Q3 2023 Crawford & Co Earnings Call
Third quarter 2023 earnings release conference call in conjunction with this call a supplementary financial presentation is available on our website at www Dot Crocco dotcom.
Speaker 1: Crawford & Company, 3rd Quarter, 2023 Earnings Release Conference Call. In conjunction with this call, a supplementary financial presentation is available on our website at www.crawco.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 re.
Speaker 1: Note that all lines have been placed on mute to prevent any background noise. After the speaker's 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 than zero and an operator will assist you.
Speaker 1: As a reminder, ladies and gentlemen, this conference is being recorded today, Tuesday, November 7, 2020.
Quarter to date Tuesday November 7th 2023.
Now I would like to introduce Tammy Stevenson Crawford <unk> company's general counsel.
Speaker 1: And now I would like to introduce Tammy Stevenson, Crawford & Company's General Counselor.
Thank you solving 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.
Speaker 2: Some of the matters to be discussed in this conference call and in the supplementary financial presentation.
Statements may relate to among other things our expected future operating results and financial condition, our ability to grow our revenues and reduce our operating expenses XP.
Speaker 2: These statements may relate to, among other things, our expected future operating results and financial conditions, our ability to grow our revenues and reduce our operating expenses, expectations regarding our anticipated contributions to our underfunded defined benefit pension plan.
Expectations regarding our anticipated contributions to our underfunded 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.
City requirements, and our ability to pay dividends in the future.
Speaker 2: 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.
Speaker 2: could differ materially from the results that may be implied.
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 new to the call or to reflect the occurrence of unanticipated events.
Speaker 2: The company undertakes no obligation to publicly release revisions to any forward-looking statements made in this conference call.
Speaker 2: after the date of the call or to reflect the occurrence of unanticipated events.
In addition, you are reminded that the operating results for any historical period are not necessarily indicative of results to be expected for any future period.
Speaker 2: In addition, you're reminded that the operating results for any historical period are not necessarily indicative of the results to be expected for any future period. We're a complete discussion regarding factors which could affect the company's financial performance.
For a complete discussion regarding factors, which could affect the companys financial performance. Please refer to the company's customers.
<unk> 10-Q for the quarter ended September 32023 filed 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 filings with the SEC.
Speaker 2: particularly the information under the headings risk factors and management discussion and analysis of financial condition and results of operations, as well as those of Quinn Company funds with the SEC. This presentation also includes certain non-GAAP financial measures defined under the SEC rules.
This presentation also includes certain non-GAAP financial measures as defined under the 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 <unk> Company.
Thank you Tammy good morning, and welcome to our third quarter 2023 earnings call. Joining me today is Bruce Swain, Our Chief Financial Officer, Tom Stevenson, Our General Counsel and Joseph Blanco, Our president after our prepared remarks, we will open the call for your questions.
Speaker 3: Thank you, Tammy. Good morning and welcome to our third quarter 20-23 earnings call. Joining me today is Bruce Sway, an Archive Financial Officer, Tammy Stevenson, our General Counsel, and Joseph Blancor, President.
Speaker 3: After our prepared remarks, we will open the call for your questions.
Before I review, our results I would like to take a minute to acknowledge the heightened conflict currently ongoing in the middle East.
Speaker 3: Before I review our results, I would like to take a minute to acknowledge the heightened conflict currently ongoing in the Middle East.
Our with all of those directly impacted and we joined the world community and our desire for peace in the region.
Speaker 3: Our thoughts are with all of those directly impacted and we join the world community in our desire for peace in the region.
Let's turn to our results now.
This was an excellent quarter for Crawford, where we achieved record consolidated revenue and saw continued growth and profit expansion.
Speaker 3: Let's turn to our results now. This was an excellent court of a Crawford, where we achieved record consolidated revenue and saw continued growth and profit expansion.
We still have a lot of work to do but this is a clear indication that our operational strategy is working and we're making progress on our strategic initiatives across our business.
Speaker 3: We still have a lot of work to do, but this is a clear indication that our operational strategy is working and we're making progress on our strategic and between zou arrives way chewy.ce?im that he has cares is like.
As a reminder, Crawford is one of the world's largest providers of claims management.
Speaker 3: As a reminder, Crawford is one of the world's largest providers of claims management.
We operate globally manage over $18 billion in claims annually and have approximately 10000 employees and thousands of field resources.
Speaker 3: We operate globally, manage over $18 billion in claims annually, and approximately 10,000 employees and thousands of field resources.
Our customer base is diversified and growing including a wide spectrum of brand names, who increasingly rely on Crawford as a claim solution provider.
Speaker 3: Our customer base is diversified and growing, including a wide spectrum of brand names who increasingly rely on Crawford as a claim solution provider.
Our established partnerships are strong and getting stronger and we have made meaningful strides acquiring new clients and establishing a leadership position.
