10-Q: Crawford & Company Reports Strong Revenue, Cash Flow

Crawford & Company announced increased revenues and significantly improved cash flow from operations for the second quarter and first half of 2025, despite a one-time tax expense impacting quarterly net income.

Summary

• Total revenues increased by 2.4% to $334.6 million for the three months ended June 30, 2025, compared to $326.9 million in the prior year.
• Total revenues increased by 2.8% to $657.9 million for the six months ended June 30, 2025, compared to $639.9 million in the prior year.
• Net income attributable to shareholders decreased by 9.4% to $7.8 million for the three months ended June 30, 2025, from $8.6 million in the prior year, primarily due to a one-time indirect tax expense of $3.1 million and a higher effective tax rate.
• Net income attributable to shareholders increased by 26.7% to $14.5 million for the six months ended June 30, 2025, from $11.4 million in the prior year.
• Diluted Earnings Per Share (EPS) for Class A and Class B Common Stock was $0.16 for the three months ended June 30, 2025, down from $0.17 in the prior year.
• Diluted Earnings Per Share (EPS) for Class A and Class B Common Stock was $0.29 for the six months ended June 30, 2025, up from $0.23 in the prior year.
• Cash provided by operating activities significantly improved to $21.1 million for the six months ended June 30, 2025, compared to cash used of $8.3 million in the prior year period.
• Total segment operating earnings increased by 6.9% to $29.0 million for the three months ended June 30, 2025, and by 12.4% to $53.1 million for the six months ended June 30, 2025.
• North America Loss Adjusting revenues grew 2.7% for the quarter, but operating earnings decreased 5.9% due to increased data processing and software costs, despite a 42.2% increase in cases received (driven by low-value inspection services transfer).
• International Operations revenues increased 6.6% for the quarter, with operating earnings up 33.9%, driven by improved results in the U.K. and Asia, despite an 8.8% decrease in cases received.
• Broadspire revenues increased 3.6% for the quarter, but operating earnings decreased 9.5% due to higher cost of risk and centralized indirect support costs.
• Platform Solutions revenues decreased 9.2% for the quarter, but operating earnings surged 113.2% due to cost reductions related to low-value inspection services and lower compensation costs.
• The effective income tax rate increased to 42.8% for the three months ended June 30, 2025, from 34.5% in the prior year, primarily due to a one-time expense of $1.3 million relating to administrative guidance from a foreign tax authority.

Sentiment

Score: 7

Explanation: The overall sentiment is positive due to consistent revenue growth, strong improvement in cash flow from operations, and increased year-to-date net income and EPS. While quarterly net income was impacted by a one-time tax expense, the underlying operational performance and segment operating earnings show strength and effective cost management in challenging areas. The company's liquidity position also appears healthy.

Positives

• Consolidated revenues before reimbursements increased by 2.8% for the quarter and 3.1% for the six months, indicating strong top-line growth.
• Net income attributable to shareholders increased by 26.7% for the six months ended June 30, 2025, demonstrating improved profitability over the longer term.
• Cash provided by operating activities significantly improved to $21.1 million for the six months ended June 30, 2025, from a cash usage of $8.3 million in the prior year, reflecting enhanced operational efficiency and working capital management.
• Total segment operating earnings increased by 6.9% for the quarter and 12.4% for the six months, indicating robust underlying business performance across segments.
• International Operations segment showed strong growth with revenues up 6.6% and operating earnings up 33.9% for the quarter, driven by higher-value claims and improved efficiencies.
• Platform Solutions segment achieved a significant increase in operating earnings of 113.2% for the quarter, despite a revenue decline, due to effective cost management and higher average rates in Contractor Connection.
• The company maintained its quarterly dividend payment of $0.07 per share for both Class A and Class B common stock.

Negatives

• Net income attributable to shareholders decreased by 9.4% for the three months ended June 30, 2025, primarily due to a one-time indirect tax expense and a higher effective tax rate.
• Diluted Earnings Per Share (EPS) for Class A and Class B Common Stock decreased to $0.16 for the three months ended June 30, 2025, from $0.17 in the prior year.
• North America Loss Adjusting segment's operating earnings decreased by 5.9% for the quarter, despite revenue growth, due to increased data processing and software costs.
• Broadspire segment's operating earnings decreased by 9.5% for the quarter, attributed to higher cost of risk and increased centralized indirect support costs.
• Platform Solutions segment experienced a 9.2% decrease in revenues for the quarter, primarily due to reduced staff augmentation services and the transfer of low-value inspection services to another segment.
• Overall cases received decreased by 3.7% for the quarter and 4.6% for the six months, indicating a general decline in claim volume, although this was offset by higher-value cases in some segments.

