Crawford & Company Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 4, 2023

There are 9 speakers on the call.

Operator

Good morning. My name is Brian, and I will be your conference facilitator today. At this time, I would now like to welcome everyone to Crawford and Company First Quarter 2023 Earnings Release Conference Call. In conjunction with this call, a supplementary financial presentation is available on our website at www.croco.com under the Investor Relations section. The call.

Operator

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. The instructions will follow at that time. The podium. As a reminder, ladies and gentlemen, this conference is being recorded today, Thursday, May 4, 2023.

Operator

The conference call. Now I would like to introduce Sami Stephenson, Crawford and Company's General Counsel.

Speaker 1

Thank you, Brian.

Speaker 2

The operator. Some of

Speaker 1

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. The operator. 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 the expectations regarding our anticipated contributions to our underfunded defined benefit pension plan, collectability of our billed and unbilled accounts receivable, the financial results of our recently completed acquisitions, our continued compliance with the financial and other covenants contained in our financing agreements, the long term capital resource and liquidity requirements and our ability to pay dividends in the future. The company's actual results achieved the conference call. 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 the call the call to reflect the occurrence of any unanticipated events.

Speaker 1

In addition, you are reminded that operating results for any historical period are not necessarily indicative of the the results to be expected for any future period. For a complete discussion regarding factors which could affect the company's financial performance, the company's Form 10 ks excuse me, 10 Q for the quarter ended March 31, 2023, filed with the Securities and Exchange Commission, call, particularly the information under the headings Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations the SEC as well as subsequent company filings with the SEC. The presentation also includes certain non GAAP financial measures as defined under SEC rule. The call. As required, a reconciliation is provided for those measures to the most directly comparable GAAP measures.

Speaker 1

I would now like to introduce Mr. Rohit Verma, Chief Executive Officer of Crawford and Company. Charlotte?

Speaker 2

Thank you, Tammy. Good morning, and welcome to our Q1 2023 earnings call. The operator. Joining me today is Bruce Wayne, our Chief Financial Officer Joseph Blanco, our President and Tammy Stevenson, our General Counsel. The operator.

Speaker 2

After our prepared remarks, we will open the call for your questions. We continued our momentum and delivered another quarter of exceptional results. The conference call. Revenues grew by 12% or 16% on a constant currency basis and operating earnings nearly doubled year over year. The operator.

Speaker 2

We experienced revenue growth and profit expansion across all segments, highlighting the underlying strength of our business model the Q1 results and solid execution of our stated strategy. Our outstanding Q1 result marks our 10th consecutive quarter of revenue growth, the Q1 of 2019, not only reflecting continued top line momentum and increasing profitability, but also the hard work and dedication of our valued teams the company's leadership team across the globe. Their unwavering commitment to quality and customer excellence is enabling us to the Q1 of 2019 to execute our long term strategy and bring our envisioned future to life. 2 years ago, the call. We shared our long term growth strategy focused on driving organic growth and improving margins across our business.

Speaker 2

The operator. I'm extremely pleased to share that to date, we have made tremendous progress against our goals, including sustained revenue growth and margin improvement. The call. Recall for North America loss adjusting, our strategy was to drive low to mid single digit revenue growth the financials and improve margins through efficiency on the volume side and investment in the expertise on the major and complex side. The Q1 of 2019.

Speaker 2

Our ongoing investment in expertise, expansion of our geographic footprint and industry leading quality have continued to drive growth the North America loss adjusting business. During the Q1, our pricing actions and improved utilization drove meaningful margin expansion. The Moving forward, we believe we will see further growth resulting from our efforts to hire additional specialist adjusters the company's leadership and increasingly scale the business. Our focus in Broadspire was to capture share in alternative markets the company's financial results and leverage data to offer cutting edge analytics services to our clients. In the quarter, overall sales momentum was driven by new client wins the Q1 of 2019.

Speaker 2

We expect continued recovery in medical management as claims frequency improves through new and existing client wins the call,

Speaker 3

as well as healthy pricing.

Speaker 2

Similarly, we had previously stated that our long term focus in platform solutions is to scale this business to deliver double digit revenue growth and strong flow through to the bottom line. We're delivering on this objective as our platform business

Speaker 3

the company's financial performance. Our highest margin

Speaker 2

operating segment continues to serve as a key growth engine for our business. The call. We delivered double digit revenue growth in the quarter driven by pricing and improved utilization in Contractor Connection along with increased market share gains the Q1 of 2019 with our top 5 carriers partners in our cat business. We expect continued strength moving forward supported by healthy underlying demand and solid execution. The We are very pleased with the turnaround we're seeing in our international business, which is now tracking towards our mid single digit growth target.