Speaker 3: Our established partnerships are strong and getting stronger and we have made meaningful strides acquiring new clients and establishing a leadership position. This has further reinforced my belief in the long-term growth opportunity for the business.
This has further reinforced my belief in the long term growth opportunity for the business.
Okay.
There are multiple reasons that we're optimistic about our long term growth prospects.
Speaker 3: There are multiple reasons that we're optimistic about our long-term growth process.
Globally weather related catastrophes are becoming more prevalent as floods wildfires hurricanes and other serious weather activity are increasing in both severity and frequency.
Speaker 3: First, globally, weather-related catastrophes are becoming more prevalent as floods, wildfires, hurricanes, and other serious weather activity are increasing in both severity and frequency.
That said some years included multiple severe weather events and other years do not see any severe events. For example in the back half of 2022, there were several damaging weather events, including Hurricane Ian Winter Storm Elliot historic flooding in Australia, and the winter freeze in the UK.
Speaker 3: That said, some years include multiple severe weather events and other years do not see any severe events. For example, in the back half of 2022, there were several damaging weather events including Hurricane Ian, Winter Storm Elliott, Historic Flood in Australia, and a Winter Freeze in the UK.
Conversely, as we move through the final few months of 2023, we have yet to see similar severe events this year.
Speaker 3: Conversely as we move through the five of the months of 2023 we have yet to see similar severe events this
Nonetheless, we are always at the ready to support the recovery of affected communities from all types of weather related events with the highest level of compassion and excellence.
Speaker 3: Nonetheless, we are always at the ready to support the recovery of affected communities from all types of weather-related events with a highest level of compassion and
We are focused on executing our operational strategy to grow and touch as many of these claims as possible to improve the customer experience.
Speaker 3: We are focused on executing our operational strategy to grow and touch as many of these claims as possible to improve the customer experience.
Second we expect to see a long term trend of carriers outsourcing claims as they contend with increased volumes staffing challenges and continued pressure of a complicated technology environment.
Speaker 3: Second, we expect to see a long-term trend of carriers outsourcing claims as they contend with increased volumes, staffing challenges, and continued pressure of a complicated technology environment.
Third the independent loss adjusting market is very fragmented and we believe our growing scale is a considerable competitive advantage in the market landscape, particularly with the reliability and resiliency of service providers, becoming more and more critical.
Speaker 3: Third, the independent loss-adjusting market is very fragmented and we believe our growing scale is a considerable competitive advantage in the market landscape, particularly with the reliability and resiliency of service providers becoming more and more critical.
Fourth the depth and breadth of our relationships with key clients across our segments, including carriers brokers and corporate customers continues to be a valuable attribute of our business.
Speaker 3: The depth and breadth of our relationships with key clients across our segments, including carriers, brokers, and corporate customers, continues to be a valuable attribute of our business.
I continue to spend much of my time building these strategic partnerships and we have significantly advanced our customer base over the past few years.
Speaker 3: I continue to spend much of my time building these strategic partnerships and we have significantly advanced our customer base over the past few years.
And finally insurance technology or in short check is a key element in the future of claims management.
Speaker 3: And finally, insurance technology or insure tech is a key element in the future of claims managed.
We are at the forefront of technological innovation for our clients, whether its machine learning data visualization or other SaaS based offerings, improving the claims process and experience.
Speaker 3: We are at the forefront of technological innovation for our clients, whether it's machine learning, data visualization, or other fast-based offerings, improving the claims process and experience.
Okay now, let's get into the results for the third quarter we.
Speaker 3: Okay, now let's get into the results for the third quarter.
We delivered another quarter of strong results revenues grew by 10% on both a reported and constant currency basis to a new quarterly record.
Speaker 3: We delivered another quarter of strong results. Revenue's grew by 10% on both a reported and constant currency basis to a new quarterly record.
And both net income and operating earnings more than doubled year over year.
Speaker 3: and both in that income and operating earnings more than doubles year over year.
This quarter, we achieved revenue growth and profit expansion across three out of our four segments.
Speaker 3: This quarter we achieved revenue growth and profit expansion across three out of our four seconds.
Our underlying operational strategy remains solid and our business. This quarter reflects the success of our operational execution.
Speaker 3: Our underlying operational strategy remains solid, and our business discordor reflects the success of our operational executions.
In fact, these were our highest quarterly earnings since 2018 fourth quarter.
Speaker 3: In fact, these were our highest quarterly earnings since 2018 fourth quarter.
We added $24 million in new and enhanced business in the third quarter with all segments announcing new partnerships and client wins this quarter.
Speaker 3: We added $24 million in new and enhanced business in the third quarter, with all segments announcing new partnerships and client wins this quarter.
These new clients have driven our revenue growth, which is in turn contributed significantly improve cash generation with $68 million and year to date operating cash flow.
Speaker 3: These new clients have driven our revenue growth, which has in turn contributed significantly improved cash generation with $68 million in year-to-date operating cash flow.
We will continue to strategic outlook.