Risks

• A decline in cases referred for any reason, including changes in the degree to which property and casualty insurance carriers outsource their claims handling functions.
• Changes in global economic conditions, including the impact of tariffs.
• The impact of changing climate conditions.
• Changes in interest rates.
• Changes in foreign currency exchange rates.
• Changes in regulations and practices of various governmental authorities.
• Changes in the competitive environment.
• Changes in the financial condition of clients.
• Changes in the rate of inflation and the ability to recover increased operating costs.
• The loss of any material customer.
• The ability to successfully integrate the operations of acquired businesses.
• The ability to timely identify and effectively remediate material weaknesses in internal control over financial reporting.
• Regulatory changes related to funding of defined benefit pension plans and future funding obligations thereunder.
• The ability to complete any transaction involving the acquisition or disposition of assets on acceptable terms and at acceptable times.
• The ability to identify new revenue sources not tied to the insurance underwriting cycle.
• The ability to develop or acquire information technology resources to support and grow the business.
• The ability to attract and retain qualified personnel.
• The ability to renew existing contracts with clients on satisfactory terms.
• The ability to collect amounts due from clients and others.
• Continued availability of funding under financing agreements.
• General risks associated with doing business outside the U.S., including changes in tax rates.
• The ability to comply with the covenants in financing or other agreements.
• Changes in the frequency or severity of man-made or natural disasters.
• The ability of third-party service providers, used for certain aspects of internal business functions, to meet expected service levels.
• The ability to prevent or detect cybersecurity breaches and cyber incidents.
• The ability to achieve targeted integration goals with the consolidation and migration of multiple software platforms.
• Proliferation and escalation of international hostilities and geopolitical events, such as the ongoing conflicts in Russia/Ukraine and Israel.
• Risks associated with having a controlling shareholder.
• Impairments of goodwill or other indefinite-lived intangible assets.

Future Outlook

The company estimates its effective income tax rate for 2025 will be approximately 30% to 32%. No additional discretionary contributions are expected for the U.S. defined benefit pension plan for the remainder of 2025, and anticipated funding for other international plans is not significant. The company's share repurchase authorization extends through December 31, 2025.

Management Comments

• Rohit Verma, President and Chief Executive Officer, is considered the Chief Operating Decision Maker (CODM) and is responsible for strategic decisions, resource allocation, financial health, budgeting, strategic planning, investments, pricing strategies, cash flow management, and risk oversight for each segment.
• Management believes that a discussion and analysis of segment operating earnings is helpful in understanding the results of operations, as it is the primary financial performance measure used by senior management and the CODM.

Industry Context

Crawford & Company operates as a leading global provider of claims management and outsourcing solutions to insurance companies and self-insured entities. Its performance is inherently tied to the property and casualty insurance markets and is influenced by factors such as weather activity, macroeconomic uncertainties, and the broader insurance underwriting cycle. The filing also acknowledges the potential impact of international hostilities and geopolitical events on its operations.

Comparison to Industry Standards

• NA

Legal Proceedings

• No pending material litigation as of June 30, 2025.

Stakeholder Impact

• Shareholders: Impacted by changes in EPS, continued dividend payments, and the ongoing share repurchase authorization.
• Employees: Affected by compensation, benefits, and staff utilization, with average full-time equivalent employees increasing in Broadspire and North America Loss Adjusting, but decreasing in International Operations and Platform Solutions.
• Customers: Benefit from the company's continued provision of claims management and outsourcing solutions, with revenue growth indicating ongoing demand for services.
• Creditors: The company's liquidity and debt levels, along with compliance with financing covenants, are relevant to creditors.

Next Steps

• The company plans to adopt ASU 2023-09 (Income Tax Disclosures) at December 31, 2025.
• The company is currently evaluating the impact of ASU 2024-03 (Disaggregation of Income Statement Expenses) on its consolidated financial statements.
• No additional discretionary contributions are expected for the U.S. defined benefit pension plan during the remainder of 2025.
• The company has authorization to repurchase 1,089,809 shares under its 2021 Repurchase Authorization through December 31, 2025.

Key Dates

Recommendation

While the company demonstrated strong operational performance with revenue growth, improved operating earnings, and significantly better cash flow from operations, the quarterly net income was negatively impacted by a one-time tax expense. The underlying business appears solid, but the mixed quarterly results (net income down, but YTD up) and ongoing macroeconomic uncertainties suggest a 'hold' position. Investors should monitor the impact of the one-time tax expense on future periods and the company's ability to sustain operational improvements and manage costs effectively across all segments.

Keywords

Claims Management, Insurance Services, Loss Adjusting, Third Party Administrator, TPA, Risk Management, Property & Casualty, Global Technical Services, Contractor Connection, Subrogation, Workers' Compensation, Disability Management, SEC Filing, Quarterly Report, Financial Results