where most of them if not all of the revenue growth came from in the.
In the segment.
And and good.
Operating.
Leverage there and good contribution margins.
Over year, we're investing in the in the contractor connection business both in terms of.
Quality assurance and.
And operational capabilities within the business as well as business development.
Business development resources.
Which.
Which weighed on their their contribution quarter over quarter, but as.
ROE It's indicated we do expect for contractor connection too.
Continue to benefit from the Onboarding of the top five carrier that they're continuing with and we would expect those.
Margins too.
To improve as we go forward.
Okay. Thanks Bruce.
You've really summarized it well.
Great. Thank you.
Can you quantify or I think you have in the past just.
What you would term quote unquote, whether surge revenue in the quarter I know.
The year ago quarter was fairly strong on that front I believe but.
We did we actually go up in that regard due to Ida.
Yes so.
Picking apart the revenue surge, it's always an estimation, but yes, we do feel that we were above the prior year period related to either we estimate that our our weather surge globally was about $47 million compared to about $36 million.
The prior year.
Okay. Thank you.
So you mean.
It looks like three nice.
Acquisitions.
Within the last.
Few months here so as the.
Is that just that you think a matter of your concerted efforts pursuing M&A.
This is picking up and gaining traction here have you seen maybe a loosening in the market in terms of.
More willing sellers or just many any comments on.
The recent momentum <unk> seen in completing acquisitions I know those are always difficult to predict when they're going to close but.
Maybe any comments on your M&A pipeline and your efforts there.
Sure look we believe we've always added momentum and <unk>.
Fortunately, we've taken certain things to do almost the last mile and then decided that it didn't make sense to pursue so they come across as a sporadic activity, where we have suddenly come over three and not had anything before.
As we have said before that organic strategy is organic growth is the bedrock of our strategy and we will continue to push on that however, M&A is an important enabler for us to take market share where it makes sense.
We continue to be very disciplined in devaluation, we continue to be very disciplined in terms of making sure that they are the strategic fit and unless it checks all those boxes and frankly, it doesn't make it through to the level, where we even engage in any sort of strategic way on that on the acquisition our pipeline remains fairly strong but again.
We're going to be extremely discerning, we don't see much loosening in the valuations so far.
We still believe that there are opportunities to gain significant value, particularly when we see a seller who sees the value of what we as Crawford <unk> company bring to the table in terms of our reach in terms of our brand in terms of our capabilities and where they believe that merging with us is a better option for their business going forward and for us together.
Other.
And then that sort of staying independent or frankly going to going through a pure financial transaction, but I'll, let Joseph add anything EBIT.
No I think that sums it up I mean, I think that we are particularly which is we're excited about these three acquisitions, where it's a one and one make more than two where we're bringing something to the table that just makes sense as we continue to build out the claims ecosystem.
Great.
Should we think of all three of those falling within loss adjusting and then.
Maybe just any comments on the margin profile of those acquired businesses I know, they're relatively small compared to your total revenue, but just how to.
Think about <unk>.
<unk> ability.
Yeah.
So a couple of things.
Boss Boon and he just are both for both mall and the loss adjusting family and then subrogation, which is practices falls under our platforms business.
The general margin profile for these businesses is at or better than what we are doing right now and sort of the businesses that we have but as you pointed out the scale of these businesses is generally much smaller than the operation that they are joining but we think that because we're joining forces together. We will eventually have significant growth coming from these operations.
<unk>, which should be both is solid topline as well as bottom line contributor.
Over that over the coming years.
Okay. That's helpful.
Just I guess one last question.
The.
Your comments on diversifying your business in Europe, I guess, that's just a matter of.
Just reducing dependence on travel and entertainment is that is that what youre driving at there.
That is absolutely absolutely right and we believe boss, born which gave us capability and injury as well as construction is is just another step in that direction.
Great. Thank you I'll turn it over thanks.
Thank you.
Thank you.
So let's start with time.
At this time there are no further questions I would now like to turn the call back over to Mr. Farmer.
Closing remarks.
Thank you Phil it's really appreciate your hub, let me close by thanking all our employees clients and shareholders for your continued commitment to Crawford <unk> company. Our third quarter results are not only indicative of Crawford strengthened resilience through 2021, but also evidence of our incredible momentum in organic growth. We continue to wish you well.
And we look forward to finishing out 2021 on positive and impactful note. Thank you very much and God bless.
Thank you for participating in today's Crawford <unk> Company Conference call. This call will be available for replay beginning at 11 30, a M. Eastern standard time today through 11 59 P. M. Eastern standard time on December 19, 2021.
The conference I'd number for the replay is 548 for 757, the number to dial for the replay is 805 858367 or 4166214642. Thank you you may now disconnect.
Right.
Okay.
Okay.
Yes.
Yes.
Thanks.
Okay.
Yes.
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