Q1 2025 Crawford & Co Earnings Call
Kevin Steinke, Mark Hughes, Rohit Verma, Tami Stevenson, Maxwell Fritscher,
John: Good morning, my name is John and I'll be your conference facilitator today.
John: At this time, I would like to welcome everyone to the Crawford & Co. first quarter 2025 earnings release conference call.
John: In conjunction with this call, a supplementary financial presentation is available on our website at www.proco.com under the Investor Relations section.
John: All lines have been placed on mute to prevent any background noise.
John: After the speaker's remarks, there will be a question and answer period. Instructions will follow at that time.
John: Should anyone need assistance at any time during this conference, please press star then 0 and an operator will assist you.
John: As a reminder, ladies and gentlemen, this conference is being recorded today, Tuesday, May 6, 2025.
Speaker Change: Now, I would like to introduce Tami Stevenson, Crawford & Companies General Council. Please go ahead.
Tami Stevenson: Thank you John . Some of the matters to be discussed in this conference call and in the supplementary financial presentation may include forward-looking statements and involve risks and uncertainties.
Tami Stevenson: These statements may relate to, among other things, our expected future operating results in financial condition, our ability to grow our revenues and reduce our operating expenses. Expectations regarding our anticipated contributions to our under-funded, fine benefit pension
Tami Stevenson: Collectibility of our build and unbuild accounts receivable. Financial results from our recently completed acquisitions are continued compliance with 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.
Tami Stevenson: The company's actual results achieved in future quarters could differ materially from the results that may be implied by such forward-looking statements.
Tami Stevenson: 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 day of the call or to reflect the occurrence of unanticipated events.
Tami Stevenson: In addition, you are reminded that the operating results for any historical period are not necessarily indicative of the results to be expected for any future period.
Tami Stevenson: For a complete discussion regarding factors which could affect the company's financial performance.
Tami Stevenson: Please refer to the company's FormtMQ for the quarter-end March 31, 2025.
File with the Securities and Exchange Commission
Tami Stevenson: particularly the information under the headings risk factors and management discussion and analysis of financial condition and results of operations, as well as subsequent company filings with the SEC.
Tami Stevenson: 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 .
Speaker Change: I would like now to introduce Mr. Rohit Verma, Chief Executive Officer of Crawford & Co. Company. Rohit.
Rohit Verma: Thank you so much, Tami. Good morning and welcome to our first quarter 2025 Learning School. Joining me today is Bruce Swain, our Chief Financial Officer and Tami Stevenson, our General Counsel. After our prepared remarks, we will open the call for your questions.
Rohit Verma: We've had a strong start to the year in the first quarter of 2025, continuing the growth and profitability and momentum we achieved in the fourth quarter of 2024.
Rohit Verma: Our diversified business model and discipline execution resulted in profitable revenue growth and meaningful margin expansion in the quarter, with expanded profit contribution
Rohit Verma: We very especially encourage by the performance of our non-weather dependent business which continue to deliver steady growth and reinforce our position as a market leader across a wide range of claim types.
Speaker Change: This morning, I'll review our segment operations for the first quarter before handing it over to Bruce for a deeper dive into our financial performance.
Speaker Change: On this slide, you will see a few of the leading global insurers in organizations that partner with Crawford.
Speaker Change: Managing over $20 billion in claims annually across 70 countries, Crawford is the largest publicly traded claims management provider in the world.
Speaker Change: Our reputation as a trusted partner is built on decades of experience, specialized expertise and our ability to operate in some of the most complex and challenging environments.
Speaker Change: Backed by a global team of 10,000 professionals, we continue to differentiate ourselves through consistent execution, scale and a unique ability to support clients wherever and whenever we're needed.
Speaker Change: Crawford brings a rare combination of global reach, technical capability and specialized talent, positioning us to grow alongside the evolving needs of our industry.
Speaker Change: With people, plus technology, at the core of our identity, our strategy blends innovation and expertise to enhance claims management and deliver superior outcomes for clients across
Speaker Change: We see growing demand for expert-led, efficient claim solutions across property, casualty and specialty lines of business with their unique complexities and need for expertise.
Speaker Change: Additionally, we remain well positioned to meet our clients' needs arising from the increasingly frequent and severe weather events globally.