Speaker 2

The call. This is resulting from the specific actions we have taken to address pricing and productivity, where we have implemented new systems, improved processes the Investor Relations team and better align our cost structure with current market conditions. We expect continued momentum and further improvement as we move forward. The call. Overall, we continue to deliver on our strategic vision for growth and margin expansion across the business that we shared with you 2 years ago.

Speaker 2

The This track record of delivering what we laid out gives us confidence in our continued execution. Our success to date position us the company's financial results for sustainable growth, and we remain focused on delivering value to our shareholders. Turning now to capital allocation. The operator. We continue to maintain a disciplined and prudent capital allocation strategy.

Speaker 2

We leverage our liquidity to fund the working capital needs related to the storm activities in the U. S. During the Q1. As mentioned in the last quarter, we expect improved cash flow the next question. As we move forward, which will be used to pay down debt and reduce our leverage ratio, taking it below 2 times EBITDA by 2023, the financial results, which is in line with our previously stated leverage target.

Speaker 2

Our positive earning results and conservatively managed balance sheet gives us tremendous flexibility to move forward with making investments for the benefit of the company. These have also enabled us to continue our quarterly dividend of $0.06 per share the Q1 of 2019 for both CRD A and CRD B. As a point of reference, we have returned more than $120,000,000 of capital to shareholders the shareholders' shareholders. We are also pleased to share buybacks and dividends over the last 4 years, further highlighting our commitment to deliver shareholder value. The operator.

Speaker 2

Overall, we are in a strong financial position and feel confident in our ability to continue execution on our long term growth strategy. The operator. With that, I'd like to hand the call over to Joseph, who will discuss our business line

Speaker 4

results for the Q1. Thanks, Rod. The Beginning with North America loss adjusting, we experienced 20% revenue growth and expanded our operating margin by more than 400 basis points. The Strength in the quarter was driven by adjuster additions, increased utilization and carryover from Hurricane Ian and winter storms in the U. S.

Speaker 4

The We also gained new clients and saw organic growth with existing clients in the quarter. Our hiring efforts on the major and complex side during the Q1 the allowed us to reach a significant milestone. We officially surpassed our 3 year global hiring goal of 200 specialist adjusters, the And we did it 1 year ahead of schedule. Looking ahead, we will continue to augment our deep bench of experts to drive penetration with top carriers the conference call as Crawford remains the premier destination for talent even in difficult labor market.

Speaker 2

We are pleased with the progress we

Speaker 4

have made in our international operations, the company's financial results, which grew revenues and expanded margins. As Rod mentioned, our actions to improve pricing and productivity as well as simplify our processes and cost structure the Q1 of 2019. These actions combined with weather related activity drove a turnaround in the quarter. The Australia experienced continued strength from last year's unprecedented flooding events in Southeast Queensland and New South Wales, along with the recovery in specialty claims. The In the U.

Speaker 4

K, revenue growth was driven by winter freeze related claim activity during the Q1, resulting in increased volumes. The Our business in Europe also reported increased revenues, and we made progress on our regionalization efforts, which have helped restructure our cost basis. The Flooding in the Philippines, along with surge activity in Thailand and client wins in Singapore and Taiwan created higher than expected revenue in Asia. The In Latin America, growth was driven by strength in Brazil, where we continue to add clients to our core business. The Looking at our Broadspire business, strength in the quarter was driven by an 11% increase in medical management revenues stemming from both recent new business wins the Q1 of 2019.

Speaker 4

We anticipate a continued steady recovery in this business moving forward. The Additionally, we are pleased with the continued pricing momentum we are seeing in this segment. We also continue to gain traction in the alternative market, the call today. We are targeting captives and MGAs through a dedicated sales effort that is bearing fruit. Clients are driving more data and analytical services work to us as well.

Speaker 4

The Platform solutions are experiencing strong results, delivering double digit revenue growth of 29% year over year. This was led by Networks, where we continue to deepen our relationship with 2 of the top 5 carriers in our property and flood businesses. The In addition, we onboarded a new top 5 carrier client. In Contractor Connection, we continued the momentum we saw late last year the conference call and

Speaker 3

delivered the best Q1 ever.