Speaker 3: We will continue to strategic allocate our capital by investing in innovation at Crawford and returning capital to shareholders.
Allocate our capital by investing in innovation at Crawford and returning capital to shareholders.
And as a reflection of our commitment to returning value to shareholders. We paid a <unk> <unk> dividend in the third quarter and resumed our share repurchase program.
Speaker 3: And as a reflection of our commitment to returning value to shareholders, we paid a seven cents dividend in the third quarter and resumed our share repurchase program.
Lastly, I am pleased to provide an update on our NPS, which has increased three points from the last quarter to 49.
Speaker 3: Lastly, I am pleased to provide an update on our NPS, which has increased 3 points from the last quarter to 49.
NPS or net promoter score measures customer loyalty and satisfaction and it remains a priority at Crawford to provide excellent service.
Speaker 3: NPS, or Net Promoter Score, measures customer loyalty and satisfaction, and it remains a priority at Crawford to provide excellent service.
We continue to see progress on our commitment to grow organically and improve margins across our business.
Speaker 3: We continue to see progress on our commitment to grow organically and improve margins across our business.
While we may see anticipated quarterly fluctuation due to weather our operational strategy remains strong and continues to produce improved financial results.
Speaker 3: While we may see anticipated quarterly fluctuation due to weather, our operational strategy remains strong and continues to produce improved financial results.
In our North America loss adjusting segment, we focused on driving low to mid single digit revenue growth and improve margins through efficiency on the volume side and investments in expertise on the major and complex side.
Speaker 3: In our North America Laws Adjusting segment, we've focused on driving low to mid-single digit revenue growth and improve margins through efficiency on the volume side and investments in expertise on the major and complex side.
We have added approximately 60, new expert adjusters year to date, which is increase our coverage density and market share in the U S.
Speaker 3: We have added approximately 60 new expert adjusters due to date, which has increased our coverage density and market share in the U.S.
The significant margin expansion achieved in the third quarter was driven by the addition of multiple new accounts and improve utilization.
Speaker 3: The significant margin expansion achieved in the third quarter was driven by the addition of multiple new accounts and improved utilization.
I am pleased with our third quarter results, but want to reiterate that we currently have a relatively benign weather trends in the second half of 2023. Accordingly, we do not expect a similar over performance in the fourth quarter of 2023 as compared to the fourth quarter of 2022.
Speaker 3: I am pleased with our third quarter results but want to reiterate that we currently have a relatively benign weather trend in the second half of 2023. Accordingly, we do not expect a similar overperformance in the fourth quarter of 2023 as compared to the fourth quarter of 2022.
Our international business has significantly improved this year, we have made excellent progress on our goal to get international to a mid single digit growth target as revenues have increased 6% year to date, 11% on constant currency.
Speaker 3: Our international business has significantly improved this year. We have made excellent progress on our goal to get international to a mid-single-digit growth target as revenues have increased 6% year-to-date, 11% on constant currency.
In the third quarter, we saw 14% growth or 12, 5% growth on a constant currency basis, and we delivered improved operating earnings of $2 $2 million.
Speaker 3: In the third quarter, we saw 14% growth, or 12.5% growth on a constant currency basis, and we delivered improved operating earnings of $2.2 million compared to an operating loss in the third quarter of last year.
Compared to an operating loss in the third quarter of last year.
We are successfully turnaround Latin America U K and Europe, although we still have work to do in order to reach our targeted margins we have demonstrated progress.
Speaker 3: We have successfully turned around Latin America, UK and Europe , although we still have work to do in order to reach our targeted margins.
In executing our strategy to address pricing and productivity and I look forward to continuing to improve our margins as we grow our international business.
Speaker 3: in executing our strategy to address pricing and productivity, and I look forward to continuing to improve our margins as we grow our international business.
The third quarter was a record quarter for broad spire, featuring best ever revenues gross profit and operating earnings.
Speaker 3: The third quarter was a record quarter for BroadSpy, featuring best-ever revenues, gross profit and operating earnings.
We continue to see tremendous growth in medical management and workers compensation clients. While we also benefit from a shift in mix.
Speaker 3: We continue to see tremendous growth in medical management and workers' compensation clients, while we also benefit from a shift in mix.
It is likely that 2023 will be our strongest ever sales year and I'm very optimistic about <unk> outlook as a high performing teams continue to capture share in alternative markets and leverage data to offer cutting edge analytic services to our clients.
Speaker 3: It is likely that 2023 will be our strongest ever sales year. And I'm very optimistic about Broadspire's outlook as our high-performing teams continue to capture share in alternative markets and leverage data to offer cutting-edge analytic services to our clients.
Platform solutions achieved growth in our contractor connection and subrogation businesses related to changes in mix, but faced some comparative pressure related to the benign hurricane season, and the absence of other significant weather events as compared to 2022, and our networks business platforms operating margin remains solid at mid double digits.