Speaker Change: Global, Reach & Provenability to rapidly deploy specialized talent and advanced technology enable us to support both weather and non-weather claims.
Speaker Change: This balance capability reinforces our role as a trusted partner and positions as well for sustained growth across diverse risk environments.
Speaker Change: As the insurance industry faces increasing regulatory demands and cost pressures, board insurers are turning to claims outsourcing to enhance efficiency and scalability. Our comprehensive service offerings, industry expertise and global reach make us the ideal partner for insurers seeking to stream line operations.
Speaker Change: Industry consolidation also creates more opportunities for specialized service providers, allowing us to expand our footprint and reinforce key partnerships in an increasingly dynamic and decentralized PNC market.
Speaker Change: Expanding our strategic partnerships is a top priority for us. Through our knowledge of our client's operations, we deliver better service and drive stronger outcomes which improves retention and positions Crawford as a long-term value partner.
Speaker Change: Finally, our ability to attract and retain top to your talent and our in short-tech capabilities are central to our growth strategy.
Speaker Change: The expertise and efficiency of our adjusters is a distinct competitive advantage and are innovative technology solutions backed by a highly skilled and agile team, enable us to drive efficiencies and deliver superior claims outcomes.
Speaker Change: These components help position Crawford as the go-to partner for insurers navigating a rapidly evolving tech-driven market.
And now, our first order highlights.
Speaker Change: In the first quarter, Crawford delivered 3.4% year-over-year growth in consolidated revenue, a 5% growth in constant currency driven by solid performances across North America and lost adjusting international operations and broads fire.
Speaker Change: We achieved a $5.7 million dollar increase in operating earnings zero-year driven by improved profitability in North America, law suggesting international operations and platform solutions.
Our consolidated operating modules improved by 170 basis points.
Reflecting our efforts to drive operational efficiencies
Speaker Change: Gross profit increased across all segments, driven by both high revenue and are focused on improving our operating leverage.
Speaker Change: Our commitment to returning value to shareholders is reflected in the quarterly dividend of seven cents per share for CRDA and CRDB, which illustrates our solid financial foundations and our confidence in the future of Crawford.
Speaker Change: Our balance sheet shows continued strength and liquidity, with a low leverage ratio of 1.9 times EBITDA providing us the flexibility to navigate market fluctuations and to make strategic investments to fuel our long-term growth.
Speaker Change: Our balanced revenue model is a core strength of the business. According to NOAA, severe storm reports increase 74% year-over-year in the first four-thirds.
Speaker Change: With Mark Storm reports jumping 215% compared to the same period last year. This uptick in severe weather events provided a late quarter boost to our weather related business lines resulting in an almost 6% increase in the first quarter weather related revenues year
Speaker Change: Importantly, with our two prong revenue models, we not only captured the benefits of this increased storm activity, but also maintained strong growth in our non-weather related business lines.
Speaker Change: Arnon Weather Business revenue grew to 1.5% or 4.6% in constant currency year over year in the first quarter of 2025 and continues to perform well.
Speaker Change: Our balanced model is a key differentiator for Crawford, allowing us to remain resilient and positioned for sustained growth regardless of weather volatility.
Speaker Change: The solid performance from both our weather and non-weather business lines highlights the strength of our diversified portfolio and the operational flexibility we've built over time.
Speaker Change: Our capital allocation strategy remains focused on maintaining financial flexibility while driving sustainable growth. We prioritize investments in long-term growth through capital expenditures and strategic acquisitions with a commitment to operational leverage and strengthening our balance sheet.
Speaker Change: During the first quarter, we maintain strong liquidity and our leverageration remains below industry averages.
Speaker Change: We have consistently returned value to shareholders as demonstrated by a quarterly dividend.
Speaker Change: The disciplined approach to capital allocation enables us to balance growth initiatives which share position in Crawford for long-term success.
Rohit Verma: Thank you, Rohit. As most of you know, our business is diversified and is comprised of four segments. North America Law Suggesting, which includes our law-suggesting operations in the U.S. and Canada, accounted for 26% at first quarter 2020-25 revenues.
Rohit Verma: International Operations, covering all service lines outside North America, contributed 33% of quarterly revenues, reflecting our strong global presence.
