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

Good morning. My name is Erica and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Crawford and Company third quarter 2026 earnings release conference call. In conjunction with this call, a supplementary financial presentation is available on our website at www.crocco.com under the Investor Relations section. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. Instructions will follow at this time. Should anyone need assistance at any time during this conference, please press star, then zero, and an operator will assist you. As a reminder, ladies and gentlemen, this conference is being recorded today, Tuesday, November 3, 2026. Now I would like to introduce Tammy Stevenson, Crawford & Company's General Counsel. Thank you, Erica. Some of 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. These statements may relate to, among other things, our expected future operating results and financial condition, our ability to grow our revenues and reduce our operating expenses, expectations regarding our anticipated contributions to our underfunded defined benefit pension plans, collectability of our billed and unbilled accounts receivable, financial results from our recently completed acquisitions, our continued compliance with the financial and other covenants contained in our financing agreements, our long-term capital resource and liquidity requirements, and our ability to pay dividends in the future. The company's actual results achieved in quarters in future quarters could differ materially from results that may be implied by such forward-looking statements. 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, or to reflect the occurrence of any anticipated events. In addition, you are reminded that operating results for any historical period are not necessarily indicative of results to be expected for any future period. For a complete discussion regarding factors which could affect the company's financial performance, please refer to the Company's Form 10-Q for the quarter ended September 30, 2026, filed with the Securities and Exchange Commission, particularly information under the headings risk factors and management's discussion and analysis of financial condition and results of operations, as well as subsequent company filings with the SEC. This presentation also includes certain non-GAAP financial measures as defined under SEC rules. As required, a reconciliation is provided for those measures to the most directly comparable GAAP measures. I'd like to now introduce Mr. Bruce Swain, Chief Executive Officer of Crawford & Company. Bruce. Thank you, Tammy. Good morning, and welcome to our third quarter 2026 earnings call. Joining me today are Holly Boudreau, our Chief Financial Officer, and Tammy Stevenson, our General Counsel. After our prepared remarks, we will open the call for your questions. As most of you know, Crawford is a global provider of claims management and outsourcing solutions, serving insurance carriers and self-insured organizations with expertise and experience that spans the entire claims lifecycle. Our purpose is to restore lives, businesses, and communities by delivering dependable and comprehensive claims solutions for our clients. With operations in more than 70 countries, a team of 10,000 professionals, and over $20 billion in claims managed each year, we have unique scale and the resources to support the world's leading insurers and corporations on programs of any size or complexity. Our global reach is strengthened by more than eight decades of technical expertise and service excellence that provide Crawford & Company with a clear competitive advantage for clients looking for a trusted partner in an increasingly complex risk environment. Our capabilities are well-matched to several ongoing market dynamics related to the property and casualty insurance claims industry first the major and complex loss market is expanding large high severity losses demand deep technical knowledge global coordination and efficient execution our team brings the comprehensive skill set and proven track record to meet the needs of our extensive customer base and also compete for and win new business second the integration of our streamlined us operating structure is progressing well bringing our u.s business together under a single client-centric model is improving collaboration and efficiency providing opportunities to accelerate execution and creating a scalable platform for growth third our industry leading expertise and technology capabilities continue to help us win market share our ongoing investments in our people and technology enable us to deliver faster and more accurate outcomes for our clients fourth natural disasters and severe weather events remain a long-term source of demand for our services while the timing of weather events is inherently unpredictable from quarter to quarter over time the trend toward a more frequent and complex loss event creates demand for the scale and rapid response capabilities that Crawford provides around the world. Finally, global growth in alternative markets continues to outpace the legacy P&C market. This includes single parent and group captives, as well as managing general agents, or MGAs, and managing general underwriters, or MGUs. As these alternative market segments expand, we're seeing increasing demand for both the technical claims expertise of our global technical services team and the third-party administration capabilities of BroadSpire. I'll now take a moment to discuss our third quarter 2026 results. Our third quarter performance demonstrated Crawford's ability to deliver improved operating results even in a mixed claims environment. Our operating earnings exceeded the prior year and were driven primarily by the substantial completion of weather-related claims activity in our international business and lower corporate costs. Third quarter revenues were $321.6 million, relatively level with the prior quarter year, and consolidated over the prior-year quarter to $28.9 million. Our non-GAAP EPS was $0.37 for both CRDA and CRDB, up from $0,032 for both share classes in the prior year quarter, and operating cash flow was $29 million year-to-day. Our