Crawford & Company, the world’s largest publicly listed independent provider of claims management solutions to insurance companies and self-insured entities, announced its financial results for the first quarter ended March 31, 2018.

The Company’s two classes of stock are substantially identical, except with respect to voting rights and the Company’s ability to pay greater cash dividends on the non-voting Class A Common Stock (CRD-A) than on the voting Class B Common Stock (CRD-B), subject to certain limitations. In addition, with respect to mergers or similar transactions, holders of CRD-A must receive the same type and amount of consideration as holders of CRD-B, unless different consideration is approved by the holders of 75% of CRD-A, voting as a class.

Consolidated Results
First Quarter 2018 Summary

• Revenues before reimbursements of $273.1 million, compared with $267.3 million for the 2017 first quarter

• Net income attributable to shareholders of $8.6 million, compared to $7.7 million in the same period last year

• Diluted earnings per share of $0.16 for CRD-A and $0.14 for CRD-B, compared with $0.14 for CRD-A and $0.12 for CRD-B in the prior year first quarter

• Diluted earnings per share of $0.16 for CRD-A and $0.14 for CRD-B in the 2018 first quarter, compared to non-GAAP earnings per share before restructuring and special charges, of $0.15 for CRD-A and $0.13 for CRD-B in the prior year first quarter

• Consolidated operating earnings, a non-GAAP financial measure, were $18.2 million or 6.7% of revenues in the 2018 first quarter, compared with $18.3 million or 6.8% of revenues in the 2017 first quarter

• Consolidated adjusted EBITDA, a non-GAAP financial measure, was $28.1 million or 10.3% of revenues in the 2018 first quarter, compared with $26.6 million or 10.0% of revenues in the 2017 period

Mr. Harsha V. Agadi, president and chief executive officer of Crawford & Company, stated, “This is an exciting time at Crawford as the comprehensive strategy that we implemented through 2017 is beginning to show signs of success as can be seen in our first quarter results where sales grew 2.2%, year over year, and earnings per share improved. The review of our core values, which led to the realignment of our organization around a refreshed corporate mission and vision, was central to our strategy which is designed to return Crawford to sustained revenue growth. This now drives everything we do including how we go to market, how we service our clients and who we hire.

“The second step to our growth strategy was the recruitment of experienced, solution based sales people to improve our sales capabilities as we focus on selling the One Crawford Solution. We have also re-evaluated our entire sales process including our sales materials, how we respond to RFPs, how we measure and track sales leads, as well as exploring opportunities to improve our technology and training to support our global sales team. Improving top line revenue growth is core to our strategy and early signs of success are clear as the momentum in our new business pipelines is building. The effectiveness of our sales teams is critical to our success as we deliver innovative solutions designed to solve the industry’s most complex challenges.

“The most recent step in our strategy was the realignment of our organization such that Crawford faces the market in the same manner as our clients. What we had found through our extensive review this past year was that our 2017 business structure was not meeting our clients’ needs, not to mention limiting the growth potential of the Company. As a result, we have successfully reorganized the Company into Global Service Lines during the first quarter, which will sharpen our method of delivery to our clients and better enable our sales teams to increase market share and grow the Company.

“Another benefit of our move to Global Service Lines is our ability to harness the expertise and product knowledge from across the Company in order to develop innovative solutions designed to solve the challenges of Carriers, Corporations, and Intermediaries. This will position Crawford to be a stronger partner to our clients as technology continues to drive the evolution of our industry. Our goal is to drive innovation in the claims settlement process, in order to deliver value to our clients in the form of improved customer satisfaction and service and reduced claim leakage which will result in improved market share and profitability for Crawford.”

Mr. Agadi concluded, “The momentum in our business is clearly accelerating as our move to Global Service Lines is unleashing the vast potential that exists within Crawford. We will continue to strive to be on the forefront of innovation within the claims settlement process and see opportunities to enhance and expand our solutions internationally. Taken together, we are excited with the progress that we have achieved executing our strategic plan in the first quarter as we have made real progress towards the achievement of our longer term goal of delivering 5% revenue growth and 15% earnings growth, annually.”

Segment Results for the First Quarter

Crawford TPA Solutions: Broadspire

Crawford TPA Solutions: Broadspire segment revenues before reimbursements were $100.2 million in the 2018 first quarter, increasing 4% from $96.3 million in the 2017 first quarter. On a constant dollar basis, a non-GAAP measure, first quarter 2018 revenues were $98.8 million. Crawford TPA Solutions: Broadspire recorded operating earnings of $7.8 million in the first quarter of 2018, representing an operating margin of 8%, compared with $8.0 million, or 8% of revenues, in the 2017 first quarter.

Crawford Claims Solutions

Crawford Claims Solutions revenues before reimbursements were $90.4 million in the first quarter of 2018, increasing 9% from $83.1 million in the first quarter of 2017. On a constant dollar basis, first quarter 2018 revenues were $87.2 million. Operating earnings were $0.7 million in the 2018 first quarter, compared with $2.4 million in the first quarter of 2017, representing operating margins of 1% in the 2018 period and 3% in the 2017 period.

Crawford Specialty Solutions

Crawford Specialty Solutions revenues before reimbursements were $82.4 million in the first quarter of 2018, down 6% from $87.8 million in the same period of 2017. On a constant dollar basis, first quarter 2018 revenues were $80.0 million. Operating earnings were $10.5 million in the 2018 first quarter compared with $8.4 million in the 2017 period. The segment’s operating margin for the 2018 quarter was 13%, as compared to 10% in the 2017 quarter.

Unallocated Corporate and Shared Costs and Credits, Net

Unallocated corporate costs, net were $0.8 million in the first quarter of 2018, compared with $0.5 million in the same period of 2017.

Restructuring and Special Charges

The Company recorded no restructuring and special charges in the 2018 first quarter and $0.6 million in the 2017 first quarter. Restructuring costs for the 2017 first quarter were comprised of costs related to the establishment and phase in of the Company's global business and technology service centers and other restructuring charges for asset impairments and lease termination costs.

Balance Sheet and Cash Flow

The Company’s consolidated cash and cash equivalents position as of March 31, 2018 totaled $64.0 million, compared with $54.0 million at December 31, 2017. The Company’s total debt outstanding as of March 31, 2018 totaled $267.3 million, compared with $225.7 million at December 31, 2017.

During the three months ended March 31, 2018, the Company repurchased 1,011,958 shares of CRD-A and 53,888 shares of CRD-B at an average cost of $8.28 and $8.96, respectively. During the three months ended March 31, 2017, the Company did not repurchase any shares of CRD-A or CRD-B.

The Company’s operations used $13.6 million of cash during the 2018 period, compared with $20.5 million used in the 2017 period.

2018 Guidance

Crawford & Company is reaffirming its guidance for 2018 as follows:

• Consolidated revenues before reimbursements between $1.12 and $1.14 billion;

• Net income attributable to shareholders of Crawford & Company between $43.0 and $48.0 million, or $0.78 to $0.88 diluted earnings per CRD-A share, and $0.71 to $0.81 diluted earnings per CRD-B share;

• Consolidated operating earnings between $85.0 and $95.0 million;

• Consolidated adjusted EBITDA between $127.0 and $137.0 million.

To a significant extent, Crawford’s business depends on case volumes. The Company cannot predict the future trend of case volumes for a number of reasons, including the fact that the frequency and severity of weather-related claims and the occurrence of natural and man-made disasters, which are a significant source of claims and revenue for the Company, are generally not subject to accurate forecasting.