Speaker 4

We benefited from price increases and improved utilization along with continued market share gains. The Exceptional growth in our Networks business is now outpacing growth in Contractor Connection, which is shifting the overall mix and slightly impacting segment margins. The We remain confident in the long term health of the business and expect organic growth momentum to continue. The We won over $36,000,000 of new and enhanced business in the Q1. Additionally, our NPS score remains healthy at 47, the operator.

Speaker 4

We are continuously looking for opportunities to improve our score. We retained 97% of our U. S. Broadspire business in the Q1, the conference call. And we are increasing market share with key carrier clients as well as corporate entities.

Speaker 4

At Crawford, the Everything we do ties back to our purpose of restoring lives, businesses and communities. We believe in minimizing our environmental impact, the Behaving with Honesty and Integrity and Driving Conscious Inclusion and Diversity at Every Level of the Organization. The We continue to make consistent progress on our DEI and human capital initiatives. Our employee resource groups or ERGs continue to engage employee segments such as multiracial and ethnic employees, women, LGBTQ plus employees and disabled employees. The Additionally, to monitor employee satisfaction and engagement, Crawford continues to conduct employee poll surveys.

Speaker 4

This helps us gather open and honest feedback the about where our organization is succeeding and where more support is needed. In 2022, we had an overall response rate of 75%, the which shows that our employees have a strong desire to be heard and that their voices matter. The survey items also revealed the state of current employee sentiment the discussion around DEI with a significant number of respondents agreeing that they did not face any bias due to their personal identity the conference call. The call is now open. And that Crawford is committed to the fair treatment of its employees.

Speaker 4

The outcome from the survey underscores the efficacy of our culture and people programs the Q1 of 2019. We will continue to focus on areas to enhance our overall employee experience. The We also strive to be an organization where our people can thrive with our focus on professional development and operational excellence. The In 2022, our employees won multiple awards around the globe in a wide range of categories, including DEI, Corporate Counsel, the Excellence in Claims Management and Technological Innovation. For example, we are proud to have been named on the 2022 Insurance Business 5 Star Diversity, Equity and Inclusion List, which has given to a small number of companies across the insurance industry.

Speaker 4

The They're demonstrating effective DEI programs that help foster change. Overall, we remain steadfast in our commitment to ESG, the And we are dedicated to cultivating a safe, inclusive environment in which everyone's unique perspectives and experiences are heard and valued. The We will continue to look for opportunities across our enterprise to become more socially responsible and are increasingly integrating ESG best practices into our operations. The conference call. In the coming weeks, we will be publishing our 2022 Global Citizenship Report, which highlights our accomplishments thus far the conference call and outlines our commitments for the future as we continue on our journey to help make the world a better place.

Speaker 4

With that, the conference call. Let me turn the call over to Bruce for a deeper look at our financial performance.

Speaker 5

Thank you, Joseph. Company wide revenues before reimbursements in the 2023 1st quarter were $313,000,000 up 12% from $279,000,000 in the prior year Q1. Foreign exchange rates decreased the

Speaker 3

Q1 of 2019. We expect revenue by

Speaker 5

$9,400,000 or 3%. On a constant dollar basis, revenues totaled $322,400,000 increasing nearly 16% compared to the 2022 Q1. GAAP diluted EPS in the 2023 Q1 was $0.22 for both CRD A and CRD B, the earnings release. Compared to $0.10 for both share classes in the 2022 period, on a non GAAP basis, Q1 2023 diluted EPS

Speaker 3

the earnings release. It was $0.28 for both

Speaker 5

CRD A and CRD B compared to $0.14 for both share classes in the prior year period. The company's non GAAP operating earnings totaled $24,900,000 in the 2023 Q1 or 7.9 percent of revenues,

Speaker 3

the earnings

Speaker 1

release, up from

Speaker 5

$12,500,000 or 4.5 percent of revenues in the prior year period. Consolidated adjusted EBITDA the earnings release. The earnings release was $32,800,000 in the 2023 Q1 or 10.5 percent of revenues compared to 21,300,000 the Q1 of 2019, we are now reviewing the Q1 of 2023 performance the next segment for each of our segments. North America loss adjusting revenues totaled $77,100,000 in the 2023 Q1, the Q1 of 2019. We are pleased to report that we are pleased to report that we are pleased to report that we are pleased to report that we are the segment reported operating earnings of $8,100,000 in the 2023 1st quarter, the company's earnings call.