pipeline activity in the RFP environment remained healthy. We added approximately $29 million in new and enhanced business during the third quarter, and the team is focused on converting the additional opportunities we're seeing into wins. Our leverage ratio is 1.52 times EBITDA at the low end of our targeted range, reflecting our financial strength and flexibility, and our liquidity remains very strong. As we look to the fourth quarter, benign weather in the U.S. and the near completion of the catastrophe claims in international during the current quarter will pressure our fourth quarter results. Despite this, we're optimistic about our ability to continue driving profitable market share growth, accelerating our U.S. realignment, strengthening operating discipline, and building the capabilities for long-term success. We take a thoughtful, balanced approach to deploying capital. Our first priority is reinvesting in the business to drive long-term growth, both through capital expenditures and technology and through targeted M&A and acqui-hires that expand our capabilities, scale, and reach. With a leverage ratio well below the industry average, we have the financial flexibility to act on opportunities as they arise. Alongside these investments, we remain committed to returning capital to shareholders. And in the third quarter, we paid a quarterly dividend of $0.08 per share and opportunistically repurchased shares. I'll now hand the call over to Holly to walk through our segment results and financial performance in more detail. Thank you, Bruce. In the third-quarter of 2026, U.S. property and casualty, which consists of our U. S. loss adjusting and networks businesses, contributed 24% of revenues. Broadspire, our U.S. third-party administration business, represented 34% of revenues, and international operations accounted for 42% of revenue. Starting with U.F. property and casualty, revenues of $76 million were essentially flat year over year. The segment's operating earnings were $9.7 million, down slightly from the prior year period, but operating margins held steady. Improved results in our networks business, which includes contractor connection and catastrophe services, was offset by softer performance in U.S. loss adjusting. Lower U.N. property claims frequency has continued throughout the course of 2026. Even so, our ability to attract and retain top-tier adjusting talent remains a key competitive advantage, and our team stands ready to handle major and complex claims at scale when activities return. Turning to Broad Spire, third quarter revenues were $109 million, down 1.5% from the prior year period due to lower casualty claims volumes and medical management revenues. Client retention improved sequentially to 88.5 percent from the second quarter, underscoring the durability of our client relationships. Operating earnings were $13 million, a decrease of $2.3 million, or 15.1% year-over-year, with operating margin down 191 basis points driven by lower revenue. Looking forward, growth in outsourced captives in the MGA and MGU market continues to create opportunities in the alternative market space. As claims grow more complex, Broad Spire's scale, expertise, and technology positions it well to capture that demand. International operations delivered revenues of $136.7 million in the third quarter, an increase of 1% over the prior year. Excluding our exit from Crawford Legal Services, the effects of foreign exchange and the effects of foreign-exchange rate revenues decreased 1.2%. Operating earnings grew $3 million, or 39.4%, and operating margin expanded 215 basis points. Australia led the segment's performance, as we benefited from the near-completion of weather-related activity in the market. In Canada, results were driven by severe flooding activity, increased utilization of GTS services, and continued cross-control initiatives. Additionally, we saw improved performance in Latin America. To give some context to the weather-related impact on our business, preliminary data shows that U.S. severe storms reports rose approximately 46% in the third quarter compared to the prior year. In comparison, our weather-related revenues in the quarter increased approximately 5% over the prior year period, offsets by decline in CAT activity. Despite the increase in the severe storms during the quarter, claims activity did not align. As we've discussed in the past, the relationship between storm counts and weather- related revenue isn't always directly correlated. Severity, geographic location, and carrier capacity can all influence our revenue. Non-weather-related revenues were down slightly. As we previously mentioned, the diversity and relative consistency of our non-weATHER business can moderate volatility from quarter to quarter. Now for a look at our consolidated results. In the 2026 third quarter, revenues before reimbursements were $321.6 million, essentially flat compared to the prior year period. Foreign exchange rates increased revenues before reimbursements by $7.9 million, or 2.5%. GAAP net income attributable to shareholders totaled $15 million compared to net income of $12.4 million in the same period of 2025. GAAP diluted EPS in the 2026 third quarter was $0.31 for CRDA and CRDB, an increase from earnings of $0,25 for both share classes in the prior year period. On a non-GAAP basis, diluted EPS was 37 cents for both CRDA and CRDB, increasing from 32 cents for both share classes in the 2025 quarter. The company's non-GAP operating earnings totaled $28.8 million in the 2026 third quarter, or 9% of revenues, compared to $26.6 million, or 8.3% of revenues in the prior year period. Consolidated adjusted EBITDA was $37.1 million in the 2026 third quarter or 11.5% of revenue, increasing from $36.3 million or 11% of revenue in the 2025 quarter. The company's cash and cash equivalents as of September 30, 2026 totaled $79 million compared to $64.1 million at December 31st, 2025. Total receivables were $259.9 million as of September 30th, 2026, up $17.3 million from 2025 year-end. The company's total debt outstanding as of Sept. 30th 2026 totalled $225.1 up $36 million from Dec. 31st 2025. Net debt was approximately $146 million as of September 30, 2026, while our U.S. pension