Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Crawford & Co (CRD.A, Financial) demonstrated strong performance in its core non-weather businesses, with growth in three out of four segments.
- Broadspire achieved significant growth, setting a new quarterly revenue and earnings record, driven by technology investments and a focused strategy.
- The company's GTS service line also recorded a revenue high, supported by strategic additions to expertise and resources.
- International operations showed a 7% revenue growth, with a significant increase in operating earnings, reflecting improved performance in the UK and Europe.
- Crawford & Co (CRD.A) maintained a low leverage ratio of 2.09 times EBITDA, providing significant financial flexibility and liquidity.
Negative Points
- Overall consolidated revenue decreased by 3.2% to $314 million, impacted by benign weather trends affecting weather-related business.
- Platform Solutions segment saw a 41% decrease in revenues due to reduced catastrophe activity, impacting operating earnings.
- The company's cash and cash equivalent position decreased to $46.7 million from $58.4 million at the 2023 year-end.
- Free cash flow was negative $26.7 million, a decline from the previous year's positive $9.2 million, due to lower operating earnings and higher incentive compensation payments.
- Weather-related business, including US CAT and US Loss Adjusting, decreased by 21%, reflecting reduced storm activity and insured losses.
Q & A Highlights
Q: The Broadspire profitability is very good in the quarter. Anything unusual boosting that or is this a level that might be sustainable?
A: Rohit Verma, CEO, explained that the profitability is due to significant investments in Broadspire, focusing on unbundled technology and med management offerings, and targeting the alternative insurance market. These strategies are working well, and the company expects to maintain or enhance profitability through continued investments and strong client retention.
Q: On GTS, you talked about the good growth there, I think, record revenue. Is that utilization or have you been adding staff there, driving the top line?
A: Rohit Verma, CEO, stated that the growth in GTS is due to building an expertise-led model and adding over 200 resources by early 2023. The company continues to add expertise and resources, contributing to growth and gaining more nominated accounts.
Q: In the International business, you had some nice recovery in margin. Have you taken the steps that you're able to take and perhaps the margin is more dependent on top line from here or are there more internal actions you can take to help improve profitability?
A: Rohit Verma, CEO, mentioned that the recovery in International margins is part of a multiyear journey. The company expects to continue making changes in the coming quarters to improve profitability, aiming to return to pre-COVID levels.
Q: In the weather-related lines where you've seen some pressure lately, is your cost structure, fixed variable, is that where you want it to be under the circumstances?
A: Rohit Verma, CEO, noted that while some cost structure elements are variable and have been adjusted for benign weather, certain parts are maintained at a higher level to stay differentiated and ready for potential increased weather activity.
Q: You had flat revenues in North America loss adjusting, but still a pickup in operating earnings year-over-year. Could you speak to that a little bit more?
A: William Swain, CFO, explained that growth in the GTS business, which attracts good margins, and effective cost management in US field operations contributed to improved profitability despite weather-related claim volatility.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