Rohit Verma: Broadspire, our US-based third-party administration business, represents 31% of quarterly revenues.
Rohit Verma: Platform Solutions, which includes contractor connection, networks, and subrogation services accounted for 10% of revenues, supporting our strategy of offering end-to-end claims management solutions.
Rohit Verma: North America Law Suggesting saw solid revenue growth in the 2025 first quarter, with revenues increasing 3% year-over-year to $79.7 million.
Rohit Verma: Operating earnings increased by 22% to 5.5 million, driven primarily by new business wins and expansion and key clients from our GTS service line, which saw revenue growth of 12% year over year.
Rohit Verma: This strong start to the year reflects continued momentum in our high-value, complex claims segment, as clients increasingly turn to Crawford for our technical expertise
Rohit Verma: We are seeing the benefits of targeted investments in talent and technology that have enhanced our ability to respond quickly and efficiently to client needs across North America.
Rohit Verma: GTS in particular continues to be a growth engine, supported by both new client wins and deeper engagements with existing accounts.
Rohit Verma: International Operations delivered another quarter of impressive growth, with first quarter revenues of 104.4 million, growing 6% year over year, or 9% on a constant currency basis.
Rohit Verma: This growth was driven by double digit revenue growth across the UK, Europe , and Asia, reflecting strong client demand and the effectiveness of our global operating model.
Rohit Verma: Operating earnings more than double to 3.5 million and operating margin improved by 159 basis points compared to the prior year.
Rohit Verma: We are seeing benefits from our discipline execution across multiple regions, including improved pricing strategies, stronger operational efficiency, and a sharpened focus on higher value services.
Rohit Verma: Our results highlight the progress we've made in scaling our international platform while maintaining our established reputation and personal service.
Rohit Verma: As we move through the year, we remain focused on capturing additional opportunities in both sure and emerging markets, while continuing to enhance profitability through targeted process improvements in technology and ablement.
Rohit Verma: Our Broughtspire business delivered a solid first quarter with revenues of 96.4 million, reflecting strong new business wins and sustained client momentum. Revenues increased by 2.2% over the prior year, driven primarily by these new client additions, with pricing improvements across all service lines.
Rohit Verma: Operating earnings were 12.2 million, with a company-leading operating margin of 12.7 percent.
Rohit Verma: As part of our strategic growth planning, we made proactive investments in talent to ensure we're well positioned to support rising client demands.
Rohit Verma: While these staffing additions modestly impact with operating earnings this quarter, they reflect our long-term commitment to service excellence and scalable growth.
Rohit Verma: Mark's parents' team continues to perform well, securing many new client wins during the quarter. Combined with the client retention rate of 97.5%, Roth's buyer remains a leader in delivering high quality, customized claim solutions.
Rohit Verma: Platform Solutions reported first quarter revenues of 31.5 million, a slight year rear decline. Despite the modest revenue decline, operating earnings rose 163% compared to the prior year, with operating margin expanding by 579 basis points.
Rohit Verma: Management, Reflecting Effective Cost Management, Improved Operational Efficiency and Favourable Mixed Ship Towards Higher Margin Assignments with Associated with Storm Activity and March.
Rohit Verma: While revenues in this segment tend to vary quarter to quarter, we're encouraged by the meaningful improvement in profitability. These results underscore our focus on discipline, execution and our ability to deliver strong financial performance, particularly during periods of elevated catastrophe activity.
Rohit Verma: Our response teams remain ready and well positioned to deploy quickly in support of our clients.
Now look at our consolidated financials.
Rohit Verma: In the 2025 first quarter, company wide revenues before reimbursements were 312 million, an increase of 3.4% compared to the prior year period, or an exchange rate decreased revenues before reimbursements by 4.5 million for 1.4%.
Rohit Verma: Gapnet income, attributable to shareholders total 6.7 million, compared to 2.8 million in the same period of 2024.
Rohit Verma: Gap diluted EPS in the 2025 first quarter with 13 cents for both CRDA and CRDB, increasing from six cents for both CRD classes in the 2024 period.
Rohit Verma: On a non-GAAP basis, diluted EPS was 21 cents for both CRDA and CRDB, compared to 13 cents for both share classes in the prior year period.