Speaker 3: Platform solutions achieved growth in our contractor connection and subrogation businesses related to changes in mix, but faced some comparative pressure related to the benign hurricane season and the absence of other significant weather events as compared to 2022 in our networks business. Platform's operating margin remains solid at mid double digits.
In summary, our business has had a tremendous third quarter, while we do not anticipate while we do anticipate some softness in North America loss, adjusting and platform solutions due to continued benign weather in the fourth quarter, we expect to deliver record revenues for full year 2023.
Bruce will provide some additional detail around our outlook during this discussion of our financial performance.
Speaker 3: Bruce will provide some additional detail around our outlook during this discussion of our financial performance.
Turning now to capital allocation.
We continue to maintain a disciplined and prudent capital allocation strategy.
Speaker 3: Turning now to capital allocation, we continue to maintain a disciplined and prudent capital allocation strategy.
Continuing the efforts of the second quarter, we once again saw improved cash generation in the third quarter.
Speaker 3: Continuing the efforts of the second quarter, we once again saw improved cash generation in the third quarter.
Our stated goal was to have our leverage ratio between two times EBITDA by the end of 2023 and.
Speaker 3: Our stated goal was to have our leverage ratio between two times EBITDA by the end of 2023.
And we have surpassed that goal and are now at one four times EBITDA at the end of the third quarter.
Speaker 3: And we have surpassed that goal and are now at 1.4 times EBITDA at the end of the third quarter.
We are pleased with our progress and early achievement of our financial goals.
Speaker 3: We are pleased with our progress and early achievement of our financial goals.
Our capital allocation strategy remains focused invest in Crawford to foster technological evolution with a long term benefit of the company, while returning capital to the shareholders.
Speaker 3: Our capital allocation strategy remains focused. Invest in Crawford to foster technological evolution for the long-term benefit of the company while returning capital to the shareholder.
This quarter, we raised our dividend of <unk> <unk> from <unk> <unk> per share for both CRD, a and <unk> and bought back more than 60000 shares of CRD B as part of our share repurchase program.
Speaker 3: This quarter we raised our dividend to $0.07 from $0.06 per share for both CRDA and CRDB and bought back more than 60,000 shares of CRDB as part of our share repurchase program. I'm proud to tell you that we have returned more than $131 million of capital to shareholders through share buybacks and dividends since 2019.
I'm proud to tell you that we have returned more than $131 million of capital to shareholders through share buybacks and dividends since 2019.
With that I'd like to hand, the call over to Joseph who will discuss our business line.
Speaker 4: With that, I'd like to hand the call over to Joseph, who will discuss our business line results for the third quarter. Thanks, Roy. As most of you know, we report our business in four operating segments.
<unk> results for the third quarter. Thanks, Rod as most of you know we report our business in four operating segments North America loss adjusting encompasses primarily our loss adjusting business in the U S and Canada. Our international operations is comprised of all reported service lines outside of North America <unk>.
Speaker 4: North America loss adjusting encompasses primarily our loss adjusting business in the U.S. and Canada. Our international operations is comprised of all reported service lines outside of North America.
<unk>, our tpa in the U S and platform solutions includes contractor connection our networks business, including catastrophe and we go look as well as our subrogation business.
Speaker 4: BroadSpy is our TPA in the U.S., and Platform Solutions includes Contractor Connection, our Networks business, including Catastrophe and WeGoLook, as well as our Subrogation business.
As you can see.
Revenue contribution is fairly evenly spread across the reportable segments.
Speaker 4: As you can see, revenue contribution is fairly evenly spread across the reportable cycle.
Beginning with North America loss, adjusting we achieved revenues of $79 4 million, representing 19% year over year revenue growth.
Speaker 4: Beginning with North America loss adjusting, we achieved revenues of $79.4 million, representing 19% year-over-year revenue growth.
Operating earnings were $10 5 million and we expanded our operating margin by 758 basis points.
Speaker 4: Operating earnings were 10.5 million, and we expanded our operating margin by 758 base.
Strength in the quarter was driven by specialists adjuster additions. We've added approximately 60 adjusters year to date, which has enabled us to increase our coverage density in the U S and subsequently capture market share. Additionally.
Speaker 4: Strength in the quarter was driven by specialist adjuster additions. We have added approximately 60 adjusters year to date, which has enabled us to increase our coverage density in the U.S. and subsequently capture market share.
Additionally, third quarter revenue increases are attributed to a meaningful increase in new account nominations and increase utilization of both GTS and field ops.
Speaker 4: Additionally, third quarter revenue increases are attributed to a meaningful increase in new account nominations and increased utilization of both GTS and FieldOps.
Our international segment achieved strong results, indicating that the business has bounced back to stable and healthy level post pandemic.
Speaker 4: Our international segment achieves strong results, indicating that the business is balanced back to stable and healthy level post-pandemic.
Third quarter revenue was $98 1 million and operating earnings were $2 2 million.
