Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Crawford & Co (CRD.A, Financial) achieved a new quarterly revenue record in its Broadspire and U.S. GTS service lines, demonstrating strong performance in non-weather dependent businesses.
- The international operations segment showed solid revenue growth and margin expansion, with an 8% increase in revenue compared to the previous year.
- The company added $24.4 million in new and enhanced business, reflecting a focus on sustainable growth and strategic partnerships.
- Crawford & Co (CRD.A) maintained a strong balance sheet with leverage at approximately 2.2 times EBITDA, providing financial flexibility.
- The company is committed to returning capital to shareholders, as evidenced by ongoing quarterly dividends for CRD A and CRD B shares.
Negative Points
- Consolidated earnings for the quarter declined due to lower weather-related revenue in North America loss adjusting and platform solutions segments.
- Operating earnings in North America loss adjusting decreased by 48% from the prior year, impacted by lower storm severity and frequency.
- Platform Solutions segment saw a 24% decrease in revenues compared to the previous year, affected by reduced storm frequency.
- GAAP net income attributable to shareholders decreased to $9.5 million from $12.3 million in the same period of 2023.
- Free cash flow was negative $18.4 million, a significant decrease from $40.4 million in the previous year, primarily due to lower operating earnings and higher incentive compensation payments.
Q & A Highlights
Q: How much weather-related revenue might extend into Q1, given the $20 to $30 million benefit expected in Q4?
A: Most of the weather-related revenue will be covered in Q4 unless there is additional storm activity from Rafael, which is currently forming in the Gulf. - Rohit Verma, CEO
Q: What is driving the strong growth in the GTS segment, and how much is due to headcount growth versus volume pricing?
A: The growth is primarily volume-driven, supported by increased headcount, which allows us to handle larger and more complex losses. Pricing remains competitive, but the growth is more about expertise. - Rohit Verma, CEO
Q: How is Broadspire shaping up for new business, especially considering Q4 and Q1 are significant for new business?
A: We are seeing a good amount of RFP activity and have strong momentum in new business. We do not anticipate any slowdown in 2025. - Rohit Verma, CEO
Q: Regarding corporate expenses, was there a catch-up this quarter, and should we expect this to calm down in Q4?
A: There was no catch-up; the increase was due to higher severity claims in self-insured medical and increased frequency in other P&C lines. We also had higher professional fees and some one-time reserves and severance costs. - William Swain, CFO
Q: What are the prospects for sustained growth in international operations, given the recent high single-digit growth?
A: We expect the international business to stabilize with low single-digit growth. Our focus is on improving profitability and diversifying our revenue base. - Rohit Verma, CEO
Q: What is the opportunity for continued hiring in the GTS segment, given the specialized expertise required?
A: We are developing talent internally and hiring from the market. We have emerged as a strong destination for talent, and there is significant movement in the marketplace, which benefits us. - Rohit Verma, CEO
Q: What is the longer-term growth rate expectation for the GTS segment?
A: Historically, the three-year CAGR for GTS is about 24% to 25%. We expect low double-digit growth for at least the next year. - Rohit Verma, CEO
Q: How is the North American loss adjusting segment performing, particularly in Canada and small claims?
A: Canada is starting to pick up but is not yet at the desired level. We are making changes to position ourselves better for the mid-term, expecting improvement in the coming quarters. - Rohit Verma, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