Rohit Verma: The company's non-GAAP operating earnings totaled 17.8 million in the 2025 first quarter or 5.7% of revenues, increasing 47% from 12.1 million or 4% of revenues in the prior year period.
Rohit Verma: Consolidated to Justin Evadot was 26.8 million in the 2025 first quarter, 8.6% of revenues, increasing 30% from 20.6 million, were 6.8% of revenues in the 2024 quarter.
Rohit Verma: Company's cash and cash equivalent position as of March 31, 2025, totaled 57.4 million compared to 55.4 million at the 2024 year end.
Rohit Verma: Our total receivables were $270.7 million as of March 31, 2025, down $2.4 million from the 2024 year-end.
Rohit Verma: The company's total debt outstanding as of March 31, 2025, total 246.6 million, up from 218.1 million as of December 31, 2024.
Rohit Verma: Net debt stood at 189.2 million as of March 31, 2025, while our U.S. pension liability was 20.5 million, reflecting a funder ratio of 92.2%.
Rohit Verma: We made no discretionary contributions to our U.S. to fund benefit pension plan during the first quarter of 2025, and we do not intend to make contributions through the remainder of the year.
Rohit Verma: Operating cash flow for the first quarter of 2025 was a use of 13.9 million, with free cash flow of negative 23.2 million. This compares to a use of 19.8 million last year with a free cash flow of negative 29.4 million.
Rohit Verma: The improvement in operating a free cash flow in the 2025 first quarter was primarily due to improved earnings.
Rohit Verma: Unallocated corporate costs were 6.2 million in the 2025 first quarter compared to cost of 8 million in the 2024 period.
Rohit Verma: The decrease was primarily due to lower self-insured expense and professional fees.
Rohit Verma: During the 2025 first quarter non-service pension cost for 2.3 million compared to 2.5 million in the 2024 period.
Rohit Verma: We recognized pre-tax contingent earnout cost of 363,000 in the 2021 first quarter compared to cost of 151,000 in the 2024 period.
Rohit Verma: During the first quarter of 2025, company did not repurchase any shares of CRDA or CRDB.
Rohit Verma: As a reminder, approximately 1.1 million shares are eligible to be repurchased under our 2021 Share Repurchase Authorization.
Rohit Verma: With that, I'll turn the call back over to Rohit for concluding remarks.
Rohit Verma: Thank you, Bruce. As we move through 2025, we're focused on continuing to drive revenue growth and profitability.
Rohit Verma: our balance portfolio of weather and non-weather businesses combined with investments in both our people and technology position as well to deliver long-term value.
Rohit Verma: We maintain a disciplined focus on cash generation and financial strength to ensure we are well prepared to endure potential economic headwinds while supporting our clients and delivering shareholder value.
Rohit Verma: I want to take a moment to thank our partners and clients for their continued trust and collaboration. Most importantly, I'd like to recognize our dedicated team around the world. Your hard work and commitment to excellence continue to drive our success.
Rohit Verma: Thank you for your time today. John , please open the call for questions.
Speaker Change: Yes sir, thank you. Ladies and gentlemen we will now begin the question and answer session. 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, please press the pound key.
Rohit Verma: If you're using a speaker phone, please pick up the handset before asking your question.
We'll pause for a moment.
to compile the Q&A roster.
One moment please.
Speaker Change: Thank you, and we now have our first question. This comes from Mark Hughes from Turois. If your line is no open, please go ahead and ask your question.
Yeah, thank you. Good morning.
Morning Mark. Good morning Mark.
Speaker Change: The GTS up 12%. Could you talk a little bit about the components of that growth? How much was...
Speaker Change: Staff Edition. How much might be, I think you mentioned, more engagement and new wins. How is that market evolving?
Speaker Change: Mark, as you know, that has been an area of growth for us for the last close to five years and we've almost tripled that business in the last five years.
Speaker Change: We've had growth from both dimensions, both from getting more experts. As we get more experts we win greater trust from our clients to win more business from them and as a result we get more nominations so it's sort of been a flywheel effect.
Speaker Change: for us. And as we continue to win more business, it creates more eminence about our capabilities across the world and we attract even more business and we attract even more experts. So it's kind of hard for me to break it down as to what percentage of that growth comes from one or the other because they're deeply interlinked now.