Speaker 5

Nearly doubling the $4,100,000 reported in last year's quarter. The operating margin was 10.5% in the 2023 quarter the Q1 of 2019 compared to 6.4% in the 2022 quarter. International operations revenues the earnings conference call.

Speaker 3

This conference totaled

Speaker 5

$91,900,000 in the 2023 Q1, up 2.9% from the $89,300,000 reported in last year's quarter, the company's financial results, including $700,000

Speaker 3

from the Van Dyke acquisition.

Speaker 5

On a constant dollar basis, international revenues totaled 99 point the $6,000,000 growing 11.6 percent over last year's quarter. The segment reported operating earnings of $3,000,000 in the 2023 1st quarter, the company's financial results, improving significantly from losses of $3,100,000 reported in last year's quarter. The operating margin was 3.3% in the 2023 quarter the Q1 of 2019 compared to negative 3.4% in the 2022 quarter. Broadspire revenues were $81,200,000 in 2023 Q1, increasing 6.2% from $76,500,000 in the 2022 period,

Speaker 3

the call today,

Speaker 5

driven by improving medical management revenues. Broadspire operating earnings were $7,900,000 in the 2023 Q1, the earnings release. Up from last year's Q1 operating earnings of $6,400,000 The operating margin in this segment was 9.8% in the 2023 quarter, the Q1 of 2019, improving from 8.4% in the 2022 period. Revenues for platform solutions were $62,800,000 in 2023 Q1, increasing 28.6 percent over the $48,900,000 in the prior year quarter the earnings release due to growth in Networks and Contractor Connection. Operating earnings in Platform Solutions totaled 10,000,000 the Q1 of 2019.

Speaker 5

Our earnings were 15.9 percent of revenues in the 2023 Q1 compared to operating earnings of $8,000,000 or 16.5 percent of revenues in the prior year quarter. The Unallocated corporate costs were $4,100,000 in the 2023 the Q1 compared to cost of $3,000,000 in the same period of 2022. The variance was primarily due to a 1,800,000 the earnings release of our Canadian head office in the 2022 Q1 and an increase in self insurance costs in 2023, the Q1, partially offset by other cost reductions. During the 2023 Q1, non service pension costs were $2,200,000 the company's financial results compared to a $500,000 credit in the 2022 period. These costs and credits are not a component of operating earnings the financial results and are added back for non GAAP earnings and EPS, similar to how we treat the amortization of intangible assets and contingent earn out adjustments.

Speaker 5

The call. We recognized a pretax contingent earn out expense of $200,000 in the 2023 period compared to $2,100,000 in the 2022 quarter. The conference call. This was a result of net changes to projections of certain recently acquired entities. During the 1st 3 months the Q1 of 2023, the company did not repurchase any shares of CRD A or CRD B.

Speaker 5

As a reminder, approximately 1,800,000 shares the shareholders who are eligible to be repurchased under our 2021 share repurchase authorization. The company's cash and cash equivalent position as of March 31, 2023 totaled $43,300,000 the Q1 of 2019 compared to $46,000,000 at the 2022 year end. Our total receivables were up $15,400,000 from the 2022 year end, the

Speaker 3

Q1 of 2019, primarily due to

Speaker 5

increased U. S. Revenues. We made no discretionary contributions to our U. S.

Speaker 5

Defined benefit pension plan for the Q1 the March 31, 2023 totaled $249,400,000 compared with $238,900,000 as of December 31, 2022.

Speaker 6

The Net debt stood at $206,100,000

Speaker 5

as of March 31, 2023, while our leverage ratio under our credit agreement the Q1 of 2019. We closed at 2.07x EBITDA. Additionally, our pension liability was $25,700,000 at the end of the first quarter, the financial results reflecting a funding ratio of 91.9%. Cash used in operations the earnings release. The $14,800,000 improvement in operating cash flow was driven by the increase in operating earnings and an improvement in working capital.

Speaker 5

The operator. Free cash flow was negative $9,100,000 for the 1st 3 months of 2023, improving from negative $22,900,000 in the prior year period. The operator. With that, I'll turn the call back to Rohit

Speaker 2

for concluding remarks. Thank you, Bruce. Overall, we are tremendously pleased with our strong results for the Q1, the call, which highlights the effectiveness of our long term strategy, commitment to our people and confidence of our customers. The conference call. As we look to the year ahead, we are excited about our promising growth trajectory and will continue our focus on delivering healthy margins and earning growth across the business.

