Crawford & Company Third Quarter 2026 Earnings Call - CRAWFORD & CO

Financial Performance:

• Third-quarter 2026 revenue was $321.6 million, essentially flat year-over-year (YoY) and quarter-over-quarter (QoQ).
• Non-GAAP operating earnings totaled $28.8 million (9.0% margin), up from $26.6 million (8.3% margin) in the prior year.
• Non-GAAP EPS was $0.37 for both CRDA and CRDB, an increase from $0.32 YoY; GAAP diluted EPS was $0.31 vs $0.25 YoY.
• Consolidated adjusted EBITDA was $37.1 million (11.5% margin), up from $36.3 million (11.0%) YoY.
• Operating cash flow for the first nine months was $29 million, down from $51.7 million YoY, primarily due to growth in billed and unbilled receivables.
• Free cash flow for the first nine months was $7.4 million, declining from $24.1 million YoY.
• Cash and equivalents increased to $79 million as of September 30, 2026, from $64.1 million at year-end 2025.
• Total debt outstanding was $225.1 million; net debt was approximately $146 million.
• Leverage ratio was 1.52x EBITDA, positioned at the low end of the target range.
• Unallocated corporate costs decreased to $4.5 million from $6.1 million YoY, driven by lower medical self-insurance expenses.

Guidance and Future Outlook:

• Management anticipates fourth-quarter results will be pressured by benign U.S. weather and the near-completion of international catastrophe claims, creating unfavorable comparisons.
• Long-term strategy focuses on driving profitable market share growth, accelerating U.S. operational realignment, strengthening operating discipline, and building long-term capabilities.
• Capital allocation prioritizes reinvestment in the business (technology, capex) and targeted M&A/acqui-hires, followed by capital returns to shareholders.
• Quarterly dividend of $0.08 per share was paid; share repurchases included 1.1 million CRDA shares and 11,000 CRDB shares, with ~1.2 million shares remaining under the program.
• U.S. operational integration is progressing well with improved collaboration, efficiency, and a scalable platform, though fine-tuning in sales and marketing continues.

Business Segments and Product Lines:

• U.S. Property & Casualty ($76M, flat YoY): Operating earnings of $9.7 million; margins held steady despite softer U.S. loss adjusting, offset by improved performance in the networks business (including contractor connection).
• BroadSpire ($109M, down 1.5% YoY): Driven by lower casualty claims volumes and medical management revenues; operating earnings decreased 15.1% to $13 million (margin down 191 bps); client retention improved sequentially to 88.5%.
• International ($136.7M, up 1% YoY): Excluding FX and divestiture impacts, revenue decreased 1.2%; however, operating earnings surged 39.4% to $136.7M contribution with margin expansion of 215 bps.
• International Highlights: Australia performed well due to the completion of weather-related activity; Canada benefited from severe flooding and increased General Technical Services (GTS) utilization; Latin America showed improvement.
• New Business: Added approximately $29 million in new and enhanced business via RFPs; pipeline activity is healthy with significant opportunities in the alternative market space (captives, MGAs, MGUs).
• Diversification: Continued growth in alternative markets (single parent/group captives, MGAs, MGUs) is creating demand for technical claims expertise and third-party administration.

Market and Competitive Landscape:

• U.S. severe storm reports rose 46% YoY, yet weather-related revenues increased only 5%, attributed to carrier capacity, claim severity, and geographic distribution rather than a lack of demand.
• The P&C property market is characterized by excess carrier capacity and soft pricing, which may influence client claim behavior, though Crawford maintains competitive advantage in complex, high-severity claims.
• Crawford leverages its scale (operations in 70+ countries, 10,000 professionals, $20B claims managed annually) to compete in the major/complex loss market and natural disaster response sectors.
• Integration of U.S. operations under a single client-centric model is enhancing the sales engine and market approach.

Risks and Challenges:

• Fourth-quarter financial performance faces headwinds due to lower weather-related activity in the U.S. and the completion of international catastrophe projects compared to prior year baselines.
• Cash flow volatility remains a risk, influenced by the timing of billed and unbilled receivables and the completion cycles of catastrophe claims.
• Uncertainty regarding the timing and frequency of natural disasters and severe weather events impacts revenue predictability.
• Potential impact from the loss of a client early in the year and general softness in casualty claims volumes.
• Forward-looking statements involve risks regarding operating results, pension contributions, receivable collectability, acquisition performance, and covenant compliance.

Management Commentary and Tone:

• Tone was confident and optimistic, emphasizing the company's ability to deliver improved operating earnings in a mixed claims environment.
• Management expressed strong confidence in the diversified business model, which provided stability against uneven claims activity.
• Leadership highlighted the strength of client relationships, the health of the new business pipeline, and the successful progress of the U.S. realignment.
• CEO Bruce Swain stated the company is well-positioned for "stronger, more consistent performance and sustainable long-term growth."
• CFO Holly Boudreau provided detailed segment breakdowns, noting specific drivers for earnings changes and margin fluctuations.

Analyst Questions and Answers:

• Mark Hughes (Truist Securities): Asked about the softness in casualty claims (specifically BroadSpire and workers' comp) and the development of the alternative market. Management confirmed general softness and client loss impacts but highlighted strong pipeline growth in captives/MGAs/MGUs.
• Weather Impact: Hughes asked about the comparison of weather-related claims in Q4; management indicated international Q4 comparisons will be down due to completed projects, while U.S. comparisons will be flat due to similar low-activity environments.
• Cash Flow: Management clarified that balance sheet build-up in receivables was primarily a timing issue related to international CAT activities winding down.
• Networks Performance: Confirmed improved earnings in the networks segment, partly due to the exit of the Turvey business.
• U.S. Integration: Confirmed progress in U.S. integration with tangible benefits in coordination and efficiency; pipeline opportunities are seen across all businesses but are increasingly weighted toward alternative markets.
• M&A: With a leverage ratio of 1.52x, management affirmed the capacity to pursue strategic acquisitions and acqui-hires, maintaining an active pipeline.

Other Key Points:

• The company exited Crawford Legal Services, an impact noted in the international segment results.
• Pension funding: U.S. pension liability was $12.8 million with a funded ratio of 95.4% following a $3 million cash contribution in the quarter.
• The call included non-GAAP financial measures reconciled to GAAP figures as per SEC rules.
• Global growth in alternative markets is outpacing the legacy P&C market, driving demand for technical expertise and administration services.