Speaker Change: Yeah, what's your sense of how much more those sort of high value claims are being outsourced by?
Insurers, now versus a couple of years ago.
Speaker Change: Well, I definitely think that there is an increase and I'll talk about it across sort of two axes. I think one axis of the increase comes from just the general increase in complexity of risk around the world.
Speaker Change: If you had a thousand billion dollar buildings in a certain country in Europe , that may be now 1100. So I think you're just seeing an increase in the complexity and level of risk. That's one. The second axis really is
The Complexity of Risk Placement
Speaker Change: because of what's happening with with the lost profile and re-chance rates they're now it's now become a layered business and when it becomes a layered business or a shared business
Speaker Change: where you've got multiple participants, it tends to require some form of an independent juster and we've certainly seen an increase in that because of what's happening in the property market. So those are probably the two access on which we've seen the increase. And I expect that to continue for the foreseeable future.
Yeah.
Speaker Change: Very good. I'm not in the broadspire of the top line growth opportunity. You had a very strong growth at this time last year.
Speaker Change: Are you seeing as much business coming up for bid and how was your success and on that you're just sort of curious on what's influencing the growth rates and broads fire.
Speaker Change: Yeah, what I would say is that we've actually seen a pretty healthy round of new business that we won in the first quarter. As you know, there is a lag between winning that business and then actually the business starting to show up as we bring those clients on board.
Speaker Change: and that remained pretty healthy. As a matter of fact, I think Bruce alluded to that, that we had a small down-tick in the Broadspot margin and that was really because of advanced staffing. So we know that new business was coming, we've already won the business, so we are doing anticipatory staffing for that. So we don't see a slowdown in the growth of that business. We've had a pretty solid retention for the quarter as well, which was at 97.5%.
Speaker Change: Very good. Anything there on workers' comp claims, frequency or severity?
Speaker Change: Anything that might be having on the medical fronts that you're seeing influencing the costs for your clients, just always looking for any kind of inflection or change and maybe some are suggesting that...
Speaker Change: a little bit of inflection here. Anything in your book on workers comp that points one way or the other?
Speaker Change: You know, Mark, we haven't observed anything which is, you know, which has caught our eye in terms of a change. You know, as you know, we've been growing, so we've just, you know, seen an increase in our activity from that. I think we had reported.
Speaker Change: maybe a year ago, maybe a year and a half ago, that we had seen a slowdown in the medical management piece after Covid, but that sort of come back.
Speaker Change: I'll come back to the levels that I would say is in line with pre-COVID. We are absolutely seeing greater engagement with our clients on how to manage the outcomes better and how to manage cost better. And that's where our technology team has been spending quite a bit of time with clients in what can we do with the various predictive models with AI analytics.
Speaker Change: Things like that, the machine learning to see how we can get better outcomes, whether it's in terms of return to work, medical payment management, or just other factors as you know that drives the workers' comp.
claims costs.
Speaker Change: And then one more if I might, you'd mention how weather activity picked up in March that was helpful but kind of laid in the quarter, I think you talked about that within the context of platform solutions. Do you think that will that flow through into 2Q?
Speaker Change: Mark, we're observing something and it's a hypothesis that we've tested with some clients and there seems to be some validity to that hypothesis, there is definitely a challenge with the affordability of insurance.
Speaker Change: that's happening today in various states and you're pretty familiar with that. What's that resulting in is is a general under under-reporting of claims.
Speaker Change: macroeconomic headwinds, we believe a lot of policyholders don't want an increase in their insurance cost of the fire claims.
Speaker Change: or use their funds towards something that may have been cosmetic from a storm damage. So, those sort of two or three things, we believe are the big factors in which we're seeing under reporting of claims. I mean, what we would see is claims from a typical weather event like what we saw in March.
Speaker Change: We're not seeing the same level and our carrier clients are telling us that, you know, they're seeing, you know, 20 to 30% drop in those reports as well.
Interesting. Okay.
Thank you very much. Thank you. Thank you
Kevin Stank: Thank you. And the next question comes from Kevin Steinke from Farrington Research. Your line is now open. Please go ahead.
[inaudible]
Good morning.
Kevin. Hi, Kevin.