Speaker 2

The call. We remain in an enviable financial position, and we look forward to delivering value to our shareholders in 2023, while fulfilling our purpose of restoring lives, the businesses and communities. Thank you for your time today. Brian, please open the call for questions.

Operator

The to the the call. Your first question comes from the line of Kevin Steinke with Barrington Research. Please go ahead.

Speaker 6

The Hey, good morning, everyone, and congratulations on the strong results.

Speaker 5

Thank you, Kevin. Good morning.

Speaker 2

Thank you, Kevin. Good morning.

Speaker 6

The Yes. I just wanted to start out by asking generally about market share gains and the If you feel like you're gaining momentum on that front across your various business lines the Based on the investments you've made, I know you mentioned onboarding a new the top carrier client networks. Maybe that's one example or I don't know if you could point to any other color or examples on that front.

Speaker 2

The Sure. Kevin, this is Rohit. There is this is our 10th consecutive quarter of growth, so there's definitely market share that we're gaining. And I think if you look carefully across the results, you will see that every segment has grown the revenue as well as expanded contribution of profit. So we definitely believe that we are gaining market share.

Speaker 2

The Also, we were certainly helped by the severe weather that we saw in the U. S. As well as U. K. And the And doing well in those weather conditions is also indicative that our clients are turning more towards us in their hour of need.

Speaker 2

So the operator. Whether we look at our North America loss adjusting business, which contains Canada and U. S. Loss adjusting, we've seen tremendous momentum in U. S.

Speaker 2

Loss adjusting,

Speaker 3

the operator, both on

Speaker 2

the volume side as well as on the expertise side. As you know, we've doubled our expertise based business over the last two and a half years or so, the call, which clearly demonstrates the addition of new clients or I would say market share gain. The same thing we're seeing in our platforms business, the Whether it's Networks, Contractor Connection, in Contractor Connection as an example, we're now writing majority of the top 10 carriers, the operator. And our goal is to grow in concentration with them. If you look at our Broadspire business, we have been winning a number of new clients in that business.

Speaker 2

In fact, the We're just starting to eclipse the rate from a pre pandemic level where we were. So we fully recovered from the pre pandemic by addition of new clients as well as the growth in frequency. And then I think I was very pleased to see what we saw in international as well where we're starting to demonstrate that we are the Q1

Speaker 3

of 2019. We are now hitting the mid single

Speaker 2

digit growth rate that we had promised 2 years ago, and the key work for us there is to continue the transformation of our operating the department, which allows us to drive better margin. So in short, yes, we believe we're gaining market share. It's coming through across all our segments, the Investor Relations and the investments that we've made are starting to show results, and we're excited about the journey we're on.

Speaker 6

The Okay, great. And you mentioned there the severe weather. Just trying to get a sense the Q1 of 2019. As to how material that was in terms of the year over year growth, the Maybe you should talk about weather surge revenue, but even I guess wrapped up within that, the I suppose would be the fact that you're probably capturing a greater share of weather related claims than you the even would have a year ago or 2 years ago. So I guess any comment on that?

Speaker 2

The Certainly. It's the easiest to measure in our catastrophe related businesses. The And that's where we've certainly seen a pretty significant movement. We can't always tell what is related to surge weather because sometimes the our clients will take their internal adjusters and move them towards surge weather and use us on their sort of day to day claims. So it's not always easy to tell exactly what was surge and what was not.

Speaker 2

The What I can tell you is that with some of our largest clients, we've seen double digit increases in revenue the call with them. And we believe that probably 20% to 30% of that is related to them being distracted with weather or deploying us directly on their weather related work. Bruce, do you want to comment on that?

Speaker 5

No, I think that's exactly right.

Speaker 6

The Okay. Thanks. And you mentioned when you laid out your longer term goals, the targeting low to mid single digit growth in North American loss adjusting. Obviously, you've been growing faster than that. The Did you think like that do you think that's still the kind of the right longer term target to think about the as that business develops.

Speaker 2

Yes. I think longer term that still is the right target. Do I think that we will continue to eclipse that growth, the Say for the next few quarters, I do believe that, that we will continue to eclipse that growth. But I think that is the right long term growth for that because to the There are forces in that place of the market and we try to predict this more on an overall cycle as over the long term cycle as opposed the quarter to quarter because that business is extremely sensitive to what we were just talking about, the weather. That business is also extremely the picking some of that revenue up on the platform side, but I think for that segment, that's I still maintain that the That's the right growth rate.