Speaker 4: Third quarter revenue was $98.1 million and operating earnings were $2.2 million.
Our revenue growth was a very strong 14% over the prior year third quarter and operating margins expanded by 680 basis points.
Speaker 4: Our revenue growth was a very strong 14% over the prior year's third quarter, an operating margin expanded by 680 basis.
We are seeing the result of our actions to improve pricing and productivity in our international business. In addition to continued growth in our UK Tpa and major loss businesses large loss performance in Latin America and growth in high margin countries in Europe.
Speaker 4: We are seeing the result of our actions to improve pricing and productivity and our international business. In addition to continued growth in our UK TPA and major loss business.
Speaker 4: Large loss performance in Latin America and growth in high-marching countries in Europe .
We have room to improve volumes and grow in Asia, which saw a weaker quarter in our Australia business faced a tough comparison to 2020 to cat activity.
Speaker 4: We have room to improve volumes in growing Asia, which saw a weaker quarter in our Australian business faces a tough comparison to 2022, Caddict.
Overall, a strong quarter and we remain committed to revenue and margin improvements in our international segment.
Speaker 4: overall a strong quarter and will remain committed to revenue and margin improvements in our international segment.
We are excited about the market opportunity ahead of us and we will not be taking our foot off the gas.
Speaker 4: We are excited about the market opportunity ahead of us, and we will not be taking our foot off the gas.
Looking at our <unk> business third quarter revenue grew by 13%.
Speaker 4: Looking at our Broad Spire business, third quarter revenue grew by 13%. As Roe had mentioned, this was a record quarter for Broad Spire in revenues, gross profit, and operating costs.
You had mentioned this was a record quarter for broad spire in revenues gross profit and operating earnings were on track for our best ever sales year fueled by successful new business development efforts that have expanded the revenue base.
Speaker 4: We are on track for our best ever sales year fuel bus successful new business development efforts that have expanded the revenue base.
Revenues in the quarter were driven by strong performance by medical management services, which grew 16% largely related to workers' compensation.
Speaker 4: Revenues in the quarter were driven by strong performance by medical management services, which grew 16% largely related to workers' compensation.
Our innovative technology and excellent service continue to drive our ability to capture market share and we retained over 94% of our business year to date.
Platform solutions had a tough comparison due to less weather related activity in third quarter revenues decreased by 6% from the prior year quarter.
We saw some remarkable growth from our subrogation business, which grew revenues by 24%.
Contractor connection revenues grew 9% and continued to benefit from shift in mix.
Some carriers rely more heavily on their internal adjusters. During this pattern of mild weather, we anticipate a challenging fourth quarter for our networks business.
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 2023 third quarter were a new quarterly record of $325 6 million up 10% from $294 9 million in the prior year third quarter Foreign exchange rates increased revenues before reimbursements by 600000 or less than 1%.
GAAP net income attributable to shareholders totaled $12 $3 million, increasing more than $27 million from a loss of $15 1 million in the same period of 2022.
GAAP diluted EPS in the 2023 third quarter was 25 cents for both CRD, a and CRD b compared to a loss per share of <unk> 31 for both share classes in the 2022 period.
On a non-GAAP basis diluted EPS was <unk> 35 for CRD, a and <unk> 36 cents for CRD b compared to <unk> 15 for both share classes in the prior year period.
The company's non-GAAP operating earnings totaled $29 9 million in the 2023 third quarter were nine 2% of revenues more than doubling the $13 7 million or four 6% of revenues in the prior year period.
Consolidated adjusted EBITDA was $38 6 million in the 2023 third quarter were 11, 9% of revenues compared to 21 4 million or seven 2% of revenues in the 2022 quarter.
I will now review the third quarter performance for each of our segments.
North America loss adjusting revenues totaled $79 4 million in the 2023 third quarter, increasing 18, 8% from $66 8 million reported in last year's quarter due to new account nominations and increased utilization of our expert adjustors.
The segment reported operating earnings of $10 5 million in the 2023 quarter, increasing from $3 8 million reported in last year's quarter.
The operating margin was 13, 2% in the 2023 quarter compared to five 6% in the 2022 quarter.
International operations revenues totaled $98 1 million in the 2023 third quarter of 13, 9% from $8 $86 1 million reported in last year's quarter.
On a constant dollar basis international revenues were $96 8 million growing 12, 5% over last year's quarter.
The segment reported operating earnings of $2 2 million in the third quarter, improving significantly from losses of $3 9 million reported in last year's quarter.
The operating margin was two 2% in the current quarter compared to negative four 6% in the 2022 quarters.
<unk> revenues were $88 3 million in the 2023 third quarter, increasing 12, 7% from $78 4 million in the 2022 period.
Driven primarily by new account nominations and continuation of increased medical management revenues.
<unk> operating earnings were $13 5 million in the 2023 quarter more than doubling last year's third quarter operating earnings of $6 2 million. The operating margin. In this segment was a company leading 15, 3% in the quarter improvement from seven 9% in the 2022 period.