liability was $12.8 million, reflecting a funded ratio of 95.4 percent after consideration of our $3 million cash contribution during the quarter. Cash flows provided by operating activities for the first nine months of 2026 was $29 million, decreasing from $51.7 million in the prior year period due to growth in billed and unbilled receivables. Free cash flows were $7.4 million in the 2026 period, declining from $24.1 million in first nine month of 2025. Unallocated corporate costs were $4.5 million in third quarter, down from $6.1 in the 2025 period. The decrease was primarily due to $2.5 million in lower medical self-insurance expense compared to the prior year period. Non-service pension costs were $1.7 million in the quarter compared to $ 2.4 million in the prior year period, and in the third quarter of 2026, we paid a quarterly dividend of $0.08 a share. During the quarter, we repurchased 1.1 million shares of CRDA and 11,000 shares of CRDB, which included the privately negotiated repurchase of a million shares as disclosed in August. As of September 30, 2026, approximately 1.2 million shares remain eligible for repurchASE under our existing program. With that, I'll turn the call back over to Bluers for closing remarks. Thanks, Holly. The third quarter was a solid one for Crawford. We reported improved operating earnings over the prior year. International delivered strong results, and our diversified model provided stability through an uneven claims environment we are encouraged by the strength of our client relationships the growth in our new business pipeline and the progress we're making to improve execution across the organization moving forward while we expect headwinds in the fourth quarter we remain focused on driving profitable market share growth accelerating our u.s realignment strengthening operating discipline and building the capabilities for long-term success over the course of 2026 we've strengthened our leadership team further defined our strategic priorities and built greater accountability across the organization there's more work ahead but i'm confident that the actions we're taking are positioning crawford for stronger more consistent performance and sustainable long- term growth that will create lasting value for our clients, employees, and shareholders. Thank you for your time today and for your continued interest in Crawford. We look forward to sharing our progress with you as we close out 2026 and move into the new year. Erica, please open the call for questions. At this time, if you would like to ask a question, please press star then the number one on your telephone keypad. To withdraw your question, press star 1 again. If you're using a speakerphone, please pick up your handset before asking your question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Mark Hughes with Truist Securities. Your line is open. Please go ahead. Yeah, thank you. Good morning. Hey, good morning, Mark. All right. Hey, Bruce. Hey, Holly and Tammy. The casualty claims in the quarter I think you described were a little softer than expected. is that kind of broad-based on some underlying change, or is that tied to a customer or two that might have influenced the quarter? Are you talking about Broad Spire in particular? Yes. Yeah, I'm sorry. Yep, in Broad Spires. And I guess I'd also ask, is the casualty, does that include the workers' comp when you say casualty? Yeah, it would include the workers comp. And, you know, we're still seeing some of the impact from that client that we lost at the very beginning of the year, but more so it was just kind of a general softness in claims during the quarter. Okay. You've talked about kind of the opportunity with captives or MGAs. I'll alternative markets. How are you seeing that develop? When might we see that impact the P&L? Well, we're certainly seeing it impact the T&L today. And a lot of the new wins that we have have been with new programs that we brought in, and then also expansion of existing relationships that we have. We have invested in and created a business development team that's specific to addressing the alternative market space and attracting specialty insurers and brokers, MGAs, MGUs, et cetera. So we see that as a very compelling future opportunity for us and one that we're quite excited about. We think that what Crawford can bring is a customized white glove claims experience to these organizations who want to offer a specialized experience for the risks that they're underwriting. um on the uh the weather claims I think you described in uh the third quarter you've substantially completed some of the international projects you've been working on I I assume those are weather related if if I look at last year's fourth quarter I think he had 77 million weather related claims. How should I think about the number this year? Was that 77 last year? Is that kind of normal run rate, or is that still kind of a tough comp under the circumstances, and maybe as it looks today, the weather claim should be down from that? I think that, I think, about it a couple of ways. One, kind of split international from the U.S. From an international perspective, last year's fourth quarter had a pickup in weather-related losses, largely driven by events in Australia. And as we went through 2026, we saw those benefits in our international results, and we also saw benefits from the completion of losses that we had in Taiwan and Thailand that carried over into 26. As we look at our fourth quarter, we think the international comparison will be down because we've completed or substantially completed those international claims. When I look at the U.S., last year, 2025, we had a weak weather-related claims environment. There was no tropical activity in the fourth quarter, and that really repeated through this year. So from a U.S. perspective, I think the comparison is probably going to be pretty flat because you've got the same sort of dynamic for weather-related claims both in the fourth quarter of last year and the fourth quarter of this year. Yeah. How about in the cash flow, the build and unbuild, is this just a timing issue? Or is there something around mix of business that is influencing those cash flow numbers and the balance sheet