Speaker 2

We'll see maybe by the end of this year, we'll take another look at it and revise it. But at least for now, I think that's the right growth rate for us.

Speaker 6

The Okay. Yes, understood. And you mentioned reaching your target of 200 specialty adjusters, the hiring those folks with the North American loss adjusting. You've reached that 200 goal the a year ahead of schedule. And I think I might have asked this something similar before, but the Now that you've reached that goal, would you like to continue adding there?

Speaker 6

Is there more capacity to do that or willingness to do that. Are you seeing the demand where that would require you to continue hiring there?

Speaker 2

Yes. When we had set that original goal, the operator. We had a certain expectation of how much market share we can gain. Candidly speaking, I think we've done better than what we had originally expected in terms of market share that we can gain. The So at this point, we don't believe there is any need for us to put our foot off the accelerator.

Speaker 2

So I think we will continue to find the people that make sense that align with our culture that brings something differentiated to our expertise base. And if we find them, we'll bring them on.

Speaker 6

The Okay, great. I wanted to ask specifically about Contractor Connection. The There was a sequential increase in revenue relative to kind of the quarterly the run rate you've been on. I think you mentioned you're gaining traction with top carriers. The Is that playing into that improved revenue?

Speaker 6

How much of that was related to weather? Just trying to get a sense as to what the

Speaker 2

the Yes. It was Q1, I believe was the best Q1 we've had for Contractor Connection as far as we can remember. And I do believe that the We're seeing traction from not only the new clients we brought in, but the sort of increased frequency that we've seen, also the increased inflation we've seen in construction costs. I think I feel that this traction will continue. Whether we'll have similar kind of growth trend or not, it's hard to the comment at this point.

Speaker 2

But overall, we feel good about that business. We feel good about the traction the Q1 of 2019. As we had shared with you last time, we've been making pricing tweaks across the business.

Speaker 3

Contractor Connection was certainly one of them where we made some pricing tweaks.

Speaker 2

We believe that pricing the was certainly one of them where we made some pricing tweaks. We believe that pricing tweak will hold. So we feel good about the business. It's hard for me to comment whether the That exact same trend will continue or not because weather does play a pretty critical role in that business.

Speaker 6

The Okay. And where are you on your overall pricing journey the As you think about offsetting inflationary headwinds, how far are you into that process? Is there a point where we the kind of start to lap those increases. You feel like you have to put more increases in place the next question.

Speaker 2

I would probably not correlate it to inflation. I would say that pricing the discipline that we have been working to build in our business. And it's a muscle memory that we're building. It's certainly building better in the some parts of our business than others. But as a management team, we don't expect to relent on our pricing discipline.

Speaker 2

Now, will we see the similar kind of double digit pricing increases that we've seen, say, in the latter half of last year or early part of this year? Probably not, but I think it will be sufficient to sustain us the conference call for solid profitability going forward.

Speaker 6

Okay. Thanks for taking all the questions. The I'll turn it over.

Speaker 2

Thanks, Kevin, as always.

Operator

Thank you. Your next question comes from Mark Hughes the Virtruvist. Please go ahead.

Speaker 7

Yes, thanks. Good morning.

Speaker 6

Hi, Mark. I missed

Speaker 8

a little bit

Speaker 7

the Hello. I missed a little bit of the early presentation, so I apologize if you've touched on some of these things. The medical management revenue sounds like it's up pretty strong. The What is driving that? I know that had been under some pressure for a while.

Speaker 7

Is it finally just normalizing? Or is there some particular catalyst?

Speaker 2

The I won't say it's normalizing. It's certainly up 10% from where it was last year. I still believe that it's below where the from a pre pandemic levels. And I think the major reason for the change that you've seen is, 1, I do believe that things are starting to normalize. To the Q2.

Speaker 2

Our claims volume has continued to increase as we've added new clients. I expect that it will continue to sort of ladder up, the But I think it will take the full this year to come back to where it was in the pre pandemic levels based on what we're seeing today.

Speaker 7

The North America, the loss adjusting, the revenue was up pretty sharply, but the claims the numbers were down year over year. Is that obviously a mix issue, but could you the

Speaker 2

Yes. It is absolutely a mixed issue. Look, what we're the Now is that as we continue to grow our large and complex business, that business just tends to be having a much higher average cost or average the average revenue per file. And as a result of that, we were seeing definitely as that business, the growth of that out the other parts of North America loss adjusting, we will continue to see that. Also, the the strength was more in the U.