Revenues for platform solutions were $59 8 million in the 2023 third quarter decreasing 6% from $63 7 million in the prior year quarter we.
We saw growth in our subrogation and contractor connect connection revenues, which were offset by networks due to the benign hurricane season, resulting in a difficult year over year comparison.
Operating earnings in platform solutions totaled $8 5 million or 14, 2% of revenues in the 2023 quarter compared to operating earnings of $10 1 million or 15, 8% of revenues in the prior year quarter.
Unallocated corporate costs were $4 8 million in the 2023 third quarter compared to cost of $2 4 million in the same period of 2022.
The increase was primarily due to increased incentive compensation and an increase in unallocated payroll tax and benefit costs.
During the 2023 third quarter non service pension costs were $2 2 million compared to a 500000 credit in the 2022 period.
We recognized a pre tax contingent earn out expense of $2 1 million in the 2023 third quarter compared to 900000 in the 2022 quarter. This was related to the fair value adjustment of earn out liabilities arising from certain acquisitions.
Both non service pension costs and credits and contingent earn out expenses are excluded from operating earnings and are added back for non-GAAP earnings and EPS.
During the first nine months of 2023, the company did not repurchase any shares of CRD, a and repurchased approximately 63000 shares of CRD b at an average share cost of $9 24.
As a reminder, approximately one 7 million shares are eligible to be repurchased under our 2021 share repurchase authorization.
The company's cash and cash equivalent position at September 32023 totaled $49 2 million compared to $46 million at the 2022 year end.
Our total receivables were up $15 million from the 2022 year end, primarily due to increased U S revenues.
The company's total debt outstanding at September 32023 totaled $218 4 million down from $238 9 million as of December 31, 2022.
Net debt stood at $169 2 million as of September 32023, while our leverage ratio under our credit agreement closed at one four times EBITDA. Additionally.
Additionally, our pension liability was $25 million at the end of the third quarter, reflecting our funded ratio of 91, 1%.
We've made no discretionary contributions to our U S defined benefit pension plan for the quarter and we do not intend to make contributions during the remainder of the year.
Cash flow from operations for the first nine months of 2023 totaled $68 $1 million with free cash flow of $40 4 million.
This compares to cash used in operating activities last year of $16 2 million and negative free cash flow of $41 1 million. This significant improvement in cash flow was driven by increased earnings and an improvement in working capital as receivables related to the 2022 weather events were collected during 2023.
I would now like to provide a bit more context around the upcoming fourth quarter.
Although we are experiencing long term trends of increasing severity and frequency of weather events. These trends ebb and flow as Robert mentioned.
We expect the North American weather dependent businesses to face continued headwinds in the fourth quarter, given the absence of the significant storm activity, which favorably impacted the fourth quarter of 2022 last.
Last year, we saw extreme weather activity in the fourth quarter, including Hurricane Ian Winter Storm Elliot Historic floods in Australia, and a winter freeze in the UK. This resulted in 40% to $50 million and weather related revenues and $10 million to $15 million and operating earnings contribution that we do not expect to see repeated in the fourth quarter of.
<unk> 2023.
That said we are on pace to report a very strong full year across our business with record revenues margin improvement strong earnings and cash flow, reflecting the strength and growth in the underlying fundamentals across our segments. We remain confident in our long term growth outlook with that I will turn the call back to <unk> for concluding remarks.
Thank you Bruce this quarter has demonstrated that our operational strategy is clearly working Crawford has exhibited unwavering resilience and adaptability fostering a culture of innovation and efficiency, which has continued to drive our sustainable growth and reinforce our position as a leader in the industry.
Our strong financial results and liquidity provide us with the flexibility to grow our market share as we continue to invest in our industry leading capabilities.
Our remarkable new account wins have resulted in a record quarter for our U S businesses and our international business has demonstrated a strong turnaround we will continue to leverage these new and existing customer relationships in order to create deeper and more durable partnerships.
Our robust financial results underscore our commitment to a strategic execution and operational excellence as we remain steadfast in our dedication to delivering exceptional value to our clients and shareholders. Thank you for your time today Sylvie. Please open the call for questions.
Thank you Sir at this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad and to withdraw. Your question. Please press Star then number two and if you are using a speaker phone. Please lift up your handset before asking your question, we will pause for just a moment, while we compile the Q&A roster.
Sure.
And your first question will be from Mark Hughes Truest. Please go ahead.
Yes, thank you very much.
Good morning, Brian spire segment.
Standout performance this quarter with gross profit with <unk>.
Equal mix.
Or.
Kind of.
A little bit of double digit.
The ability of that that's sustainable.
We believe it's sustainable I mean as broad as far as you know is one of our more resilient businesses from a from a weather perspective, obviously, there is almost no dependence on weather.