numbers? It's mainly a timing difference. As we see these international CAT activities starting to wind down, we believe those numbers will come back to more of a normal runway. Okay. Okay. And then I think, Holly, you might have described a little bit better performance in the networks business. Did I hear that properly? Maybe the contractor connection was better in Q3. If I heard that properly, could you talk a little more about that? Yeah, we saw some improved performance in networks. Remember, we exited our Turvey business last year. That helped their performance. Operating earnings was up $1.5 million. versus the prior year quarter, and $1.2 million of that was Tervi-related. Okay. Any change in the top-line trends? Anything there? In terms of networks? Yeah. Yeah. No, I think, you know, it's obviously a business that's impacted by weather. And so, like our property and casualty business, our U.S. loss adjusting business, they're going to be impacted by by weather trends. We don't see any significant movement there on the contractor's connection side. And of course, our catastrophe response business is down pretty significantly over the year, as it has been all year. And that's largely reflected, reflecting the weather trends that we're seeing. But again, as we look at the fourth quarter this year versus last year, you know, we think that our weather related businesses are going to be pretty flat. Thank you very much. Thank you. Your next question comes from the line of Kevin Stanky with Barrington Research. Your line is open. Please go ahead. Great. Thank you. I wanted to just follow up on the weather-related business, and as you noted, the U.S. severe storm activity was up about 46 percent and you noted that your revenue performance didn't follow that which you know I guess is not surprising given the factors you've talked about I mean would you primarily attribute that to just the excess carrier capacity you You know, or are there still, do you feel like affordability issues in the, you know, property insurance market for homeowners or just kind of what you're seeing in relation to the various factors there? Yeah, obviously there's capacity in the carriers and you only have to look at the P&C carrier results to see it. They're enjoying another great year. and uh that that obviously gives them a lot of internal capacity to uh to handle claims in terms of of property affordability i mean we're certainly seeing rates go go down i mean it's a soft market there could be some some scars from prior years where people are or maybe hesitant to still make claims but pricing you know at the at the top line level is certainly not something that we would see as uh as holding as holding claims back uh you know i do think as you look at the soft thing market we have an event uh create a high demand for for our services but the okay the property claims market uh from an adjuster's perspective is uh is is has been pretty tough the past couple of years okay yeah okay that's helpful um and um you talked about the the integration of your u.s operations uh progressing well um i think you're are you pretty much done with the process and and you know maybe where do you stand in that process and uh what kind of have you seen started to see any benefits flowing out of that in terms of uh just just the sales engine i guess as you uh go to market in a more integrated fashion I've made a lot of progress. There's fine tuning to do as we go for sales and marketing group. We're approaching the market in an integrated fashion. Our account management team in the U.S. is on the line. We've got technology in the US all under So we're a lot more coordinated in our approach and we're operating as one organization rather than a collection of individual organizations. So yeah, I'm certainly seeing the benefits, the collaboration and efficiency and the teamwork. And I think we'll see that show through in our results as we go forward. okay yeah that's good to hear um and you also mentioned that the pipeline looks good rfp opportunities look good um any particular businesses where you're you're seeing the pipelines build or is it kind of generally across the board it's a it's across the border but maybe getting back to the question that uh that that mark asked about the alternative market space we see we are seeing uh a lot of opportunities in the pipeline from uh the alternative marketplace whether that's captives mgas mgus uh that is becoming uh an increasing uh amount of the pipeline that we have but overall our pipeline's strong and it's uh it's global across all of our businesses Okay, great. So you talked about your leverage ratio being quite low right now, and I assume that would give you the necessary capacity to continue looking at acquisition opportunities. Maybe any thoughts on acquisition opportunities, what kind of things you're seeing in the pipeline, and your appetite for continuing to pursue acquisitions currently. Our ratio is at 1.52, which is on the lower end, and we do have capacity to make strategic acquisition as we see fit. You know, we've primarily been focused on over kind of the recent past couple of years, but we're always have an active pipeline for opportunities. And we've seen a lot of success as we've done these tuck-in and acqui-hires where we go out and acquire certain teams. But our pipeline is active and we have low enough leverage to do a good deal when we see one. Okay, that sounds good. I appreciate the update. I will turn it back over. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. We have reached the end of the Q&A session. I will now turn the call back to Mr. Swain for closing remarks. Thank you, Erica, and thank you to all of our employees, clients, and shareholders for your continued commitment to Crawford & Company. We hope you have a great rest of the week and look forward to speaking to you on our fourth quarter earnings call. Thank you very much. thank you for participating in today's crawford and company conference call this will be available for replay at 11 30 a.m est today through 11 59 p.m EST on November 10, 2026. The meeting ID for the replay is 623-275-442. The number to dial for the reply is 1-833-309-1852. Thank you. You may now disconnect.