Speaker 2

S. Versus Canada, where we tend to see larger size claims versus, the Canada where the claim size is smaller in terms of the revenue that those claims produce for us. And so I think that's the big push. The We've also seen in Canada some weakness in our TPA business, which tends to have much higher claim count to the U. S.

Speaker 2

So it's absolutely a mix issue. And look, I think that we will continue to see that, right? Whether we'll the at the same magnitude as we saw or not, time will tell, but, our large and complex business continues to be extremely strong. And even on the volume side, we the We're tending to see claims, which are a little bit larger in terms of the revenue that they create.

Speaker 5

The One thing I'd add to that, Mark, is it's not just a North America loss adjusting phenomenon. Actually, our cases in each of our segments

Speaker 4

the

Speaker 5

Maybe we had takeover cases in the prior year that weren't present this year. The number of looks, the There's variability there year over year and some of our revenues are generated by us providing the staff to our carrier clients and that revenue is not denominated in claims. So we particularly see that in the networks business within platforms where revenues can be up the next question. And then on the

Speaker 7

the Thank you for that.

Speaker 8

And then on the Platform Systems,

Speaker 7

how much more the Build out is there you've got the increased market share you highlight with the 2 carriers you're the onboarding another carrier. Is there how much growth is in the pipeline, so to speak, as you continue to ramp those relationships or are you at kind of stability with some of them and it was the benefit of the cat the Q1 of

Speaker 2

2019. Mark, there's definitely benefit of Cat that drove the top line growth. There's no question about it. But I think as far as the opportunity is concerned, we believe that there's still significant opportunity in the network business to continue to grow. The The two clients that we already have, there's still headroom for us to scale with them.

Speaker 2

You called it right, we've added a third the consumer engagement and we'll likely add more. There's certainly more that we can do on the Looker side of our business. The So I think there is still quite a lot of headroom for us to grow there. That business will continue to be dependent significantly on weather. So the individual quarterly revenue on that will depend on how much weather we saw.

Speaker 2

But I think at this the At this point, what we're trying to do is we're trying to onboard as many clients as we can and be as we move forward and we drive the greater quality in our cat execution, we should start to see more traction on market share in that business. So the I feel extremely excited about that business in terms of the growth prospects ahead of us and certainly don't believe that it's tapering by any stretch of the imagination.

Speaker 7

The And you had mentioned last question, you had mentioned work or potential work with MGAs or the other third parties. Could you expand on that a little bit? How meaningful, if at all, is it in your current book of business and the How real are those prospects?

Speaker 2

Yes. I would put that all in what we call alternative market segment. The And it's not it's there in our book today, but it's probably not as meaningful as we'd like it to be. The There is if you look at the market, there is a consistent the happening in MGAs and alternate market sort of activity. You're seeing more captives being formed.

Speaker 2

You're seeing more MGAs being formed. The And a lot of them are looking for unbundling of claims, meaning the places where they're getting the paper from is different from where they want to place their claims. So the I think that is a trend that will continue, particularly given the harder market on the P and C side, as I'm sure you're covering for your carrier clients. The And as a result of that, the clients would like to take on more risk and we'll use different vehicles to take on risk. So us being present there as the chosen claims the provider for that is pretty important.

Speaker 2

So, I just want to make sure that we, as a claims company, is capturing that aspect of the market the the management and coupled with that, the capabilities to handle field claims as well as large and complex claims, I think places us very uniquely in the market to serve that segment.

Speaker 7

Understood. Thank you very much.

Speaker 6

The Thanks, Mark.

Operator

And there are no further questions. I'll pass the call over to Mr. Verma for closing remarks.

Speaker 3

The conference call.

Speaker 2

Thank you, Brian, and thank you all of our employees, our clients, our shareholders for your continued commitment to Crawford and Company. The call. Our fantastic start to 2023 provides strong momentum for the rest of the year and beyond. As always, we wish you well and look forward to taking you along on the journey with us.

Operator

The Dan's call. This call will be available for replay beginning 11:30 am Eastern today through 11:59 pm Eastern the conference call on June 4, 2023. The conference ID number for the replay is 184,847 pound. The number to dial for the replay is 877-674-7070 or 4167 6 48,692. Thank you.

Operator

You may now disconnect.

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Earnings Conference Call
Crawford & Company Q1 2023
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