And then as you know we've been investing significantly in technology, we're starting to see those results I'll also we're starting to see a return of of our medical management business, which is.
Is almost at the same level this year back to where it used to be pre pandemic, we still believe that theres more room to gain on the medical Bill review side, but the overall medical management business is roughly on par with what it used to be in 2019. So so.
So we believe that.
This is this is a pretty durable profitability number obviously there is some help from the interest rate environment.
And that and we expect that to continue in the near term, but overall, we feel a good trajectory and trend on a broad spot business.
Likewise.
North America the loss adjusting margin look as good as we've seen in quite some time.
Anything unusual about that.
To your point about hiring more.
Technical.
Adjusters.
The higher utilization.
Likewise as something Thats sustainable.
Yes, and Mark you will recall that when we add when we discussed our strategy back in 2020, we had talked about specifically focused on our North America loss adjusting business growing the bench of experts on the on the complex side and then deploying technology on the volume side as well as other efficiency gains on the volte.
<unk> side all of those things are starting to take effect as you know obviously this business gets impacted significantly by weather, but we're seeing that on our large and complex business that'd be call GTS that we've got.
Got pretty good strength in that business and sustainability in that business.
The volume business will fluctuate a little bit with weather events.
And then Brian any comments on the <unk>.
Frequency or severity around workers' comp, but I think youre, certainly being helped by new business.
It is the medical case management is it being driven.
Driven by uptake in.
I guess either.
Frequency of severity with your existing clients.
I don't know if I can comment on the frequency and severity I think its hard its hard for me to do that but we're definitely seeing that.
The slowdown in the medical case management.
That happened during Covid that has certainly gotten better and we're seeing a lot more people now going back and going back into the medical offices than they used to and then we've also been leveraging quite a lot of our technology to make sure that we are identifying cases, where an early medical.
<unk> can actually help the help the case move faster and better through the process. Bruce I don't know if you want to add anything no I think thats I think that covers it.
Okay and then.
On the pension any thought of doing any kind of risk transfer.
You are not fully funded as of yet, but 25 million feels like something that could be.
Manageable.
Would you even consider that.
Yeah happy to Greg Thank you Evan.
Yes, it certainly something thats.
That we've considered what we have done over the past several years as a new attack certain portions of the pension plan. So we've kind of systematically been been cutting the tail off of the off of the plan and transferring liabilities to <unk>.
Insurance companies, along the way so I think.
We will continue to do that as we as we go forward.
To reduce the amount of the.
The benefit obligation.
And reduce some of the volatility associated with the plan, although having said that I mean, the plan is is fairly well immunized from interest rate.
Changes, we feel we feel good about.
The position of the plan relative to market risk.
Great. Thank you very much.
Thanks, Mark arguably don't speak with you a very happy holidays.
Yes, Thank you <unk>.
Once again, ladies and gentlemen, if you would like to ask a question. Please press star followed by one and your next question will be from Kevin Spanky Barrington. Please go ahead.
Good morning.
I wanted to.
I wanted to follow up on.
North America loss adjusting business.
The strength there you mentioned new client wins.
New account nominations, just wondering how we should think about that in terms of.
Yes, how broad base those wins, where are we talking about.
<unk>.
Large clients.
Seeing some some new business activity in the small end.
Small and mid sized market.
Yes, Kevin this is right so we've.
Yes.
Particularly in our large and complex segment, which we call our GTS business.
The account nominations have been very very strong it's something that we focused on and adding the experts gives us the bench to go. After these account nomination. So we feel that that businesses is strong and we see trajectory of that business to grow on our field operations business as well, we believe that there is significant opportunity for us we are still in the low.
Low to mid single digits and market share.
And we have a very pronounced a strategy there to continue to penetrate what we call. The regional Company America. So we believe that we will continue to see growth in that business and as I've stated before that businesses quite susceptible to changes in weather.
Third element in that businesses, Canada and.
Canada has been going through a very low frequency environment. We did see some cat activity there, but really did not result in too many claims and we believe that there is opportunity in Canada as well for us to continue our strategic position there and overall.
If you go back to our strategy that we shared in 2020, we had talked about.
Margin expansion as well as <unk>.
Mid single digit growth so far we've exceeded on both fronts and we expect that over the cycle, we'll get there we will get there somewhat.
Okay. Thanks.
You mentioned there.
I'm going to ask you about the longer term.
Mid low to mid single digit growth for North America loss, suggesting that clearly <unk> been exceeding that growing more like mid to high teens.
And outside of the upcoming fourth quarter here.
We have some.
Just weather related comps I mean do you think.
There is some legs to sustaining.
Growth above the low to mid single digit target.
Over the next few quarters or the next year.
I believe so I mean, notwithstanding the tough comparisons because of weather I believe that there is still quite a lot of gas left in the engine for us to for us to start lit up.
Okay.
Okay great.
Great.
Also following up on broad spire.
Yes, certainly strong performance there.
And you mentioned new business development efforts.