Speaker Change: I wanted to start off by asking about international continued revenue momentum there.
Speaker Change: and you mentioned pricing as well as higher value services so maybe if you can delve a little bit more into the drivers there and I was particularly interested in the comment about higher value services.
Speaker Change: Yeah, the high value services is more around the GTS kind of work that we've been doing and that's been growing I mean we've seen as you know we've had some struggles in our Asia market that has started to come back more because we've been investing there in GTS like talent or high complexity talent.
Speaker Change: Look, we feel very good about our international business. We've been through a transformation cycle. It took us better part of three years, really to transform that business. We've gone through management changes. We've gone through repricing some of our client programs. We've gone through adding additional teams, as you know, in Netherlands and more recently in Spain and other parts of the world. [inaudible]
Speaker Change: So we believe that we've been on this transformation trajectory. Kevin, you would recall that our European business and our international business broadly was hit pretty severely after Covid because a big portion of our business was related to travel and travelling entertainment.
Speaker Change: And since then we've been working on diversifying that book. I'm really pleased to see the work that our TPA teams have done internationally and as well as our lost adjusting teams that have worked really hard to win larger clients.
Speaker Change: to get nominated on larger loss of adjusting programs and then also on much better priced TPA programs. So those have been the big factors.
That I've been driving.
Speaker Change: International and then I think the leadership change and the management changes that that we've made, they've also had a pretty significant impact. I mean...
Speaker Change: We have a newer leader in Europe , we have a newer leader in UK, we have a newer leader in Australia, and newer leader in Latin America. And then a newer leader in Asia. So you pick any of our regions. We've over the last three to five years, we've gone through leadership changes there. And we've got to run the international businesses is doing a spectacular job of.
Speaker Change: Okay, great, yeah, that's helpful color. And you mentioned their DTS helping growth internationally.
Speaker Change: You know, I've always thought of GTS more as benefiting North America's lost adjusting, but, you know, how meaningful it is.
The addition of GTS adjusters has been within international.
Speaker Change: Yeah, look, the substantive growth in GTS has definitely come in the U.S. as you heard me talk to Mark about it. The business that we've tripled in the last five years has certainly been in the U.S. But, you know, that should not sort of suggest that we haven't made progress internationally. I would say that UK has done a great job bringing in more GTS and specialty business, same thing in Europe and same thing in Asia, as well as Latin America. So, I would say that we benefit from GTS.
Speaker Change: across the world, for the factors that I was talking about earlier, which is the complexity of the risk continues to go up, complexity of the displacement continues to go up. [inaudible]
Speaker Change: and as we establish ourselves at the destination for experts, we also then establish ourselves at the destination for complex claims to come through. So, you know, I don't have an exact number that I can give you right now in terms of what's been the growth for GTS internationally because it's not something that we track that way because we track things more to countries level, but I can tell you that, you know, GTS has played a pretty significant role for us.
growing not just in North America but across the world.
Okay, great. And so...
Speaker Change: He talked quite a bit in your prepared markets remarks about the focus on.
Speaker Change: Just maybe if you can touch on some of the factors driving operating leverage.
Speaker Change: You know, similarly our TPA business, which has been running on several systems, we are slowly moving for our, you know, non-North America business or I should say international business outside of North America to one TPA system.
Speaker Change: Those are all things that we're doing. We're looking at an entire technology landscape, both from an IT simplification, but also from a process simplification lens. And I believe that that will start to show stronger results in terms of operating leverage in months and in quarters to come.
Okay, great.
Speaker Change: I think that's all I have for now. I'll turn it back over. Thank you. Thank you, Kevin. Thank you.
Speaker Change: Thank you, and we don't have any further questions at this time, so I will turn the call over back to Mr. Rohit Verma for closing remarks. Please go ahead, sir. Thank you, John , and thank you to all our employees, clients and shareholders for your continued commitment to Crawford. Thank you, and God bless.
Speaker Change: Thank you for participating in today's Crawford & Company Conference call. This call will be available for replay beginning at 11.30 a.m. ESC today.
Speaker Change: Through 11.59 p.m. ESD on May 13, 2025, the conference ID number for the replay is...
Speaker Change: 27578- and the number to dial for the replay is 1-888-660-6264. Thank you, you may now disconnect.