Driving that growth.
What stood out to me was the strong sequential.
Growth in both revenue and.
Operating earnings.
Margin.
For for that segment, so was there some sort of.
New business wins larger contracts ramping up in the quarter that led to that strong sequential increase.
I would attribute that to three things one we have had some initiatives to improve profitability by the use of technology that certainly is starting to gain some critical critical mass or youre starting to see it in the numbers.
Second we have had.
<unk> sort of new business several quarters of strong new business wins, which is what is leading to a full year of our largest almost.
Or just a new business win linear and then third is that we've also been working on right pricing some accounts that needed the pricing shift and we've been we've been successful in doing that so we believe the profitability is coming back in line with where we expect the profitability for this business to be and then obviously the fourth which is not something.
That we control, but as the interest rate environment that is that has helped us.
Okay.
How meaningful is the interest rate piece.
When thinking about the profitability.
Broad spire.
If a contributor but the majority of the increase in profitability is coming from the corporate underlying business.
Okay great.
Yes, certainly another nice.
Profitability and improvement year over year for the international operations.
Yes.
The sequential basis there is.
Bit of a step down in the operating earnings Antelope that there's anything to call out there.
Or.
Kind of what.
The pad or it might be like.
Going forward.
You should expect some quarterly ups and downs with the.
Continued up into the right over the long term.
That's how I would look at it I think over the long term it would continue to be on an upward trajectory.
Might see some quarterly ups and downs as an example.
A pretty large.
And in Australia that we worked through all through the year and.
And that event has largely been tailing off so so you'll see some impact of that we also had some events early in the year or late last year and early this year in the UK, which which we're also starting to starting to tail off so I think it's more that than anything.
We still believe that there is more room for us to improve international and that's what we're going to continue to work on and that's what gives us confidence that we're going to do more of it in the as you said the upper right quadrant.
Okay. Thank you and.
Just on the comments around the.
The fourth quarter were in here.
Difficult weather related comps Bruce I think you said.
40% to $50 million.
Of revenue $10 million to $15 million of operating earnings in the year ago fourth quarter that won't recur if I look at them.
More.
Weather sensitive.
Vince North America loss, adjusting had an $11 million sequential revenue increase in the year ago fourth quarter and then the networks line was about I think.
$15 million sequential increase.
So should we think about those.
Two particular.
Business lines stinks.
<unk> declines in this fourth quarter of 2023 or <unk>.
I assume that's kind of where they are.
Wade.
Absence of revenue is going to fall yes.
Yes.
The $40 million to $50 million in the $10 million to $15 million and operating earnings is related to the North America loss adjusting business and their networks component within platform. So it's not it's in all of our international business. It's certainly not the <unk> of our business.
Alright.
That's how you should think about that.
Okay.
Lastly, I wanted to ask about.
You had the favorable.
Adjustments to <unk>.
Tangent consideration, which.
Is indicative.
The prior acquisitions that you made are performing well or better than expectation. So I don't know if theres.
There are any particular businesses to call out there that have been performing well.
What if there's anything in particular you'd want to highlight there.
I mean, I think wanted to wanted to call out that's been.
A strong performer for us and was a strong performer and the third quarters of subrogation business.
That we have purchased a few years ago.
They've had.
They've been performing very well, but a number of our acquisitions have done well on that that that adjustment that we made in the quarter just wasn't related to the to.
To the Subrogation acquisition. It was it included other businesses that we've purchased as well.
Okay. That's good.
Well I might as well ask then just about.
Your view on acquisitions in the acquisition pipeline I guess.
Yes.
Yeah, a little bit of time since you've.
So on the deal.
What youre seeing out there.
It might be attractive.
And then on the acquisition pipeline.
I wouldn't say, it's as robust.
Right now as it used to be say two years ago, and thats, mainly reflective of the deal flow in the market than a change in our posture.
We continue to look for acquisitions, which will add a specific capability to us that we can scale across our platform.
And the valuation is attractive from our standpoint. So we'll continue to be have a we'll continue to have a very discerning attitude towards acquisitions as we've had and.
We've got plenty of capital capacity to make the acquisition, if we need to but it needs to be the right acquisition. So that's the discipline that we'll continue to maintain.
Okay. Thanks for taking the questions and for all the insight I'll turn it back over.
Thank you Kevin Thanks, Kevin.
And at this time, we have no other questions registered so I would like to turn the call back over to Mr. Vermont.
Thank you Sylvie.
First thank all our employees our clients and shareholders for your continued commitment to Crawford <unk> company. Looking ahead, we are resolute in our efforts to navigate the dynamic landscape of the industry, leveraging our expertise and harnessing emerging opportunities for continued success and sustainable growth in the quarters to come.
And God bless.
Thank you.
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 today through 11 59 PM Eastern on December seven 2023.
The conference I'd number for the replay is 766677 pound the number to dial for the replay are 870 76747070 or 416764.
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